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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
February 3, 2001 000-20969
HIBBETT SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-1074067
(State of other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
451 Industrial Lane
Birmingham, Alabama 35211
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(205) 942-4292
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class CUSIP Number Which Registered
Common Stock, $.01 Par Value 428565-10-5 NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No ___
----
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ___.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant (assuming for purposes of this calculation that all executive
officers and directors are "affiliates") was $109,892,606 at April 5, 2001,
based on the closing sale price of $28.625 for the Common Stock on such date on
the Nasdaq National Market.
The number of shares outstanding of the Registrant's Common Stock,
as of April 5, 2001 was 6,533,683.
DOCUMENTS INCORPORATED BY REFERENCE
Items 6, 7, 7A and 8 of Part II are incorporated by reference from the Company's
2001 Annual Report to Stockholders. Items 10, 11, 12 and 13 of Part III are
incorporated by reference from the Company's definitive Proxy Statement for the
2001 Annual Meeting of Stockholders, to be held June 6, 2001. Registrant's
definitive Proxy Statement will be filed with the Securities and Exchange
Commission on or before April 30, 2001.
HIBBETT SPORTING GOODS, INC.
INDEX
PART I
Item 1. Business 2
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Consolidated Financial and Operating Data 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 8
Item 8. Consolidated Financial Statements and Supplementary Data 8
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 8
PART III
Item 10. Directors and Executive Officers of Registrant 8
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners
and Management 8
Item 13. Certain Relationships and Related Transactions 8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 8
PART I
Item 1. Business
General
Hibbett Sporting Goods, Inc. ("we" or "Hibbett") is a rapidly-growing operator
of full-line sporting goods stores in small to mid-sized markets predominantly
in the southeastern United States. Our stores offer a broad assortment of
quality athletic equipment, footwear and apparel at competitive prices with
superior customer service. Our merchandise assortment features a broad
selection of brand name merchandise emphasizing team and individual sports
complemented by localized apparel and accessories designed to appeal to a wide
range of customers within each market. We believe that our stores are among the
primary retail distribution alternatives for brand name vendors that seek to
reach our target markets.
As of February 3, 2001, we operated 261 Hibbett Sports stores as well as
seventeen smaller-format Sports Additions athletic shoe stores and four larger-
format Sports & Co. superstores in 19 states. Over the past two years, we have
increased our store base by approximately 65%. Our primary retail format and
growth vehicle is Hibbett Sports, a 5,000 square foot store located in enclosed
malls and dominant strip centers. Although competitors in some markets may
carry similar product lines and national brands, we believe that the Hibbett
Sports stores are typically the primary, full-line sporting goods retailers in
their markets due to the extensive selection of traditional team and individual
sports merchandise offered and a high level of customer service.
Business Strategy
We target markets with county populations that range from 30,000 to 250,000.
By targeting these smaller markets, we believe that we achieve significant
strategic advantages, including numerous expansion opportunities, comparatively
low operating costs and a more limited competitive environment than generally
faced in larger markets. In addition, we establish greater customer and vendor
recognition as the leading full-line sporting goods retailer in these local
communities.
Our management team believes that our ability to merchandise to local sporting
or community interests differentiates Hibbett from its national competitors.
This strong regional focus also enables us to achieve significant cost benefits
including lower corporate expenses, reduced distribution costs and increased
economies of scale from marketing activities. Additionally, we also use
sophisticated information systems to maintain tight controls over operating
costs.
We strive to hire enthusiastic sales personnel with an interest in sports.
Our extensive training program focuses on product knowledge and selling skills
and is conducted through the use of in-store clinics, videos, self-study
courses, and interactive group discussions.
Store Concepts
Hibbett Sports
Our primary retail format is Hibbett Sports, a 5,000 square foot store located
in enclosed malls and dominant strip centers. We tailor our Hibbett Sports
stores to the size, demographics and competitive conditions of each market.
Ninety-eight Hibbett Sports stores are located in enclosed malls, the majority
of which are the only enclosed malls in the county, and the remaining 163 are
located in dominant strip centers.
Hibbett Sports stores offer a core selection of quality, brand name
merchandise with an emphasis on team and individual sports. This merchandise
mix is complemented by a selection of localized apparel and accessories designed
to appeal to a wide range of customers within each market. For example, we
believe that apparel with logos of sports teams of local interest represents a
larger percentage of the merchandise mix in Hibbett Sports stores than it does
in the stores of national chain competitors. In addition, we strive to
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quickly respond to major sports events of local interest such as the fiscal 2000
Tennessee Titans AFC championship.
Sports Additions
Our seventeen Sports Additions stores are small, mall-based stores, averaging
1,500 square feet with approximately 90% of merchandise consisting of athletic
footwear and the remainder consisting of caps and a limited assortment of
apparel. Sports Additions stores offer a broader assortment of athletic
footwear, with a greater emphasis on fashion than the athletic footwear
assortment offered by Hibbett Sports stores. All but one Sports Additions store
are currently located in malls in which Hibbett Sports stores are also present.
Sports & Co.
We opened four Sports & Co. superstores between March 1995 and September 1996.
Sports & Co. superstores average 25,000 square feet and offer a larger
assortment of athletic footwear, apparel and equipment than Hibbett Sports
stores. Athletic equipment and apparel represent a higher percentage of the
overall merchandise mix at Sports & Co. superstores than they do at Hibbett
Sports stores. Sports & Co. superstores are designed to project the same
exciting and entertaining in-store atmosphere as Hibbett Sports stores but on a
larger scale. For example, Sports & Co. superstores offer customer
participation areas, such as putting greens and basketball hoop shoots, and
feature periodic special events including appearances by well-known athletes.
Team Sales
Hibbett Team Sales, Inc. ("Team Sales"), a wholly-owned subsidiary of Hibbett,
is a leading supplier of customized athletic apparel, equipment and footwear to
school, athletic and youth programs in Alabama. Team Sales sells its
merchandise directly to educational institutions and youth associations. The
operations of Team Sales are independent of the operations of our retail stores,
and its warehousing and distribution operate out of its own warehouse. Team
Sales does not meet the materiality reporting requirements of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information.
Expansion Strategy
In fiscal 1994, we began to accelerate our rate of new store openings to take
advantage of the growth opportunities in our target markets. We have identified
approximately 600 potential markets for future Hibbett Sports stores within the
states in which we operate and in certain contiguous states. Our clustered
expansion program, which calls for opening new stores within a two-hour driving
distance of an existing Hibbett location, allows us to take advantage of
efficiencies in distribution, marketing and regional management. During the
last half of fiscal 2000, we expanded our distribution center to accommodate our
recent growth and continued expansion. The newly expanded facility can support
the Company's growth for the foreseeable future.
In evaluating potential markets, we consider population, economic conditions,
local competitive dynamics and availability of suitable real estate. Hibbett
Sports stores effectively operate in both enclosed mall and dominant strip
center locations.
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Our continued growth largely depends upon our ability to open new stores in a
timely manner and to operate them profitably. Additionally, successful
expansion is subject to various contingencies, many of which are beyond our
control. These contingencies include, among others:
(i) Our ability to identify and secure suitable store sites on a timely basis
with advantageous terms and to complete any necessary construction or
refurbishment of these sites,
(ii) Our ability to hire, train and retain qualified managers and other
personnel, and
(iii) The successful integration of new stores into existing operations.
Although we believe that we have personnel and other resources required to
implement our store expansion goals, we cannot guarantee that we will be able to
successfully implement these plans within the expected time frame. We also
cannot guarantee that our new stores will achieve the same results as our old
stores. If we were unable to execute our expansion plans or effectively manage
our growth, it would be detrimental to our business, financial condition, and
results of operations.
Merchandising
Our merchandising strategy is to provide a broad assortment of quality
athletic equipment, footwear and apparel at competitive prices in a full service
environment. Our stores offer a broad selection of brand name merchandise with
an emphasis on team and individual sports. This merchandise mix is complemented
by a selection of localized apparel and accessories designed to appeal to a wide
range of customers within each market. Our leading product category is athletic
footwear, followed by apparel and sporting equipment, ranked according to sales.
Our stores emphasize quality brand name merchandise. We believe that the
breadth and depth of our brand name merchandise selection generally exceeds the
merchandise selection carried by local independent competitors. Many of these
branded products are highly technical and require considerable sales assistance.
We coordinate with our vendors to educate the sales staff at the store level on
new products and trends.
Although the core merchandise assortment tends to be similar for each Hibbett
Sports store, important local or regional differences frequently exist.
Accordingly, our stores regularly offer products that reflect preferences for
particular sporting activities in each community and local interest in college
and professional sports teams. Our knowledge of these interests, combined with
access to leading vendors, enables Hibbett Sports stores to react quickly to
emerging trends or special events, such as college or professional
championships.
Our merchandise staff analyzes current sporting goods trends by maintaining
close relationships with vendors, monitoring sales at competing stores,
communicating with customers, store managers and personnel and reviewing
industry trade publications. The merchandise staff works closely with store
personnel to meet the requirements of individual stores for appropriate
merchandise in sufficient quantities.
Our success depends in part on our ability to anticipate and respond to
changing merchandise trends and consumer demand in a timely manner.
Accordingly, the following scenarios could be detrimental to our business,
financial condition, and results of operations:
(i) If we are unable to identify and respond to emerging trends
(ii) If we miscalculate either the market for the merchandise in our stores or
our customers' purchasing habits, we may be faced with a significant
amount of unsold inventory
(iii) If consumer demand dramatically shifts away from athletic footwear and
apparel
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Vendor Relationships
The sporting goods retail business is very brand name driven. Accordingly, we
maintain relationships with a number of well known sporting goods vendors to
satisfy customer demand. We believe that our stores are among the primary
retail distribution alternatives for brand name vendors that seek to reach
Hibbett's target markets. As a result, we are able to attract considerable
vendor interest and establish long-term partnerships with vendors. As our
vendors expand their product lines and grow in popularity, we expand sales and
promotions of these products within our stores. In addition, as we continue to
increase our store base and enter new markets, the vendors have increased their
brand presence within these regions. We also emphasize and work with our
vendors to establish the most favorable pricing and to receive cooperative
marketing funds. Our management believes that Hibbett maintains excellent
working relationships with vendors. During fiscal 2001, our largest vendor,
Nike, represented approximately 26% of our total purchases.
The loss of key vendor support could be detrimental to our business, financial
condition and results of operations. We believe that we have long-standing and
strong relationships with our vendors and that we have adequate sources of brand
name merchandise on competitive terms; however, we cannot guarantee that we will
be able to acquire such merchandise at competitive prices or on competitive
terms in the future. In this regard, certain merchandise that is high profile
and in high demand may be allocated by vendors based upon the vendors' internal
criteria, which are beyond our control.
Advertising and Promotion
We target special advertising opportunities in our markets to increase the
effectiveness of our advertising budget. In particular, we prefer advertising
in local media as a way to further differentiate Hibbett from national chain
competitors. Substantially all of our advertising and promotional spending is
centrally directed, with some funds allocated to district managers on an as-
requested basis. Print advertising, including newspaper ads, inserts, and
direct mail to customers, serves as the foundation of our promotional program
and accounted for the majority of our total advertising costs in fiscal 2001.
Other media such as local radio, television and outdoor billboards are used to
reinforce Hibbett's name recognition and brand awareness in the community.
Distribution
We maintain a single 220,000 square foot distribution center in Birmingham,
Alabama, which services our existing stores. The distribution process is
centrally managed from our corporate headquarters, which is located in the same
building as the distribution center. To support our continued expansion, we
added approximately 90,000 square feet to the facility in fiscal 2000. We
believe strong distribution support for our stores is a critical element of our
expansion strategy and is central to our ability to maintain a low cost
operating structure. As we continue to expand our store base, we intend to open
new stores in locations that can be supplied from our existing distribution
center.
We receive substantially all of our merchandise at our distribution center.
For key products, we maintain backstock at the distribution center that is
allocated and distributed to stores through an automatic replenishment program
based on items sold during the prior week. Merchandise is typically delivered
to stores weekly via Company-operated vehicles.
Competition
The business in which we are engaged is highly competitive. Many of the items
that we offer in our stores are also sold by local sporting goods stores,
department and discount stores, athletic footwear and other specialty athletic
stores, traditional shoe stores and national and regional full-line sporting
goods stores. The marketplace for sporting goods remains highly fragmented as
many different retailers compete for market share by utilizing a variety of
store formats and merchandising strategies. In recent years, there has
5
been significant consolidation of large format retailers in large metropolitan
markets. However, we believe that the competitive environment for sporting
goods remains different in small to mid-sized markets where retail demand may
not support larger format stores. In smaller markets, such as those targeted by
Hibbett, national chains compete by focusing on a specialty category like
athletic footwear in the case of Foot Locker and Foot Action. Many of the
stores with which we compete are units of these national chains that have
substantially greater financial and other resources than we do.
Hibbett Sports format stores compete with national chains that focus on
athletic footwear, local sporting goods stores, department and discount stores,
traditional shoe stores and mass merchandisers. Although our Hibbett Sports
format may face competition from a variety of competitors, we believe that our
Hibbett Sports format is able to compete effectively by distinguishing itself as
a full-line sporting goods store with an emphasis on team and individual sports
merchandise complemented by a selection of localized apparel and accessories.
The larger markets targeted by Sports & Co. superstores are also highly
competitive. Our Sports & Co. superstores compete with sporting goods
superstores, athletic footwear superstores and mass merchandisers. Competitors
of Sports & Co. superstores may carry similar product lines and national brands
and a broader assortment, but we believe the principal competitive factors in
its markets are service, breadth of merchandise offered availability of brand
names, availability of local merchandise and price. We believe we compete
favorably with respect to these factors in the small to mid-sized markets
predominantly in the Southeast. However, we cannot guarantee that we will
continue to be able to compete successfully against existing or future
competitors. Expansion into markets served by our competitors, entry of new
competitors or expansion of existing competitors into our markets, could be
detrimental to our business, financial condition and results of operations.
Employees
As of February 3, 2001, we employed approximately 962 full-time and
approximately 1,559 part-time employees, none of whom are represented by a labor
union. The number of part-time employees fluctuates depending on seasonal
needs. We cannot guarantee that our employees will not, in the future, elect to
be represented by a union. We consider our relationship with our employees to
be good and have not experienced significant interruptions of operations due to
labor disagreements.
Item 2. Properties
We currently lease all of our existing 282 store locations and expect that our
policy of leasing rather than owning will continue as we expand. Our leases
typically provide for a short initial lease term with options on the part of
Hibbett to extend. We believe that this lease strategy enhances our flexibility
to pursue various expansion opportunities resulting from changing market
conditions and to periodically re-evaluate store locations. Our ability to open
new stores is contingent upon locating satisfactory sites, negotiating favorable
leases and recruiting and training additional qualified management personnel.
As current leases expire, we believe that we will be able either to obtain
lease renewals if desired for present store locations or to obtain leases for
equivalent or better locations in the same general area. To date, we have not
experienced any significant difficulty in either renewing leases for existing
locations or securing leases for suitable locations for new stores. Our leases
may contain certain provisions with which we may not be in compliance. Based
primarily on our belief that we maintain good relations with our landlords, that
most of our leases are at market rents and that we have historically been able
to secure leases for suitable locations, we believe that these provisions will
not be detrimental to our business or financial condition.
Our offices and the distribution center are leased under a long term operating
lease. Team Sales owns its warehousing and distribution center located in
Birmingham, Alabama.
6
Item 3. Legal Proceedings
Hibbett is a party to various legal proceedings incidental to our business. In
the opinion of management, after consultation with legal counsel, the ultimate
liability, if any, with respect to those proceedings is not presently expected
to materially affect the business, financial position or results of operations
of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded on the NASDAQ National Market (NASDAQ)
under the symbol HIBB. The following table sets forth, for the periods
indicated the high and low closing sales prices of shares of the Common Stock as
reported by NASDAQ.
High Low
--------- --------
Fiscal 2001:
First Quarter (January 30 to April 29) $24 1/4 $13 5/8
Second Quarter (April 30 to July 29) $25 1/2 $19 3/8
Third Quarter (July 30 to October 28) $27 3/8 $21 3/4
Fourth Quarter (October 29 to February 3) $36 13/16 $23 3/4
Fiscal 2000: High Low
--------- --------
First Quarter (January 31 to May 1) $28 1/8 $17 9/16
Second Quarter (May 2 to July 31) $29 11/16 $20 1/4
Third Quarter (August 1 to October 30) $20 1/4 $15 5/8
Fourth Quarter (October 31 to January 29) $19 9/32 $12 3/4
On April 5, 2001, the last reported sale price for the Company's common stock
as quoted by NASDAQ was $28.625 per share. As of April 5, 2001, the Company had
approximately 40 registered shareholders.
We have never declared or paid any dividends on our common stock. We
currently intend to retain our future earnings to finance the growth and
development of our business, and therefore we do not anticipate declaring or
paying cash dividends on our common stock for the foreseeable future. Any
future decision to declare or pay dividends will be at the discretion of the
Board of Directors and will be dependent upon our financial condition, results
of operations, capital requirements, and such other factors as the Board of
Directors deems relevant.
Item 6. Selected Consolidated Financial and Operating Data
The information required is incorporated by reference from page 12 of the
Company's 2001 Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required is incorporated by reference from pages 13 to 17 of
the Company's 2001 Annual Report to Stockholders.
7
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
The information required is incorporated by reference from page 16 of the
Company's 2001 Annual Report to Stockholders.
Item 8. Consolidated Financial Statements and Supplementary Data
The information required is incorporated by reference from pages 18 to 27 of
the Company's 2001 Annual Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of Registrant
The information required is incorporated by reference from the sections
entitled "Directors and Executive Officers", "The Board of Directors", and
"Certain Relationships and Related Transactions" in the Proxy Statement for the
Annual Meeting of Stockholders to be held June 6, 2001 (the "Proxy Statement"),
which is to be filed with the Securities and Exchange Commission.
Item 11. Executive Compensation
The information required is incorporated by reference from the section
entitled "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required is incorporated by reference from the sections
entitled "Security Ownership of Certain Beneficial Owners" and "Directors and
Executive Officers" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required is incorporated by reference from the section
entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report:
1. Financial Statements:
The following Financial Statements and Supplementary Data of the
Registrant and Independent Auditors' Report on such Financial
Statements are incorporated by reference from the Company's 2001 Annual
Report to Stockholders, in Part II, Item 8:
Consolidated Balance Sheets as of February 3, 2001 and January 29, 2000
8
Consolidated Statements of Operations for the fiscal years ended February
3, 2001, January 29, 2000 and January 30, 1999
Consolidated Statements of Stockholders' Investment for the fiscal years
ended February 3, 2001, January 29, 2000 and January 30, 1999
Consolidated Statements of Cash Flows for the fiscal years ended
February 3, 2001, January 29, 2000 and January 30, 1999
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
2. Financial Statement Schedules:
The following consolidated financial statement schedule of Hibbett Sporting
Goods, Inc. is attached hereto:
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable, and
therefore have been omitted.
3. Exhibits.
The Exhibits listed on the accompanying Exhibits Index are filed as part
of, or incorporated by reference into, this report.
EXHIBITS INDEX
Exhibit #
- ---------
3.1 Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K
for the fiscal year ended February 1, 1997 (the "1997 10-K")).
3.2 Bylaws of the Company (incorporated herein by reference to Exhibit 3.2
of the 1997 10-K).
10.1.1 Credit Agreement dated as of November 5, 1998 between the Company,
Hibbett Team Sales, Inc., Sports Wholesale, Inc., AmSouth Bank,
NationsBank, N.A. and BankBoston, N.A (incorporated by reference to
Exhibit 10.1 of the Company's Annual Report on Form 10-K for the fiscal
year ended January 30,1999 (the "1999 10-K")).
10.1.2 + First Amendment to Credit Agreement dated as of April 17, 2000, between
Hibbett Sporting Goods, Inc., Hibbett Team Sales, Inc., Sports
Wholesale, Inc., Bank of America, N.A, Fleet National Bank, and AmSouth
Bank.
10.1.3 + Second Amendment to Credit Agreement dated as of November 30, 2000,
between Hibbett Sporting Goods, Inc., Hibbett Team Sales, Inc., Sports
Wholesale, Inc., Bank of America, N.A, Fleet National Bank, and AmSouth
Bank.
10.2.1 Credit Agreement dated as of November 5, 1998 between the Company,
Hibbett Team Sales, Inc., Sports Wholesale, Inc. and AmSouth Bank
(incorporated by reference to Exhibit 10.2 of the 1999 10-K).
9
10.2.2 + First Amendment to Credit Agreement dated as of November 17, 1999,
between Hibbett Sporting Goods, Inc., Hibbett Team Sales, Inc., Sports
Wholesale, Inc. and AmSouth Bank.
10.2.3 + Second Amendment to Credit Agreement dated as of April 17, 2000,
between Hibbett Sporting Goods, Inc., Hibbett Team Sales, Inc., Sports
Wholesale, Inc. and AmSouth Bank.
10.2.4 + Third Amendment to Credit Agreement dated as of November 30, 2000,
between Hibbett SportingGoods, Inc., Hibbett Team Sales, Inc., Sports
Wholesale, Inc. and AmSouth Bank.
10.3 Letter Agreement dated November 1, 1995 between the Company and
Saunders, Karp & Co., L.P (incorporated by reference to Exhibit 10.3 of
the Company's Registration Statement on Form S-1 (Registration No. 333-
07023), filed with the Securities and Exchange Commission on June 27,
1996) ("the 1996 S-1")).
10.4 The Company's Stock Option Plan (as amended effective as of September
13, 1996) (incorporated by reference to Exhibit 10.7 of Amendment No. 2
to the Company's Registration Statement on Form S-1 (Registration No.
333-07023), filed with the Securities and Exchange Commission on
September 16, 1996) ("Amendment No. 2 to the 1996 S-1")).
10.5 The Company's Amended and Restated 1996 Stock Option Plan (incorporated
by reference to Exhibit 10.8 of Amendment No. 2 to the 1996 S-1).
10.6 The Company's Employee Stock Purchase Plan dated September 13, 1996
(incorporated by reference to Exhibit 10.10 of Amendment No. 2 to the
1996 S-1).
10.7 The Company's Stock Plan for Outside Directors (incorporated by
reference to Exhibit 10.11 of Amendment No. 2 to the 1996 S-1).
10.8.1 Lease Agreement dated as of February 12, 1996 between QRS 12-14 (AL),
Inc. and Sports Wholesale, Inc. (the "Lease Agreement") (incorporated
by reference to Exhibit 10.9 of the 1996 S-1).
10.8.2 First Amendment to Lease Agreement dated December 30, 1999 between QRS
11-41 (AL), Inc. and Sports Wholesale, Inc. (incorporated herein by
reference to Exhibit 10.9.2 of the Company Annual Report on Form 10-K
for fiscal year ended January 29, 2000).
10.9 Letter from the Company to Clyde B. Anderson dated September 13, 1996
re: Consulting Agreement (incorporated herein by reference to Exhibit
10.12 of Amendment No. 2 to the 1996 S-1).
13.1 + Fiscal 2001 Annual Report to Shareholders.
21 List of Company's Subsidiaries (incorporated herein by reference to
Exhibit 21 of the 1996 S-1).
23.1 + Consent of Arthur Andersen LLP
+ Filed herewith
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by us during the three months ended
February 3, 2001.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HIBBETT SPORTING GOODS, INC.
By: /s/ Michael J. Newsome
---------------------------------------
Michael J. Newsome, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
- ----------------------------------------------------- ----------------------------------- ----------------------
/s/ Michael J. Newsome Principal Executive Officer and April 30, 2001
- ----------------------------------------------------- Director ----------------------
Michael J. Newsome
/s/ Tommy J. Schifanella Principal Financial Officer and April 30, 2001
- ----------------------------------------------------- Principal Accounting Officer ----------------------
Tommy J. Schifanella
/s/ Clyde B. Anderson Director April 30, 2001
- ----------------------------------------------------- ----------------------
Clyde B. Anderson
April 30, 2001
/s/ H. Ray Compton Director ----------------------
- -----------------------------------------------------
H. Ray Compton
/s/ F. Barron Fletcher, III Director April 30, 2001
- ----------------------------------------------------- ----------------------
F. Barron Fletcher, III
/s/ Carl Kirkland Director April 30, 2001
- ----------------------------------------------------- ----------------------
Carl Kirkland
/s/ John F. Megrue Director April 30, 2001
- ----------------------------------------------------- ----------------------
John F. Megrue
/s/ Thomas A. Saunders, III Director April 30, 2001
- ----------------------------------------------------- ----------------------
Thomas A. Saunders, III
11
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Schedules and Exhibits
to
Annual Report
on
Form 10-K
for the Fiscal Year Ended
February 3, 2001
HIBBETT SPORTING GOODS, INC.
================================================================================
12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To Hibbett Sporting Goods, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of HIBBETT SPORTING GOODS,
INC. (a Delaware corporation) AND SUBSIDIARIES, included in this Form 10-K and
have issued our report thereon dated March 15, 2001. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. Schedule II included in Item 14 of the Form 10-K is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 15, 2001
13
HIBBETT SPORTING GOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 3, 2001, JANUARY 29, 2000, AND JANUARY 30, 1999
Fiscal Year Ended
--------------------------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
------------------ --------------- -----------------
Balance of allowance for doubtful accounts
at beginning of period $279,000 $224,000 $184,000
Charged to costs and expenses - 73,900 85,400
Write-offs, net of recoveries (24,000) (18,900) (45,400)
-------- -------- --------
Balance of allowance for doubtful accounts
at end of period $255,000 $279,000 $224,000
======== ======== ========
14
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(Dollars In Thousands, Except Per Share Amounts)
February 3, January 29, January 30, January 31, February 1,
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
Income Statement Data:
- ----------------------
Net sales $ 209,626 $ 174,312 $ 143,350 $ 113,563 $ 86,401
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 145,800 121,962 100,409 78,714 60,017
---------- ---------- ---------- ---------- ----------
Gross profit 63,826 52,350 42,941 34,849 26,384
Store operating, selling, and administrative
expenses 40,789 34,142 28,720 22,947 17,339 (1)
Depreciation and amortization 4,802 3,762 3,056 2,286 1,821
---------- ---------- ---------- ---------- ----------
Operating income 18,235 14,446 11,165 9,616 7,224
Interest expense, net 830 422 141 8 (2) 2,642
---------- ---------- ---------- ---------- ----------
Income before provision for income
taxes and extraordinary item 17,405 14,024 11,024 9,608 4,582
Provision for income taxes 6,593 5,364 4,234 3,675 1,752
---------- ---------- ---------- ---------- ----------
Income before extraordinary item 10,812 8,660 6,790 5,933 2,830
Extraordinary item, net - - - - (1,093)(2)
---------- ---------- ---------- ---------- ----------
Net income $ 10,812 $ 8,660 $ 6,790 $ 5,933 $ 1,737
========== ========== ========== ========== ==========
Earnings per common share:
Basic:
Income before extraordinary item $ 1.67 $ 1.35 $ 1.06 $ 0.95 $ 0.62
Extraordinary item, net - - - - (0.24)(2)
---------- ---------- ---------- ---------- ----------
Net income $ 1.67 $ 1.35 $ 1.06 $ 0.95 $ 0.38
========== ========== ========== ========== ==========
Diluted:
Income before extraordinary item $ 1.63 $ 1.33 $ 1.04 $ 0.93 $ 0.61
Extraordinary item, net - - - - (0.24)(2)
---------- ---------- ---------- ---------- ----------
Net income $ 1.63 $ 1.33 $ 1.04 $ 0.93 $ 0.37
Weighted average shares outstanding:
Basic 6,466,279 6,427,745 6,403,922 6,227,415 4,552,118
Diluted 6,626,384 6,529,980 6,557,273 6,362,755 4,671,268
Selected Operating Data:
- ------------------------
Number of stores open at end of period:
Hibbett Sports 261 206 156 107 77
Sports & Co. 4 4 4 4 4
Sports Additions 17 13 11 9 8
---------- ---------- ---------- ---------- ----------
Total 282 223 171 120 89
========== ========== ========== ========== ==========
Balance Sheet Data:
- -------------------
Working capital $ 51,684 $ 37,831 $ 29,127 $ 25,649 $ 16,280
Total assets 101,252 63,278 68,552 53,366 40,358
Total debt 9,748 4,391 - - - (2)
Stockholders' investment 66,665 54,201 45,260 38,155 26,512 (2)
15
Footnotes (dollars in thousands):
(1) Includes a $513 pre-tax gain on the sale of the Company's former
headquarters and distribution facility and a one-time pre-tax compensation
expense of $462 related to stock options issued on August 1, 1996.
(2) During the third quarter of fiscal 1997 ended November 2, 1996, the Company
completed its initial public offering with net proceeds of $32,868. In
connection therewith, a substantial portion of the Company's long-term debt
was repaid resulting in an extraordinary loss of $1,093 (net of applicable
tax benefit of $677).
16
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
Hibbett Sporting Goods, Inc. ("we" or "Hibbett") is a rapidly-growing operator
of full-line sporting goods stores in small to mid-sized markets predominantly
in the southeastern United States. Our stores offer a broad assortment of
quality athletic equipment, footwear and apparel at competitive prices with
superior customer service. Our merchandise assortment features a broad
selection of brand name merchandise emphasizing team and individual sports
complemented by a selection of localized apparel and accessories designed to
appeal to a wide range of customers within each market. Our management team
believes that our stores are among the primary retail distribution alternatives
for brand name vendors that seek to reach our target markets.
As of February 3, 2001 we operated 261 Hibbett Sports stores as well as
seventeen smaller-format Sports Additions athletic shoe stores and four larger-
format Sports & Co. superstores in 19 states. Our primary retail format and
growth vehicle is Hibbett Sports a 5,000 square foot store located in enclosed
malls and dominant strip centers. We target markets with county populations
that range from 30,000 to 250,000. By targeting smaller markets, we believe
that we achieve significant strategic advantages, including numerous expansion
opportunities, comparatively low operating costs and a more limited competitive
environment than generally faced in larger markets. In addition, we establish
greater customer and vendor recognition as the leading full-line sporting goods
retailer in these local communities. Although competitors in some markets may
carry similar product lines and national brands, we believe that the Hibbett
Sports stores are typically the primary, full-line sporting goods retailers in
their markets due to the extensive selection of traditional team and individual
sports merchandise offered and a high level of customer service.
In fiscal 1994, we began to accelerate our rate of new store-openings to take
advantage of the growth opportunities in our target markets. Since fiscal 1994,
we have grown our store base from 49 to 282 stores. Our expansion strategy is
to continue to open Hibbett Sports stores in our target markets. We plan to
open approximately 65 Hibbett Sports stores in fiscal 2002.
Hibbett operates on a 52 or 53 week fiscal year ending on the Saturday nearest
to January 31 of each year. The consolidated statements of operations for
fiscal years ended January 29, 2000, and January 30, 1999, include 52 weeks of
operations, while the fiscal year ended February 3, 2001, includes 53 weeks of
operations. Hibbett is incorporated under the laws of the State of Delaware.
Results of Operations
The following table sets forth consolidated statements of operations
expressed as a percentage of net sales for the periods indicated:
Fiscal Year Ended
------------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------
Net sales 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 69.6 70.0 70.0
----- ----- -----
Gross profit 30.4 30.0 30.0
Store operating, selling, and administrative expenses 19.4 19.6 20.0
Depreciation and amortization 2.3 2.1 2.1
----- ----- -----
Operating income 8.7 8.3 7.9
Interest expense, net 0.4 0.2 0.1
----- ----- -----
Income before provision for income taxes 8.3 8.1 7.8
Provision for income taxes 3.1 3.1 3.0
----- ----- -----
Net income 5.2% 5.0% 4.8%
===== ===== =====
17
Fiscal 2001 Compared to Fiscal 2000
Net sales. Net sales increased $35.3 million, or 20.3%, to $209.6 million for
the 53 weeks ended February 3, 2001, from $174.3 million for the 52 weeks ended
January 29, 2000. The increase is attributable to the opening of 58 Hibbett
Sports stores, four Sports Additions stores, a 2.0% increase in comparable store
net sales and an additional week of sales in fiscal 2001. The increase in
comparable store net sales was due primarily to increased equipment and
accessory sales. The additional week of sales, new stores and stores not in the
comparable store net sales calculation accounted for $32.4 million of the
increase in net sales, and increases in comparable store net sales contributed
$2.9 million. During fiscal 2001, we closed three Hibbett Sports stores.
Comparable store net sales data for the period reflect sales for our traditional
format stores open throughout the period and the corresponding period of the
prior fiscal year.
Gross profit. Cost of goods sold includes the cost of inventory, occupancy
costs for stores and occupancy and operating costs for the distribution center.
Gross profit was $63.8 million, or 30.4% of net sales, in the 53 weeks ended
February 3, 2001, as compared to $52.4 million, or 30.0% of net sales, in the
prior fiscal year. The increase in gross profit as a percentage of net sales
was primarily the result of higher product margins.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $40.8 million, or 19.4% of net sales,
in fiscal 2001 as compared to $34.1 million, or 19.6% of net sales, in fiscal
2000. The decrease in store operating, selling and administrative expenses as a
percentage of net sales in fiscal 2001 is attributable to improved leveraging of
administrative costs over increased sales.
Depreciation and amortization. Depreciation and amortization as a percentage
of net sales was 2.3% in the 53 weeks ended February 3, 2001, and 2.1% in the 52
weeks ended January 29, 2000. The increase as a percentage of sales is
primarily attributable to depreciation associated with the warehouse expansion
last year.
Interest expense, net. Net interest expense for the 53 weeks ended February
3, 2001, was $830,000 compared to $422,000 in the prior year period. The
increase is attributable to higher levels of borrowing on the Company's
revolving credit facilities in the current fiscal year to fund working capital
requirements and new store growth.
Fiscal 2000 Compared to Fiscal 1999
Net sales. Net sales increased $31.0 million, or 21.6%, to $174.3
million for the 52 weeks ended January 29, 2000, from $143.4 million for the 52
weeks ended January 30, 1999. The increase is attributable to the opening of 50
Hibbett Sports stores, two Sports Additions stores, and a 2.8% increase in
comparable store net sales. The increase in comparable store net sales was due
primarily to increased equipment sales, particularly baseball and softball
equipment due to the growing popularity of these sports and our emphasis
thereon. New stores and stores not in the comparable store net sales
calculation accounted for $28.0 million of the increase in net sales, and
increases in comparable store net sales contributed $3.0 million. During fiscal
2000, we also closed one Hibbett Sports store and reopened one that had been
temporarily closed.
Gross profit. Cost of goods sold includes the cost of inventory, occupancy
costs for stores and occupancy and operating costs for the distribution center.
Gross profit was $52.4 million, or 30.0% of net sales, in the 52 weeks ended
January 29, 2000, as compared to $42.9 million, or 30.0% of net sales, in the
prior fiscal year. Increased product margins were offset by higher store
occupancy costs as a percentage of net sales as a result of the increased number
of new stores in the store base. Higher product margins resulted from lower
markdowns on winter apparel as compared to the previous year when apparel
margins were negatively impacted by unusual weather patterns.
18
Store operating, selling and administrative expenses. Store operating, selling
and administrative expenses were $34.1 million, or 19.6% of net sales, in fiscal
2000 as compared to $28.7 million, or 20.0% of net sales, in fiscal 1999. The
decrease in store operating, selling and administrative expenses as a percentage
of net sales in fiscal 2000 is attributable to improved leveraging of
administrative costs over increased sales.
Depreciation and amortization. Depreciation and amortization as a percentage
of net sales was 2.1% in the 52 weeks ended January 29, 2000 and January 30,
1999.
Interest expense, net. Net interest expense for the 52 weeks ended January 29,
2000 was $422,000 compared to $141,000 in the prior year period. The increase is
attributable to higher levels of borrowing on the Company's revolving credit
facilities in fiscal 2000 to fund the distribution center expansion and new
store openings.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings 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 quarter of our fiscal year. Historically, we have funded
our cash requirements primarily through cash flow from operations and borrowings
under our revolving credit facilities.
Net cash provided by operating activities has historically been driven by net
income levels combined with fluctuations in inventory and accounts payable
balances. Net income has increased in each of the last three fiscal years. In
addition, we have continued to increase our inventory levels throughout these
periods as the number of stores has increased. These inventory increases were
primarily financed with cash from operations in each of the last three fiscal
years. These activities resulted in cash flows provided by operating activities
of $3.1 million, $3.6 million, and $2.6 million in fiscal 2001, fiscal 2000, and
fiscal 1999, respectively.
With respect to cash flows from investing activities, capital expenditures for
fiscal 2001 were $8.6 million compared with $10.6 million in fiscal 2000 and
$6.3 million in fiscal 1999. Capital expenditures in fiscal 2001 resulted
primarily from the opening of 58 new Hibbett Sports stores and four Sports
Additions stores, certain store remodels, and office and distribution center
expenditures. Capital expenditures in fiscal 2000 included $3.7 million for
construction and equipment costs for the warehouse expansion.
The Company estimates capital expenditures in fiscal 2002 to be approximately
$9.9 million which will fund the opening of approximately 65 Hibbett Sports
stores, remodel selected existing stores, and fund headquarters and distribution
center related capital expenditures.
Net cash provided by financing activities was $6.4 million, $4.6 million, and
$127,000 in fiscal 2001, fiscal 2000, and fiscal 1999, respectively. Cash flows
from financing activities have historically represented the Company's financing
of its long-term growth. The increase of revolving loan borrowings and
repayments in fiscal 2001 was used to finance new store openings and related
working capital requirements. In fiscal 2001, the Company received $1.1
million, excluding the related tax benefit, from proceeds related to stock
options exercised and shares issued under the employee stock purchase plan.
Hibbett maintains an unsecured revolving credit facility which will expire
November 5, 2003 and allows borrowings up to $35 million. We also maintain an
unsecured working capital line of credit for $7 million which is subject to
annual renewal. As of February 3, 2001, we had $9.7 million outstanding under
these facilities. Based on our current operating and store opening plans,
management believes that we can adequately fund our cash needs for the
foreseeable future through borrowings under the credit facility, the working
capital line of credit and cash generated from operations.
19
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In June 1999, the FASB issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133, which amends FASB Statement No. 133 to be effective
for all fiscal years beginning after June 15, 2000 (January 1, 2001 for
companies with calendar-year fiscal years). This statement did not have a
material effect on the Company's consolidated financial statements.
Dividend Policy
Hibbett has never declared or paid any dividends on its common stock. We
currently intend to retain our future earnings to finance the growth and
development of our business, and therefore we do not anticipate declaring or
paying cash dividends on our common stock for the foreseeable future. Any future
decision to declare or pay dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of
operations, capital requirements and other factors, as the Board of Directors
deems relevant.
Market Risk
The Company's financial condition, results of operations and cash flows are
subject to market risk from interest rate fluctuations on its revolving credit
facility and working capital line of credit, each of which bears interest at
rates that vary with LIBOR, prime or quoted cost of funds rates. The average
amount of borrowings outstanding under these agreements during fiscal 2001 was
$9,386,748, the maximum amount outstanding was $22,405,744 and the weighted
average interest rate was 7.68%. A 10% increase or decrease in market interest
rates would not have a material impact on the Company's financial condition,
results of operations or cash flows.
Special Note Regarding Forward Looking Statements
The statements contained in this report that are not purely historical or
which might be considered an opinion or projection concerning the Company or its
business, whether express or implied, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements may include statements regarding the Company's expectations,
intentions, plans or strategies regarding the future. All forward-looking
statements included in this document are based upon information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statements. It is important to note that the Company's
actual results could differ materially from those described or implied in such
forward-looking statements because of, among other factors, the ability of the
Company to execute its expansion plans, a shift in demand for the merchandise
offered by the Company, the Company's ability to obtain brand name merchandise
at competitive prices, the effect of regional or national economic conditions
and the effect of competitive pressures from other retailers. In addition, the
reader should consider the risk factors described from time to time in the
Company's other documents and reports, including the factors described under
"Risk Factors" in the Company's Registration Statement on Form S-1, filed with
the Securities and Exchange Commission on October 1, 1997, and any amendments
thereto.
20
Quarterly Fluctuations
The Company has historically experienced and expects to continue to experience
seasonal fluctuations in its net sales and operating income. The Company's net
sales and operating income are typically higher in the fourth quarter due to
sales increases during the holiday selling season. However, the seasonal
fluctuations are mitigated by the strong product demand in the spring, summer
and back-to-school sales periods. The Company's quarterly results of operations
may also fluctuate significantly as a result of a variety of factors, including
the timing of new store openings, the amount and timing of net sales contributed
by new stores, the level of pre-opening expenses associated with new stores, the
relative proportion of new stores to mature stores, merchandise mix, the
relative proportion of stores represented by each of the Company's three store
concepts and demand for apparel and accessories driven by local interest in
sporting events.
The following tables set forth certain unaudited financial data for the
quarters indicated:
Unaudited Quarterly Financial Data
(Dollar amounts in thousands, except per share amounts)
Fiscal Year Ended February 3, 2001
----------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (14 Weeks)
---------- ---------- ---------- ----------
Net sales $50,522 $46,626 $52,075 $60,403
Gross profit 15,392 13,693 15,833 18,908
Operating income 4,541 3,436 4,434 5,824
Net income $ 2,761 $ 2,020 $ 2,639 $ 3,392
======= ======= ======= =======
Basic earnings per common share $ 0.43 $ 0.31 $ 0.41 $ 0.52
======= ======= ======= =======
Diluted earnings per common share $ 0.42 $ 0.31 $ 0.40 $ 0.51
======= ======= ======= =======
Fiscal Year Ended January 29, 2000
----------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
--------- --------- ---------- ----------
Net sales $42,804 $39,342 $42,223 $49,943
Gross profit 12,992 11,485 12,806 15,067
Operating income 3,717 2,755 3,518 4,456
Net income $ 2,263 $ 1,638 $ 2,121 $ 2,638
======= ======= ======= =======
Basic earnings per common share $ 0.35 $ 0.26 $ 0.33 $ 0.41
======= ======= ======= =======
Diluted earnings per common share $ 0.35 $ 0.25 $ 0.33 $ 0.40
======= ======= ======= =======
In the opinion of our management, this unaudited information has been prepared
on the same basis as the audited information presented elsewhere herein and
includes all adjustments necessary to present fairly the information set forth
therein. The operating results from any quarter are not necessarily indicative
of the results to be expected for any future period.
21
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
February 3, January 29,
2001 2000
----------- -----------
Assets
Current Assets:
Cash and cash equivalents $ 1,884 $ 860
Accounts receivable, net 2,649 2,123
Inventories 70,058 58,066
Prepaid expenses and other 822 736
Refundable income taxes - 14
Deferred income taxes 1,110 718
-------- -------
Total current assets 76,523 62,517
-------- -------
Property and Equipment:
Land 24 24
Buildings 221 216
Equipment 15,318 13,202
Furniture and fixtures 10,978 8,752
Leasehold improvements 17,506 14,373
Construction in progress 995 156
-------- -------
45,042 36,723
Less accumulated depreciation & amortization 21,332 16,766
-------- -------
Total property and equipment 23,710 19,957
-------- -------
Noncurrent Assets:
Deferred income taxes 741 610
Other, net 278 194
-------- -------
Total noncurrent assets 1,019 804
-------- -------
Total Assets $101,252 $83,278
======== =======
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 18,268 $19,047
Accrued income taxes 1,859 546
Accrued expenses:
Payroll-related 2,640 3,044
Other 2,072 2,049
-------- -------
Total current liabilities 24,839 24,686
-------- -------
Long-Term Debt 9,748 4,391
-------- -------
Commitments and Contingencies
Stockholders' Investment:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, no shares outstanding - -
Common Stock, $.01 par value, 12,000,000 shares
authorized, 6,532,885 and 6,435,552 shares issued
and outstanding at February 3, 2001 and
January 29, 2000 respectively 65 64
Paid-in capital 55,928 54,277
Retained earnings (deficit) 10,672 (140)
-------- -------
Total stockholders' investment 66,665 54,201
-------- -------
Total Liabilities and Stockholders' Investment $101,252 $83,278
======== =======
The accompanying notes are an integral part of these
consolidated balance sheets.
22
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Amounts)
Fiscal Year Ended
----------------------------------------
February 3, January 29, January 30,
2001 2000 1999
(53 Weeks) (52 Weeks) (52 Weeks)
----------- ----------- ------------
Net sales $ 209,626 $ 174,312 $ 143,350
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 145,800 121,962 100,409
---------- ---------- ----------
Gross profit 63,826 52,350 42,941
Store operating, selling, and administrative
expenses 40,789 34,142 28,720
Depreciation and amortization 4,802 3,762 3,056
---------- ---------- ----------
Operating income 18,235 14,446 11,165
Interest expense, net 830 422 141
---------- ---------- ----------
Income before provision for income taxes 17,405 14,024 11,024
Provision for income taxes 6,593 5,364 4,234
---------- ---------- ----------
Net income $ 10,812 $ 8,660 $ 6,790
========== ========== ==========
Basic earnings per share $1.67 $1.35 $1.06
========== ========== ==========
Diluted earnings per share $1.63 $1.33 $1.04
========== ========== ==========
Weighted average shares outstanding:
Basic 6,466,279 6,427,745 6,403,922
========== ========== ==========
Diluted 6,626,384 6,529,980 6,557,273
========== ========== ==========
The accompanying notes are an integral part of these consolidated statements.
23
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(Dollars In Thousands)
Common Stock
---------------------- Retained
Number of Paid-In Earnings
Shares Amount Capital (Deficit)
--------- ------ ------- --------
BALANCE, January 31, 1998 6,393,977 $64 $53,681 $(15,590)
Net income - - - 6,790
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
including tax benefit 19,803 - 315 -
--------- --- ------- --------
BALANCE, January 30, 1999 6,413,780 64 53,996 (8,800)
Net income - - - 8,660
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
including tax benefit 21,772 - 281 -
--------- --- ------- --------
BALANCE, January 29, 2000 6,435,552 64 54,277 (140)
Net income - - - 10,812
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
including tax benefit 97,333 1 1,651 -
--------- --- ------- --------
BALANCE, February 3, 2001 6,532,885 $65 $55,928 $ 10,672
========= === ======= ========
The accompanying notes are an integral part of these consolidated statements.
24
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Fiscal Year Ended
-----------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,812 $ 8,660 $ 6,790
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,802 3,762 3,056
Deferred income taxes (523) (85) (273)
Loss on disposal of assets 16 25 20
(Increase) decrease in assets:
Accounts receivable, net (526) 21 (305)
Inventories (11,992) (10,372) (14,427)
Prepaid expenses and other (86) 66 (199)
Refundable income taxes 14 82 (49)
Other noncurrent assets (124) (6) (237)
Increase (decrease) in liabilities:
Accounts payable (779) 2,814 5,282
Accrued income taxes 1,313 (1,844) 1,805
Accrued expenses (381) 511 1,182
-------- -------- --------
Total adjustments (8,266) (5,026) (4,145)
-------- -------- --------
Net cash provided by operating activities 2,546 3,634 2,645
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,557) (10,619) (6,340)
Proceeds from sales of property and equipment 26 2,315 15
-------- -------- --------
Net cash (used in) investing activities (8,531) (8,304) (6,325)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings and repayments, net 5,357 4,391 -
Proceeds from options exercised and purchase of shares
under the employee stock purchase plan, including tax
benefit 1,652 194 127
-------- -------- --------
Net cash provided by financing activities 7,009 4,585 127
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,024 (85) (3,553)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 860 945 4,498
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,884 $ 860 $ 945
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 762 $ 401 $ 235
======== ======== ========
Income taxes, net of refunds $ 5,233 $ 6,942 $ 2,596
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
25
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Hibbett Sporting Goods, Inc. (the "Company") is an operator of full-line
sporting goods retail stores in small to mid-sized markets in the southeastern
United States. The Company's fiscal year ends on the Saturday closest to
January 31 of each year. The consolidated statements of operations for fiscal
years ended January 29, 2000, and January 30, 1999, include 52 weeks of
operations, while the fiscal year ended February 3, 2001, includes 53 weeks of
operations. The Company's merchandise assortment features a core selection of
brand name merchandise emphasizing team and individual sports complemented by a
selection of localized apparel and accessories designed to appeal to a wide
range of customers within each market.
Principles of Consolidation
The consolidated financial statements of the Company include its accounts and
the accounts of all wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect (1) the reported amounts of certain assets
and liabilities and disclosure of certain contingent assets and liabilities at
the date of the financial statements, and (2) the reported amounts of certain
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all short-term, highly liquid investments with original maturities of
three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market using the retail
inventory method of accounting, with cost determined on a first-in, first-out
basis and market based on the lower of replacement cost or estimated realizable
value. The Company's business is dependent to a significant degree upon close
relationships with its vendors. During fiscal 2001, the Company's largest
vendor, Nike, represented approximately 26% of its purchases.
Property and Equipment
Property and equipment are recorded at cost. It is the Company's policy to
depreciate assets acquired prior to January 28, 1995 using accelerated and
straight-line methods over their estimated service lives (3 to 10 years for
equipment, 5 to 10 years for furniture and fixtures, and 10 to 31.5 years for
buildings) and to amortize leasehold improvements using the straight-line method
over the periods of the applicable leases. Depreciation on assets acquired
subsequent to January 28, 1995 is provided using the straight-line method over
their estimated service lives (3 to 5 years for equipment, 7 years for furniture
and
26
fixtures, and 39 years for buildings) or, in the case of leasehold improvements,
10 years or over the lives of the respective leases, if shorter.
Maintenance and repairs are charged to expense as incurred. Costs of renewals
and improvements are capitalized by charges to property accounts and are
depreciated using applicable annual rates. The cost and accumulated depreciation
of assets sold, retired, or otherwise disposed of are removed from the accounts,
and the related gain or loss is credited or charged to income.
Store Opening Costs
Non-capital expenditures incurred in preparation for opening new retail stores
are expensed as incurred.
Stock-Based Compensation
Compensation cost is measured under the intrinsic value method in accordance
with Accounting Principles Bulletin No. 25. Pro forma disclosures of net income
and earnings per share are presented as if the fair value method had been
applied, as required under Statement of Financial Accounting Standards ("SFAS")
No. 123.
Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments,
management considers that the carrying amount approximates fair value for cash
and cash equivalents, receivables, short-term borrowings and accounts payable,
because of the short maturities of those instruments.
Advertising Costs
Costs incurred for producing and communicating advertising are expensed when
incurred.
Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by dividing
net income by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in earnings. Diluted EPS has been computed based on the weighted average number
of shares outstanding, including the effect of outstanding stock options, if
dilutive, in each respective year.
A reconciliation of the weighted average shares for basic and diluted EPS is
as follows:
Fiscal Year Ended
--------------------------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
------------ ----------- -----------
Weighted average shares outstanding:
Basic 6,466,279 6,427,745 6,403,922
Dilutive effect of stock options 160,105 102,235 153,351
--------- --------- ---------
Diluted 6,626,384 6,529,980 6,557,273
========= ========= =========
For the 53 week period ended February 3, 2001, 12,100 anti-dilutive options
were appropriately excluded from the computation. For the 52 week period ended
January 29, 2000, 94,600 anti-dilutive options were appropriately excluded from
the computation.
27
Accounting for the Impairment of Long-Lived Assets
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining balance of long-lived assets and
intangibles may be impaired and not recoverable. The Company's policy is to
recognize any impairment loss on long-lived assets as a charge to current income
when certain events or changes in circumstances indicate that the carrying value
of the assets may not be recoverable.
Prior Year Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. LONG-TERM DEBT
The Company maintains an unsecured revolving credit facility, which will
expire November 5, 2003 and allows borrowings up to $35 million. The Company
also maintains an unsecured working capital line of credit for $7 million, which
is subject to annual renewal (collectively, the "Debt Agreements"). As of
February 3, 2001, the Company had $9,748,000 outstanding under these facilities.
The average amount of borrowings outstanding under the Debt Agreements during
fiscal 2001 was $9,386,748, the maximum outstanding was $22,405,744, and the
weighted average interest rate was 7.68%. The average amount of Debt Agreements
during fiscal 2000 was $5,391,090, the maximum amount outstanding was
$14,155,468, and the weighted average interest rate was 6.48%. The average
amount of borrowings outstanding under the applicable loan agreements during
fiscal 1999 was $4,550,992, the maximum amount outstanding was $11,024,717, and
the weighted average interest rate was 6.49%.
The Company's Debt Agreements contain certain restrictive covenants common
to such agreements. The Company was in compliance with respect to all of its
covenants at February 3, 2001.
3. LEASES
The Company leases the premises for its retail sporting goods stores under
operating leases which expire in various years through the year 2009. Many of
these leases contain renewal options and require the Company to pay executory
costs (such as property taxes, maintenance, and insurance). Rental payments
typically include minimum rentals plus contingent rentals based on sales.
In February 1996, the Company entered into a sale-leaseback transaction to
finance its warehouse and office facilities. In December 1999, the related
operating lease was amended to include the fiscal 2000 expansion of these
facilities. The amended lease rate is $784,000 per year and will expire in
December 2014.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of February 3, 2001 are as follows:
Fiscal Year Ending
------------------
2002 $14,712,000
2003 13,769,000
2004 11,668,000
2005 9,102,000
2006 5,571,000
Thereafter 10,918,000
-----------
$65,740,000
===========
28
Rental expense for all operating leases consisted of the following:
Fiscal Year Ended
----------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------
Minimum rentals $12,969,000 $10,145,000 $8,049,500
Contingent rentals 1,043,000 833,000 790,000
----------- ----------- ----------
$14,012,000 $10,978,000 $8,839,500
=========== =========== ==========
4. PROFIT-SHARING PLAN
The Company maintains a 401(k) profit sharing plan (the "Plan") which permits
participants to make pretax contributions to the Plan. The Plan covers all
employees who have completed one year of service and who are at least 21 years
of age. Participants of the Plan may voluntarily contribute from 2% to 15% of
their compensation within certain dollar limits as allowed by law. These
elective contributions are made under the provisions of Section 401(k) of the
Internal Revenue Code which allows deferral of income taxes on the amount
contributed to the Plan. The Company's contribution to the Plan equals (1) an
amount determined at the discretion of the Board of Directors plus (2) a
matching contribution equal to a discretionary percentage of up to 6% of a
participant's compensation. Contribution expense for fiscal years 2001, 2000,
and 1999 was $344,000, $436,000 and $397,000, respectively.
5. RELATED-PARTY TRANSACTIONS
The Company's majority stockholder provides financial advisory services to the
Company. Such services include, but are not necessarily limited to, advice and
assistance concerning any and all aspects of the operation, planning, and
financing of the Company. Management fee expense under this arrangement was
$200,000 in fiscal 2001, fiscal 2000 and fiscal 1999.
The Company maintains a sublease for one store with an entity that is
controlled by a minority stockholder which expires in June 2008. Minimum lease
payments were $190,800 in fiscal 2001, fiscal 2000 and fiscal 1999. Future
minimum lease payments under this noncancelable sublease aggregate $1,415,100.
6. INCOME TAXES
A summary of the components of the provision for income taxes is as follows:
Fiscal Year Ended
----------------------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
---------- ---------- ----------
Federal:
Current $6,108,000 $4,648,000 $3,878,000
Deferred (423,000) (95,000) (190,000)
---------- ---------- ----------
5,685,000 4,553,000 3,688,000
---------- ---------- ----------
State:
Current 1,008,000 801,000 629,000
Deferred (100,000) 10,000 (83,000)
---------- ---------- ----------
908,000 811,000 546,000
---------- ---------- ----------
Provision for income taxes $6,593,000 $5,364,000 $4,234,000
========== ========== ==========
29
The provision for income taxes differs from the amounts computed by applying
federal statutory rates due to the following:
Fiscal Year Ended
------------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
---------- ---------- ------------
Tax provision computed at the federal
statutory rate (34%) $5,918,000 $4,768,000 $3,748,000
Effect of state income taxes, net of
benefits 574,000 592,000 439,000
Other 101,000 4,000 47,000
---------- ---------- ----------
$6,593,000 $5,364,000 $4,234,000
========== ========== ==========
Temporary differences which create deferred tax assets are detailed below:
February 3, 2001 January 29, 2000
------------------------------------------------------------------
Current Noncurrent Current Noncurrent
---------- ---------- ---------- ----------
Depreciation $ --- $741,000 $ --- $610,000
Inventory 399,000 --- 105,000 ---
Accruals 766,000 --- 653,000 ---
Other (55,000) --- (40,000) ---
---------- -------- -------- --------
Deferred tax asset $1,110,000 $741,000 $718,000 $610,000
========== ======== ======== ========
The Company has not recorded a valuation allowance for deferred tax assets as
realization is considered more likely than not.
7. STOCK OPTION AND STOCK PURCHASE PLANS
Stock Option Plans
The Company utilizes the intrinsic value method of accounting for stock
option grants. As the option exercise price is generally equal to the fair
value of the shares of common stock at the date of the option grant, no
compensation cost is recognized.
The Hibbett Sporting Goods, Inc. Employee Stock Option Plan, as amended
(the "Original Option Plan") authorizes the granting of stock options for the
purchase of up to 66,352 shares of common stock. Options granted vest over a
three-year period for 25,369 shares and a five-year period for 40,983 shares and
expire on the tenth anniversary of the date of grant. As of February 3, 2001,
8,198 of these options were outstanding.
In fiscal 1997, the Company adopted the Hibbett Sporting Goods, Inc. 1996
Stock Option Plan, as amended (the "1996 Option Plan"). The 1996 Option Plan
authorizes the granting of stock options for the purchase of up to 538,566
shares of common stock. Options granted vest over a five-year period and expire
on the tenth anniversary of the date of grant. As of February 3, 2001, a total
of 80,998 shares of the Company's authorized and unissued common stock were
reserved for future grants under the 1996 Option Plan, and options for 386,457
shares were outstanding at that date.
30
A summary of the status of the Company's stock option plans is as follows:
Fiscal Year Ended
--------------------------------------------------------------------------------------
February 3, 2001 January 29, 2000 January 30, 1999
-------------------------- -------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------------------------- -------------------------- --------------------------
Outstanding at beginning
of year 398,610 $16.54 302,571 $15.46 244,088 $10.83
Granted 95,100 15.75 118,650 18.09 77,000 27.71
Exercised (91,413) 9.45 (16,619) 6.92 (16,579) 3.73
Forfeited (7,642) 17.61 (5,992) 19.33 (1,938) 20.25
------- ------ -------- ------ ------- ------
Outstanding at end of
year 394,655 $17.97 398,610 $16.54 302,571 $15.46
======= ====== ======= ====== ======= ======
Exercisable at end of
year 123,005 $17.61 134,710 $12.78 93,749 $ 9.75
======= ====== ======= ====== ======= ======
Weighted average fair
value of options
granted $12.65 $10.70 $16.51
====== ====== ======
The following table summarizes information about stock options outstanding at
February 3, 2001:
Options Outstanding Options Exercisable
------------------------------------------------------ ---------------------------------
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Exercisable at Average
Range of February 3, Contractual Exercise February 3, Exercise
Exercise Prices 2001 Life (Years) Price 2001 Price
--------------- ------------- ----------- --------- -------------- ---------
$6.10 24,916 5.9 $ 6.10 16,107 $ 6.10
$15.00 to $17.75 283,739 7.9 $16.31 76,998 $16.15
$20.25 to $28.00 86,000 8.4 $26.90 29,900 $27.57
Compensation costs of $50,000 were accrued in fiscal 2001, 2000, and 1999,
related to the difference in the estimated market value of the stock and the
nonqualified option exercise price, including the related tax benefit. As these
options are exercised, the excess of the proceeds and accruals over the par
value is credited to paid-in capital. Additionally, the tax benefit associated
with 1) the exercise of nonqualified stock options and 2) disqualifying
dispositions of shares acquired in the Company's option plans, is also credited
to paid-in capital and amounted to $570,000 in fiscal 2001, $87,000 in fiscal
2000, and $188,000 in fiscal 1999.
If the Company had recorded compensation costs in accordance with SFAS No. 123
under the fair value based method (using the Black-Scholes option pricing
model), the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below:
Fiscal Year Ended
----------------------------------------------
February 3, January 29, January 30,
2001 2000 1999
----------- ----------- -----------
Net income--as reported $10,812 $8,660 $6,790
Net income--pro forma 10,206 8,293 6,499
Diluted earnings per share--as reported 1.63 1.33 1.04
Diluted earnings per share--pro forma 1.54 1.27 .99
31
The weighted average assumptions for determining compensation costs under the
fair value method include (i) a risk-free interest rate based on zero-coupon
governmental issues on each grant date with the maturity equal to the expected
term of the options (6.6%, 5.2% and 5.5% for fiscal 2001, 2000 and 1999,
respectively), (ii) an expected forfeiture rate of 7.0%, (iii) an expected stock
volatility of 56%, and (iv) no expected dividend yield.
Other Plans
On September 13, 1996, the Company adopted an Employee Stock Purchase Plan and
Outside Director Stock Plan reserving 75,000 shares and 50,000 shares of the
Company's common stock, respectively, for purchase by the employees and
directors at 85% and 100% of the fair value of the common stock, respectively.
On February 2, 2001, January 28, 2000 and January 29, 1999, the Company granted
7,500 options at exercise prices of $34.72, $18.31 and $17.75 (market value at
the date of grant) respectively, under the Outside Director Stock Plan. These
options vest immediately and expire on the earlier of the tenth anniversary of
the grant or one year from the date on which the director is no longer eligible.
The Employee Stock Purchase Plan became effective on April 1, 1997, and as of
February 3, 2001, 16,807 shares have been issued.
8. COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hibbett Sporting Goods, Inc.:
We have audited the accompanying consolidated balance sheets of HIBBETT
SPORTING GOODS, INC. (a Delaware corporation) AND SUBSIDIARIES as of February 3,
2001 and January 29, 2000, and the related consolidated statements of
operations, stockholders' investment, and cash flows for each of the three
fiscal years in the period ended February 3, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hibbett Sporting Goods, Inc.
and subsidiaries as of February 3, 2001 and January 29, 2000, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 3, 2001, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 15, 2001
33