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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 2, 2002 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 (ss.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 $199,388,668 at April 15, 2002,
based on the closing sale price of $25.49 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 15, 2002 was 10,031,433.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III are incorporated by reference from the
Company's definitive Proxy Statement for the 2002 Annual Meeting of
Stockholders, to be held June 5, 2002. Registrant's definitive Proxy Statement
will be filed with the Securities and Exchange Commission on or before April 30,
2002.
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 8
Item 7. Management's Discussion and Analysis of Financial Condition 9
and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 16
Item 8. Consolidated Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 29
PART III
Item 10. Directors and Executive Officers of Registrant 29
Item 11. Executive Compensation 29
Item 12. Security Ownership of Certain Beneficial Owners and Management 29
Item 13. Certain Relationships and Related Transactions 29
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 29
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 2, 2002, we operated 309 Hibbett Sports stores as well
as sixteen smaller-format Sports Additions athletic shoe stores and four
larger-format Sports & Co. superstores in 20 states. Over the past two years, we
have increased our store base by approximately 48%. 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 andcompetitive conditions of each
market. One hundred-eight Hibbett Sports stores are located in enclosed malls,
the majority of which are the only enclosed malls in the county, and the
remaining 201 are located in dominant strip centers.
2
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 quickly respond
to major sports events of local interest such as the 2001 Miami Hurricanes
national championship.
Sports Additions
Our sixteen Sports Additions stores are small, mall-based stores,
averaging 2,200 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.
Expansion Strategy
In fiscal 1994, we accelerated our rate of new store openings to take
advantage of the growth opportunities in our target markets. We have currently
identified approximately 500 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.
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:
3
(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
4
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. The Company's largest vendor, Nike, represented
approximately 27%, 26% and 30% of total purchases in fiscal 2002, 2001 and 2000,
respectively.
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 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 2002.
Other advertising means, such as outdoor billboards and Hibbett trucks, 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. Due to improved technology, increased productivity, and the
implementation of a new warehouse system, management believes that it can
service up to 550 stores out of this 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.
5
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 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 2, 2002, we employed approximately 1,020 full-time and
approximately 1,607 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 329 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.
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
6
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.
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
No matters were submitted to a vote of the Company's security holders
during the three months ended February 2, 2002.
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.
Fiscal 2002: High Low
---- ---
First Quarter (February 4 to May 5) $ 23.59 $ 15.42
Second Quarter (May 6 to August 4) $ 28.00 $ 13.80
Third Quarter (August 5 to November 3) $ 20.48 $ 14.45
Fourth Quarter (November 4 to February 2) $ 23.40 $ 16.13
Fiscal 2001: High Low
---- ---
First Quarter (January 30 to April 29) $ 16.17 $ 9.08
Second Quarter (April 30 to July 29) $ 17.00 $ 12.92
Third Quarter (July 30 to October 28) $ 18.25 $ 14.50
Fourth Quarter (October 29 to February 3) $ 24.54 $ 15.83
On April 15, 2002, the last reported sale price for the Company's
common stock as quoted by NASDAQ was $25.49 per share. As of April 15, 2002, the
Company had approximately 39 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.
7
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
(Dollars In Thousands, Except Per Share Amounts)
February 2, February 3, January 29, January 30, January 31,
2002 2001 2000 1999 1998
--------------- -------------- --------------- --------------- ---------------
(52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
Income Statement Data:
- ---------------------
Net sales $ 241,130 $ 209,626 $ 174,312 $ 143,350 $ 113,563
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 167,402 145,800 121,962 100,409 78,714
----------- ----------- ----------- ----------- -----------
Gross profit 73,728 63,826 52,350 42,941 34,849
Store operating, selling, and administrative
expenses 48,891 40,789 34,142 28,720 22,947
Depreciation and amortization 5,873 4,802 3,762 3,056 2,286
----------- ----------- ----------- ----------- -----------
Operating income 18,964 18,235 14,446 11,165 9,616
Interest expense, net 625 830 422 141 8
----------- ----------- ----------- ----------- -----------
Income before provision for income
taxes and extraordinary item 18,339 17,405 14,024 11,024 9,608
Provision for income taxes 6,786 6,593 5,364 4,234 3,675
----------- ----------- ----------- ----------- -----------
Net income $ 11,553 $ 10,812 $ 8,660 $ 6,790 $ 5,933
=========== =========== =========== =========== ===========
Earnings per common share:
Basic: $ 1.17 $ 1.11 $ 0.90 $ 0.71 $ 0.64
Diluted: $ 1.15 $ 1.09 $ 0.88 $ 0.69 $ 0.62
Weighted average shares outstanding:
Basic 9,875,182 9,699,419 9,641,618 9,605,883 9,341,123
Diluted 10,079,040 9,939,577 9,794,971 9,835,910 9,544,133
Selected Operating Data:
- -----------------------
Number of stores open at end of period:
Hibbett Sports 309 261 206 156 107
Sports & Co. 4 4 4 4 4
Sports Additions 16 17 13 11 9
----------- ----------- ----------- ----------- -----------
Total 329 282 223 171 120
=========== =========== =========== =========== ===========
Balance Sheet Data:
- ------------------
Working capital $ 56,334 $ 51,684 $ 37,831 $ 29,127 $ 25,649
Total assets 115,315 101,252 83,278 68,552 53,366
Total debt 3,903 9,748 4,391 - -
Stockholders' investment 80,063 66,665 54,201 45,260 38,155
8
Item 7. 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 2, 2002 we operated 309 Hibbett Sports stores as well as
sixteen smaller-format Sports Additions athletic shoe stores and four
larger-format Sports & Co. superstores in 20 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 accelerated 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 329 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 2003.
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 February 2, 2002 and January 29, 2000, 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.
Critical Accounting Policies
Inventory Valuation. Cost is assigned to store inventories using the retail
inventory method. In using this method, the valuation of inventories at cost and
the resulting gross margins are computed by applying a calculated cost-to-retail
ratio to the retail value of inventories. The retail method is an averaging
method that has been widely used in the retail industry and results in valuing
inventories at lower of cost or market when markdowns are taken as a reduction
of the retail value of inventories on a timely basis.
Inventory valuation methods require certain significant management
estimates and judgments. These include estimates of merchandise markdowns and
shrinkage, which significantly affect the ending inventory valuation at cost, as
well as the resulting gross margins. The averaging required in applying the
retail inventory method and the estimates of shrink and markdowns may, under
certain circumstances, result in differing cost figures. Inaccurate inventory
cost may be caused by applying the retail inventory to a group of products that
have differing characteristics related to gross margin and turnover.
9
The Company's accrual for shrink is based on the actual historical shrink
results of our most recent physical inventories. These estimates are compared to
actual results as physical inventory counts are taken and reconciled to the
general ledger. Store physical inventory counts are taken on a cyclical basis
and the distribution center physical inventory count is taken at the end of
December or in early January each year.
Management believes that the application of the retail inventory method
results in an inventory valuation that reasonably approximates cost and results
in carrying inventory at the lower of cost or market.
Accrued Expenses. On a monthly basis, certain material expenses are
estimated in an effort to record those expenses in the period incurred. The most
material estimate relates to payroll related expenses, insurance related
expenses and certain store level operating expenses, such as property taxes and
utilities. The company's expenses are estimated based on current activity and
historical results. Differences in management's estimates and assumptions could
result in an accrual materially different from the calculated accrual.
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 2, February 3, January 29,
2002 2001 2000
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 69.4 69.6 70.0
--------- --------- ---------
Gross profit 30.6 30.4 30.0
Store operating, selling, and administrative expenses 20.3 19.4 19.6
Depreciation and amortization 2.4 2.3 2.1
--------- --------- ---------
Operating income 7.9 8.7 8.3
Interest expense, net 0.3 0.4 0.2
--------- --------- ---------
Income before provision for income taxes 7.6 8.3 8.1
Provision for income taxes 2.8 3.1 3.1
--------- --------- ---------
Net income 4.8% 5.2% 5.0%
========= ========= =========
Fiscal 2002 Compared to Fiscal 2001
Net sales. Net sales increased $31.5 million, or 15.0%, to $241.1 million
for the 52 weeks ended February 2, 2002, from $209.6 million for the 53 weeks
ended February 3, 2001. The increase is attributable to the opening of 53
Hibbett Sports stores and a 2.7% increase in comparable store net sales for
fiscal 2002. The increase in comparable store net sales was due primarily to
increased footwear sales. Sales in new stores and stores not in the comparable
store net sales calculation accounted for $26.9 million of the increase in net
sales, and increases in comparable store net sales contributed $4.6 million of
the increase. During fiscal 2002, we closed five Hibbett Sports stores and one
Sports Addition store. 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.
10
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 $73.7 million, or 30.6% of net sales, in the 52 weeks ended
February 2, 2002, as compared to $63.8 million, or 30.4% of net sales, in the 53
week fiscal 2001 year. The increase in gross profit as a percentage of net sales
was primarily the result of higher product margins due to increased discounts
from our vendors, reduced freight costs and a reduction in inventory shrinkage.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $48.9 million, or 20.3% of net sales,
in fiscal 2002 as compared to $40.8 million, or 19.4% of net sales, in fiscal
2001. The increase in store operating, selling and administrative expenses as a
percentage of net sales in fiscal 2002 is attributable to the under-performance
of some of the smaller format stores opened in fiscal 2001.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales was 2.4% in the 52 weeks ended February 2, 2002, and
2.3% in the 53 weeks ended February 3, 2001.
Interest expense, net. Net interest expense for the 52 weeks ended February
2, 2002, was $625,000 compared to $830,000 in the prior 53 week year period. The
decrease is attributable to a reduction in borrowing rates throughout the year.
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 in Fiscal 2000.
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
11
borrowing on the Company's revolving credit facilities in the current fiscal
year to fund working capital requirements and new store growth.
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 $12.8 million, $2.5 million, and $3.6 million in fiscal 2002, fiscal 2001,
and fiscal 2000, respectively.
With respect to cash flows from investing activities, capital expenditures
for fiscal 2002 were $8.7 million compared with $8.6 million in fiscal 2001 and
$10.6 million in fiscal 2000. Capital expenditures in fiscal 2002 and fiscal
2001 resulted primarily from the opening of new Hibbett Sports 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 2003 to be
approximately $8.9 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 (used in) provided by financing activities was ($4.0 million),
$7.0 million, and $4.6 million in fiscal 2002, fiscal 2001, and fiscal 2000,
respectively. Cash flows from financing activities have historically represented
the Company's financing of its long-term growth. In fiscal 2002, the Company
received $1.4 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 2, 2002, we had $3.9 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.
The following table lists the aggregate maturities of various classes of
obligations and expiration amounts of various classes of commitments related to
Hibbett Sporting Goods, Inc. at February 2, 2002 (in millions):
12
Payments due under contractual obligations
Total F 2003 F 2004 F 2005 F 2006 F 2007
Long-term debt - revolving credit facility (1) $ 3,903 $ - $ 3,903 $ - $ - $ -
Operating Leases (2) 62,916 17,782 15,949 13,638 9,932 5,615
-------- ------- ------- ------- ------- -------
$ 66,819 $17,782 $19,852 $13,638 $ 9,932 $ 5,615
======== ======= ======= ======= ======= =======
(1) See "Long-term Debt" - Financial Statement Note 2.
(2) See ""Leases" - Financial Statement Note 3.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets ".
Business combinations initiated after June 30, 2001, must be accounted for under
the provisions of these two statements. We must also apply these provisions to
previously recorded business combinations as of January 1, 2002. The principal
provisions of SFAS No. 141 and SFAS No. 142 are as follows:
. All business combinations initiated after June 30, 2001, will be
accounted for using the "purchase" method, under which the identifiable
assets and liabilities of the acquired business are recorded at their
respective fair market values with the residual amount being recorded as
goodwill. The "pooling-of-interests" method, under which the financial
statements of the acquirer and the acquiree were combined as if the two
businesses had always been one, will no longer be used.
. Goodwill and identifiable intangible assets will no longer be amortized
over a maximum period of forty years. Goodwill will not be amortized but
will instead be tested for impairment annually or upon the occurrence of
certain "triggering events." Identifiable intangible assets will be
amortized over their expected useful lives; those with indefinite expected
useful lives will not be amortized. Identifiable intangible assets will
continue to be tested for impairment under previously existing accounting
standards.
Additionally, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" during 2001. SFAS No. 143 relates to obligations
which generally are incurred in connection with the ownership of real property.
We currently lease the substantial majority of our real property and, therefore,
do not believe that the provisions of SFAS No. 143 apply to our current
operations.
SFAS No. 144 superseded SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. SFAS No.
144 also amended Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary.
We adopted SFAS No. 142, SFAS No. 143 and SFAS No. 144 on February 3, 2002,
and expect the adoption of these standards to have no material impact on our
financial condition, results of operations or cash flows.
13
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.
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, back-to-school and holiday 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.
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-3, filed with
the Securities and Exchange Commission on January 16, 2002, and any amendments
thereto.
14
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 2, 2002
---------------------------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
------------- ------------- ------------- ------------
Net sales $ 60,345 $ 55,633 $ 57,737 $ 67,415
Gross profit 18,464 16,606 17,610 21,143
Operating income 5,645 3,481 4,138 5,699
Net income $ 3,419 $ 2,046 $ 2,523 $ 3,566
============= ============= ============= ============
Basic earnings per common share $ 0.35 $ 0.21 $ 0.26 $ 0.36
============= ============= ============= ============
Diluted earnings per common share $ 0.34 $ 0.20 $ 0.25 $ 0.35
============= ============= ============= ============
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 $ 0.29 $ 0.21 $ 0.27 $ 0.35
============= ============= ============= ============
Diluted earnings per common share $ 0.28 $ 0.20 $ 0.27 $ 0.34
============= ============= ============= ============
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.
15
Item 7A. Quantitative and Qualitative Disclosure About 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 2002 was
$10,304,366, the maximum amount outstanding was $18,860,102 and the weighted
average interest rate was 5.21%. 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.
Item 8. Consolidated Financial Statements and Supplementary Data
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 2,
2002 and February 3, 2001, and the related consolidated statements of
operations, stockholders' investment, and cash flows for each of the three
fiscal years in the period ended February 2, 2002. 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 2, 2002 and February 3, 2001, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 2, 2002, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 13, 2002
16
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
February 2, February 3,
2002 2001
------------- ------------
Assets
Current Assets:
Cash and cash equivalents $ 1,972 $ 1,884
Accounts receivable, net 2,352 2,649
Inventories 81,082 70,058
Prepaid expenses and other 902 822
Deferred income taxes 1,375 1,110
------------- ------------
Total current assets 87,683 76,523
------------- ------------
Property and Equipment:
Land 24 24
Buildings 221 221
Equipment 19,331 15,318
Furniture and fixtures 11,480 10,978
Leasehold improvements 17,137 17,506
Construction in progress 289 995
------------- ------------
48,482 45,042
Less accumulated depreciation & amortization 22,011 21,332
------------- ------------
Total property and equipment 26,471 23,710
------------- ------------
Noncurrent Assets:
Deferred income taxes 945 741
Other, net 216 278
------------- ------------
Total noncurrent assets 1,161 1,019
------------- ------------
Total Assets $ 115,315 $ 101,252
============= ============
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 23,721 $ 18,268
Accrued income taxes 2,308 1,859
Accrued expenses:
Payroll-related 2,954 2,640
Other 2,366 2,072
------------- ------------
Total current liabilities 31,349 24,839
------------- ------------
Long-Term Debt 3,903 9,748
------------- ------------
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,
9,927,317 and 9,799,328 shares issued and outstanding
at February 2, 2002 and February 3, 2001 respectively 99 98
Paid-in capital 57,739 55,895
Retained earnings 22,225 10,672
------------- ------------
Total stockholders' investment 80,063 66,665
------------- ------------
Total Liabilities and Stockholders' Investment $ 115,315 $ 101,252
============= ============
The accompanying notes are an integral part of these consolidated balance
sheets.
17
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Amounts)
Fiscal Year Ended
---------------------------------------------
February 2, February 3, January 29,
2002 2001 2000
(52 Weeks) (53 Weeks) (52 Weeks)
-------------- -------------- ------------
Net sales $ 241,130 $ 209,626 $ 174,312
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 167,402 145,800 121,962
-------------- ------------- ------------
Gross profit 73,728 63,826 52,350
Store operating, selling, and administrative
expenses 48,891 40,789 34,142
Depreciation and amortization 5,873 4,802 3,762
-------------- ------------- ------------
Operating income 18,964 18,235 14,446
Interest expense, net 625 830 422
-------------- ------------- ------------
Income before provision for income taxes 18,339 17,405 14,024
Provision for income taxes 6,786 6,593 5,364
-------------- ------------- ------------
Net income $ 11,553 $ 10,812 $ 8,660
============== ============= ============
Basic earnings per share $ 1.17 $ 1.11 $ 0.90
============== ============= ============
Diluted earnings per share $ 1.15 $ 1.09 $ 0.88
============== ============= ============
Weighted average shares outstanding:
Basic 9,875,182 9,699,419 9,641,618
============== ============= ============
Diluted 10,079,040 9,939,577 9,794,971
============== ============= ============
The accompanying notes are an integral part of these consolidated statements.
18
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 30, 1999 - $ 96 $ 53,964 $ (8,800)
Net income - - - 8,660
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
including tax benefit - 1 280 -
-------------- ---------- ----------- ------------
BALANCE, January 29, 2000 - 97 54,244 (140)
Net income - - - 10,812
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
including tax benefit 146,000 1 1,651 -
-------------- ---------- ----------- ------------
BALANCE, February 3, 2001 146,000 98 55,895 10,672
Net income - - - 11,553
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
including tax benefit (173) 1 1,844 -
-------------- ---------- ----------- ------------
BALANCE, February 2, 2002 145,827 $ 99 $ 57,739 $ 22,225
============== ========== =========== ============
The accompanying notes are an integral part of these consolidated statements.
19
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Fiscal Year Ended
----------------------------------------------
February 2, February 3, January 29,
2002 2001 2000
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,553 $ 10,812 $ 8,660
------------- ------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,873 4,802 3,762
Deferred income taxes (469) (523) (85)
Loss on disposal of assets 118 16 25
(Increase) decrease in assets:
Accounts receivable, net 297 (526) 21
Inventories (11,024) (11,992) (10,372)
Prepaid expenses and other (90) (86) 66
Refundable income taxes - 14 82
Other noncurrent assets 19 (124) (6)
Increase (decrease) in liabilities:
Accounts payable 5,453 (779) 2,814
Accrued income taxes 449 1,313 (1,844)
Accrued expenses 608 (381) 511
------------- ------------- -------------
Total adjustments 1,234 (8,266) (5,026)
------------- ------------- -------------
Net cash provided by operating activities 12,787 2,546 3,634
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,726) (8,557) (10,619)
Proceeds from sales of property and equipment 28 26 2,315
------------- ------------- -------------
Net cash (used in) investing activities (8,698) (8,531) (8,304)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan borrowings and repayments, net (5,845) 5,357 4,391
Proceeds from options exercised and purchase of shares
under the employee stock purchase plan, including tax
benefit 1,844 1,652 194
------------- ------------- -------------
Net cash provided by (used in) financing activities (4,001) 7,009 4,585
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 88 1,024 (85)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,884 860 945
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,972 $ 1,884 $ 860
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 580 $ 762 $ 401
============= ============= =============
Income taxes, net of refunds $ 6,403 $ 5,233 $ 6,942
============= ============= =============
The accompanying notes are an integral part of these consolidated statements.
20
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 2, 2002
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 predominately 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 February 2, 2002, and January 29, 2000, 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.
Stock Split
On January 10, 2002, the Board of Directors declared a 3-for-2 Stock Split
on the Company's Common Stock to holders of record on February 1, 2002. All
share and per share data presented reflect the 3-for-2 stock split.
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.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets".
Business combinations initiated after June 30, 2001, must be accounted for under
the provisions of these two statements. We must also apply these provisions to
previously recorded
21
business combinations as of January 1, 2002. The principal provisions of SFAS
No. 141 and SFAS No. 142 are as follows:
. All business combinations initiated after June 30, 2001, will be
accounted for using the "purchase" method, under which the identifiable
assets and liabilities of the acquired business are recorded at their
respective fair market values with the residual amount being recorded as
goodwill. The "pooling-of-interests" method, under which the financial
statements of the acquirer and the acquiree were combined as if the two
businesses had always been one, will no longer be used.
. Goodwill and identifiable intangible assets will no longer be amortized
over a maximum period of forty years. Goodwill will not be amortized but
will instead be tested for impairment annually or upon the occurrence of
certain "triggering events." Identifiable intangible assets will be
amortized over their expected useful lives; those with indefinite expected
useful lives will not be amortized. Identifiable intangible assets will
continue to be tested for impairment under previously existing accounting
standards.
Additionally, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" during 2001. SFAS No. 143 relates to obligations
which generally are incurred in connection with the ownership of real property.
We currently lease the substantial majority of our real property and, therefore,
do not believe that the provisions of SFAS No. 143 apply to our current
operations.
SFAS No. 144 superseded SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. SFAS No.
144 also amended Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary.
We adopted SFAS No. 142, SFAS No. 143 and SFAS No. 144 on February 3, 2002, and
expect the adoption of these standards to have no material impact on our
financial condition, results of operations or cash flows.
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. The Company's largest vendor, Nike, represented
approximately 27%, 26% and 30% of its purchases in fiscal 2002, 2001 and 2000,
respectively.
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
22
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 in Note 7 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 believes that the carrying amount approximates fair value for cash
and cash equivalents, receivables, short-term borrowings, long-term debt 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 2, February 3, January 29,
2002 2001 2000
---------------- --------------- ----------------
Weighted average shares outstanding:
Basic 9,875,182 9,699,419 9,641,618
Dilutive effect of stock options 203,858 240,158 153,353
---------------- --------------- ----------------
Diluted 10,079,040 9,939,577 9,794,971
================ =============== ================
23
For the 52 week period ended February 2, 2002, 139,650 anti-dilutive
options were appropriately excluded from the computation. For the 53 week period
ended February 3, 2001, 18,150 anti-dilutive options were appropriately excluded
from the computation. For the 52-week period ended January 29, 2000, 141,900
anti-dilutive options were appropriately excluded from the computation.
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 2, 2002, the Company had an aggregate of $3,903,000 outstanding under
these facilities. The average amount of borrowings outstanding under the Debt
Agreements during fiscal 2002 was $10,304,000, the maximum outstanding was
$18,860,000, and the weighted average interest rate was 5.21%. The average
amount of borrowings outstanding under the Debt Agreements during fiscal 2001
was $9,387,000, the maximum amount outstanding was $22,406,000, and the weighted
average interest rate was 7.68%. The average amount of borrowings outstanding
under the Debt Agreements during fiscal 2000 was $5,391,000, the maximum amount
outstanding was $14,155,000, and the weighted average interest rate was 6.48%.
The Company's Debt Agreements contain certain restrictive covenants common
to such agreements. The Company was in compliance with respect to its covenants
at February 2, 2002.
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 the lease will
expire in December 2014.
24
Future minimum rental payments under noncancelable operating leases having
remaining terms in excess of one year as of February 2, 2002 are as follows:
Fiscal Year Ending
------------------
2003 $ 17,782,000
2004 15,949,000
2005 13,638,000
2006 9,932,000
2007 5,615,000
Thereafter 10,396,000
-------------
$ 73,312,000
=============
Rental expense for all operating leases consisted of the following:
Fiscal Year Ended
---------------------------------------------
February 2, February 3, January 29,
2002 2001 2000
---------------------------------------------
Minimum rentals $ 15,906,000 $12,969,000 $ 10,145,000
Contingent rentals 1,011,000 1,043,000 833,000
------------- ----------- ------------
$ 16,917,000 $14,012,000 $ 10,978,000
============= =========== ============
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 amounts for fiscal years 2002,
2001, and 2000 were $242,000, $344,000, and $436,000, 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 2002, fiscal 2001 and fiscal 2000. During fiscal 2002, the
Company filed a S-3 on behalf of this stockholder. Approximately $200,000 will
be reimbursed to the Company for expenses incurred with the filing.
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 $191,000 in fiscal 2002, fiscal 2001 and fiscal 2000. Future
minimum lease payments under this noncancelable sublease aggregate approximately
$1.2 million.
25
6. INCOME TAXES
A summary of the components of the provision for income taxes is as
follows:
Fiscal Year Ended
------------------------------------------------
February 2, February 3, January 29,
2002 2001 2000
------------------------------------------------
Federal:
Current $ 6,439,000 $ 6,108,000 $ 4,648,000
Deferred (384,000) (423,000) (95,000)
------------ ------------- -------------
6,055,000 5,685,000 4,553,000
------------ ------------- -------------
State:
Current 816,000 1,008,000 801,000
Deferred (85,000) (100,000) 10,000
------------ ------------- -------------
731,000 908,000 811,000
------------ ------------- -------------
Provision for income taxes $ 6,786,000 $ 6,593,000 $ 5,364,000
============ ============= =============
The provision for income taxes differs from the amounts computed by
applying federal statutory rates due to the following:
Fiscal Year Ended
---------------------------------------------
February 2, February 3, January 29,
2002 2001 2000
---------------------------------------------
Tax provision computed at the federal
statutory rate $ 6,235,000 $ 5,918,000 $ 4,768,000
Effect of state income taxes, net
of benefits 520,000 574,000 592,000
Other 31,000 101,000 4,000
------------ ----------- -----------
$ 6,786,000 $ 6,593,000 $ 5,364,000
============ =========== ===========
Temporary differences that create deferred tax assets are detailed
below:
February 2, 2002 February 3, 2001
----------------------------------------------------------
Current Noncurrent Current Noncurrent
----------------------------------------------------------
Depreciation $ --- $ 945,000 $ --- $ 741,000
Inventory 762,000 --- 399,000 ---
Accruals 743,000 --- 766,000 ---
Other (130,000) --- (55,000) ---
----------- ----------- ----------- ----------
Deferred tax asset $ 1,375,000 $ 945,000 $ 1,110,000 $ 741,000
=========== =========== =========== ==========
The Company has not recorded a valuation allowance for deferred tax
assets as realization is considered more likely than not.
26
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") authorized the granting of stock options for the
purchase of up to 99,528 shares of common stock. Options granted pursuant to the
Original Option Plan vested over a three-year period for 38,053 shares and a
five-year period for 61,475 shares and will expire on the tenth anniversary of
the date of grant. All of the 99,528 options available under the Original Option
Plan have been granted and all such options have been exercised.
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 1,332,849
shares of common stock, including an amendment to the plan in fiscal 2002, which
authorized the granting of an additional 525,000 stock options. Options granted
vest over a five-year period and expire on the tenth anniversary of the date of
grant.
A summary of the status of the Company's stock option plans is as follows:
Fiscal Year Ended
--------------------------------------------------------------------------------------
February 2, 2002 February 3, 2001 January 29, 2000
-------------------------- -------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------------------------- -------------------------- --------------------------
Outstanding at beginning of
year 591,982 $11.98 597,915 $11.03 453,857 $10.31
Granted 123,900 19.92 142,650 10.50 177,975 12.06
Exercised (103,233) 10.28 (137,120) 6.30 (24,929) 4.61
Forfeited (37,678) 12.37 (11,463) 11.74 (8,988) 12.89
------------- ------------ -------------------------- --------------------------
Outstanding at end of year 574,971 $14.12 591,982 $11.98 597,915 $11.03
========================== ========================== ==========================
Exercisable at end of year 209,946 $13.14 184,508 $11.74 202,065 $ 8.52
========================== ========================== ==========================
Weighted average fair value
of options granted $10.96 $ 8.43 $ 7.13
============ ============ ============
The following table summarizes information about stock options outstanding at
February 2, 2002:
Options Outstanding Options Exercisable
------------------------------------------------------ ----------------------------------
Weighted
Number Average Number Weighted
Outstanding at Remaining Weighted Exercisable at Average
Range of February 2, Contractual Average February 2, Exercise
Exercise Prices 2002 Life (Years) Exercise Price 2002 Price
- ------------------------ --------------- ---------------- ----------------- ---------------- ---------------
$4.07 10,519 4.2 $ 4.07 10,519 $ 4.07
$10.00 to $13.54 349,502 6.9 $ 11.01 146,237 $ 10.87
$16.67 to $20.57 214,950 7.8 $ 19.21 53,190 $ 18.42
27
Compensation costs of $50,000 were accrued in fiscal 2001 and 2000, 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 $402,000 in fiscal 2002, $570,000 in fiscal
2001, and $87,000 in fiscal 2000.
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 2, February 3, January 29,
2002 2001 2000
-----------------------------------
Net income--as reported $ 11,553 $ 10,812 $ 8,660
Net income--pro forma 10,956 10,206 8,293
Diluted earnings per share--as reported 1.15 1.09 .88
Diluted earnings per share--pro forma 1.08 1.02 .84
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 (5.0%, 6.6%, and 5.2% for fiscal 2002, 2001 and 2000,
respectively), (ii) an expected forfeiture rate of 6.0%, (iii) an expected stock
volatility of 58%, 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 112,500 shares and 75,000 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 1, 2002, February 2, 2001, and January 28, 2000, the Company granted
11,250 options at exercise prices of $20.42, $23.15, and $12.21 (market value on
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 an optionee ceases to be an
Eligible Director. The Employee Stock Purchase Plan became effective on April 1,
1997, and as of February 2, 2002, 31,389 shares have been issued and 81,111
shares are reserved for future purchase.
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.
28
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 5, 2002 (the "Proxy Statement"),
which is to be filed with the Securities and Exchange Commission on or before
April 30, 2002.
Item 11. Executive Compensation
The information required is incorporated by reference from the section
entitled "Executive Compensation" in the Proxy Statement, which is to be filed
with the Securities and Exchange Commission on or before April 30, 2002.
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, which is to be filed with the
Securities and Exchange Commission on or before April 30, 2002.
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, which is to be filed with the Securities and Exchange Commission on
or before April 30, 2002.
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:
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.
29
3. Exhibits.
The Exhibits listed on the accompanying Exhibit Index are filed as
part of, or incorporated by reference into, this report.
EXHIBIT 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 (incorporated by reference to Exhibit 10.1 of the
Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 2001 (the "2001 10-K")) .
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 (incorporated by reference to Exhibit 10.1 of the
2001 10-K).
10.1.4 Third Amendment to Credit Agreement dated as of June 15, 2001,
between Hibbett Sporting Goods, Inc., Hibbett Team Sales, Inc.,
Sports Wholesale, Inc., Bank of America, N.A, Fleet National Bank,
and AmSouth Bank (incorporated by reference to Exhibit 10.1.4 of the
10-Q for Quarter ended August 4, 2001).
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).
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 (incorporated by reference
to Exhibit 10.2 of the 2001 10-K).
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 (incorporated by reference
to Exhibit 10.2 of the 2001 10-K).
10.2.4 Third Amendment to Credit Agreement dated as of November 30, 2000,
between Hibbett Sporting Goods, Inc., Hibbett Team Sales, Inc.,
Sports Wholesale, Inc. and AmSouth Bank (incorporated by reference
to Exhibit 10.2 of the 2001 10-K).
10.2.5 Fourth Amendment to Credit Agreement dated as of June 15, 2001,
between Hibbett Sporting Goods, Inc., Hibbett Team Sales, Inc.,
Sports Wholesale, Inc. and AmSouth Bank
30
(incorporated by reference to Exhibit 10.2.5 of the 10-Q for Quarter
ended August 4, 2001).
10.2.6 + Fifth Amendment to Credit Agreement dated as of November 30, 2001,
between Hibbett Sporting Goods, 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 by
reference to Exhibit 10.9.2 of the Company's 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 by reference to Exhibit
10.12 of Amendment No. 2 to the 1996 S-1).
21 List of Company's Subsidiaries (incorporated by reference to Exhibit
21 of the 1996 S-1).
23.1 + Consent of Arthur Andersen LLP
99 + Letter from Hibbett Sporting Goods, Inc. to the Securities and
Exchange Commission dated April 2, 2002
+ Filed herewith
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by us during the three months ended
February 2, 2002.
31
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 15, 2002
- ---------------------------------------- Director --------------
Michael J. Newsome
/s/ Gary A. Smith Principal Financial Officer and April 15, 2002
--------------------------------------- Principal Accounting Officer --------------
Gary A. Smith
/s/ Clyde B. Anderson Director April 15, 2002
- ---------------------------------------- --------------
Clyde B. Anderson
/s/ H. Ray Compton Director April 15, 2002
- ---------------------------------------- --------------
H. Ray Compton
/s/ F. Barron Fletcher, III Director April 15, 2002
- ---------------------------------------- --------------
F. Barron Fletcher, III
/s/ Carl Kirkland Director April 15, 2002
- ---------------------------------------- --------------
Carl Kirkland
/s/ John F. Megrue Director April 15, 2002
- ---------------------------------------- --------------
John F. Megrue
/s/ Thomas A. Saunders, III Director April 15, 2002
- ---------------------------------------- --------------
Thomas A. Saunders, III
32
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 13, 2002. 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 13, 2002
33
HIBBETT SPORTING GOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 2, 2002, FEBRUARY 3, 2001 AND JANUARY 29, 2000
Fiscal Year Ended
---------------------------------------------------
February 2, February 3, January 29,
2002 2001 2000
---------------- ------------- -------------
Balance of allowance for doubtful accounts
at beginning of period $ 255,000 $ 279,000 $ 224,000
Charged to costs and expenses - - 73,900
Write-offs, net of recoveries (59,000) (24,000) (18,900)
---------------- ------------- -------------
Balance of allowance for doubtful accounts
at end of period $ 196,000 $ 255,000 $ 279,000
================ ============= =============
34