Hibbett (HIBB) 10-Q2022 Q2 Quarterly report

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

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

During the 13-weeks ended July 31, 2021 and August 1, 2020, $0.6 million and $0.5 million, respectively, of gift card deferred revenue from prior periods was realized. During the 26-weeks ended July 31, 2021 and August 1, 2020, $1.0 million and $0.8 million, respectively, of gift card deferred revenue from prior periods was realized.

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

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

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

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

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

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

Lease costs are as follows (in thousands):

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

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

The following table provides supplemental cash flow and other information related to leases (in thousands):

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

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

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

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

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

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

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

On April 16, 2020, we entered into the Second Amended and Restated Note with Regions Bank ("Amended Credit Facility") that provided for an aggregate amount of credit available to us of $75.0 million. The Amended Credit Facility superseded the Regions Bank credit agreement dated October 2018, with a maturity date of April 19, 2021, and was secured by all assets of the Company with the exception of real property. Simultaneous with the execution of the Amended Credit Facility, the $50.0 million outstanding under the previous credit agreements was paid in full, the Bank of America credit agreement dated October 2018 was terminated and we incurred borrowings under the Amended Credit Facility of $50.0 million. On June 5, 2020, we entered into a Note Modification Agreement that extended the maturity date of the Amended Credit Facility from April 19, 2021 to July 18, 2021. No other provisions of the Amended Credit Facility were affected.

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

The 2021 Credit Facility includes an annual commitment fee, payable quarterly in arrears, in an amount between 15 and 20 basis points of the unused portion of the line of credit as determined on a daily basis, dependent on the amount of debt outstanding. In addition, the Company is subject to certain financial covenants which include:

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

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

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

Expense for restricted stock units is shown net of forfeitures of approximately $0.1 million and $0.7 million for the 13-weeks ended July 31, 2021 and August 1, 2020, respectively. Expense for restricted stock units is shown net of forfeitures of approximately $0.2 million and $0.9 million for the 26-weeks ended July 31, 2021 and August 1, 2020, respectively.

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

During the 13-weeks ended July 31, 2021 and August 1, 2020, no stock options were granted. During the 26-weeks ended July 31, 2021 and August 1, 2020, 4,384 and 27,000 stock options were granted, respectively. The weighted-average grant date fair value of stock options granted during the 26-weeks ended July 31, 2021 and August 1, 2020 was $39.73 and $3.33 per share, respectively.

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

We also excluded 55,084 unvested stock awards granted to certain employees from the computations of diluted weighted-average common shares and common share equivalents outstanding because they are subject to certain performance-based annual vesting conditions which had not been achieved by July 31, 2021. Assuming the performance-criteria had been achieved as of July 31, 2021, the incremental dilutive impact would have been 17,216 shares.

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

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

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

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

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

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

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

In addition to the related party interests listed above, Mr. Longo also has a membership interest in the earnout discussed in Note

This document contains “forward-looking statements” as that term is used in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address future events, developments, and results and do not relate strictly to historical facts. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. They include statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “forecast,” “guidance,” “outlook,” “estimate” “will,” “may,” “could,” “possible,” “potential,” or other similar words, phrases or expressions. For example, our forward-looking statements include statements regarding:

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

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

We do not undertake to publicly update or revise any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events, or otherwise, and you should not expect us to do so.

Investors should also be aware that while we do, from time to time, communicate with securities analysts and others, we do not, by policy, selectively disclose to them any material non-public information with any statement or report issued by any analyst regardless of the content of the statement or report. We do not, by policy, confirm forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

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

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

If a store remodel, relocation, or expansion results in the store being closed for a significant period, its sales are removed from the comparable store sales base until it has been open a full 12 months. In addition, rebranded stores are treated as new stores and are not presented in comparable store sales until they have been open a full 12 months under the new brand.

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

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

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

cost of our stores operating at regular business hours with full staffs as well as increased investments to attract new customers, improve the customer experience, and make back-office processes more efficient.

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

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

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

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

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

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

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

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

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

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

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

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

SG&A expenses were 22.3% of net sales for the 13-weeks ended July 31, 2021, compared with 22.6% of net sales for the 13-weeks ended August 1, 2020. This decrease was the result of having minimal costs in the current year associated with City Gear acquisition and integration activities. This year's second quarter SG&A expenses of 22.3% of net sales compares to prior year second quarter adjusted SG&A expenses of 19.3% of net sales, which excludes certain City Gear acquisition and integration activities. This approximate 300 basis point increase was primarily related to the incremental costs of our stores operating at regular hours with full staffs as well as increased investments to attract new customers, improve the customer experience, and make back-office processes more efficient. In the prior year second quarter, many of our stores operated at less than regular business hours with slightly reduced staffing levels.

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

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

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

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

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

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