HIBBETT SPORTING GOODS INC - 10-Q Quarterly Report

Back to GetFilings.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended: November 2, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934.

For the transaction period from to

Commission File Number 000-20969

HIBBETT SPORTING GOODS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		63-1074067
(State or other jurisdiction of incorporation or organization)		(IRS Employee Identification No.)

451 Industrial Lane, Birmingham, Alabama		35211
(Address of principal executive offices)		(Zip code)

(205) 942-4292

(Registrant’s telephone number including area code)

NONE

(Former name, former address and former fiscal year, if changed since last report)

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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate the number of shares outstanding of each of the issuer’s common stock, as of the latest practicable date: Shares of common stock, par value $.01 per share, outstanding as of December 09, 2002 were 10,060,964 shares.

HIBBETT SPORTING GOODS, INC.

INDEX

		Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets at November 2, 2002 and February 2, 2002	2

	Unaudited Condensed Consolidated Statements of Operations for the Thirteen and Thirty-Nine Week Periods Ended November 2, 2002 and November 3, 2001	3

	Unaudited Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Week Periods Ended November 2, 2002 and November 3, 2001	4

	Notes to Unaudited Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13

Item 4.	Controls and Procedures	13

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	14

Item 2.	Changes in Securities and Use of Proceeds	14

Item 3.	Defaults Upon Senior Securities	14

Item 4.	Submission of Matters to Vote of Security-Holders	14

Item 5.	Other Information	14

Item 6.	Exhibits and Reports on Form 8-K	14

HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands)

	November 2, 2002		February 2, 2002
Assets
Current Assets:
Cash and cash equivalents	$	288	$	1,972
Accounts receivable, net		2,956		2,352
Inventories		99,917		81,082
Prepaid expenses and other		2,941		902
Refundable income tax		94		—
Deferred income taxes		1,335		1,375

Total current assets		107,531		87,683

Property and equipment, net		25,724		26,471

Noncurrent Assets:
Deferred income taxes		1,019		945
Other, net		186		216

Total noncurrent assets		1,205		1,161

Total Assets	$	134,460	$	115,315

Liabilities and Stockholders’ Investment
Current Liabilities:
Accounts payable	$	32,788	$	23,721
Accrued income taxes		831		2,308
Accrued expenses:
Payroll-related		3,340		2,954
Other		2,976		2,366

Total current liabilities		39,935		31,349

Long-Term Debt		2,126		3,903

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, 10,059,644 shares issued and outstanding at November 2, 2002 and 9,927,317 shares issued and outstanding at February 2, 2002		101		99
Paid-in capital		59,937		57,739
Retained earnings		32,361		22,225

Total stockholders’ investment		92,399		80,063

Total Liabilities and Stockholders’ Investment	$	134,460	$	115,315

See notes to condensed consolidated financial statements.

HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars In Thousands, Except Per Share Amounts)

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 2, 2002		November 3, 2001		November 2, 2002		November 3, 2001
Net sales	$	67,004	$	57,737	$	203,714	$	173,715
Cost of goods sold, including warehouse, distribution and store occupancy costs		46,404		40,127		141,014		121,036

Gross profit		20,600		17,610		62,700		52,679
Store operating, selling, and administrative expenses		13,715		11,973		41,452		35,090
Depreciation and amortization		1,733		1,499		5,113		4,325

Operating income		5,152		4,138		16,135		13,264
Interest expense		21		137		172		484

Income before provision for income taxes		5,131		4,001		15,963		12,780
Provision for income taxes		1,873		1,478		5,827		4,792

Net income	$	3,258	$	2,523	$	10,136	$	7,988

Basic earnings per common share	$	0.32	$	0.26	$	1.01	$	0.81

Diluted earnings per common share	$	0.32	$	0.25	$	0.99	$	0.79

Weighted average shares outstanding:
Basic		10,056,330		9,884,585		10,023,043		9,861,551

Diluted		10,204,946		10,047,275		10,224,709		10,073,402

See notes to condensed consolidated financial statements.

HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars In Thousands)

	Thirty-Nine Weeks Ended
	November 2, 2002			November 3, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	10,136		$	7,988

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		5,113			4,325
Deferred income taxes		(34	)		(39	)
Loss on disposal of assets		14			64
Change in assets and liabilities		(12,384	)		(13,024	)

Total adjustments		(7,291	)		(8,674	)

Net cash provided by (used in) operating activities		2,845			(686	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(4,463	)		(5,646	)
Proceeds from sale of property		117			20

Net cash (used in) investing activities		(4,346	)		(5,626	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan activity, net		(1,777	)		4,248
Proceeds from options exercised and purchase of shares under employee stock purchase plan		1,594			976

Net cash provided by (used in) financing activities		(183	)		5,224

NET INCREASE IN CASH AND CASH EQUIVALENTS		(1,684	)		(1,088	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		1,972			1,884

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	288		$	796

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	143		$	431

Income taxes, net of refunds	$	6,776		$	5,606

See notes to condensed consolidated financial statements.

HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation & Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Hibbett Sporting Goods, Inc. and its wholly-owned subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended February 2, 2002. In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position as of November 2, 2002 and November 3, 2001, and the results of its operations and cash flows for the periods presented.

The Company has experienced and expects to continue to experience seasonal fluctuations in its net sales and operating income. Therefore, the results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

Interest

Interest expense for the thirteen weeks ended November 2, 2002 and November 3, 2001 was $40,572 and $137,892, respectively, shown net of interest income of $19,035 and $923, respectively. Interest expense for the thirty-nine weeks ended November 2, 2002 and November 3, 2001 was $192,677 and $485,132, respectively, shown net of interest income of $20,797 and $1,391, respectively.

Advertising

Hibbett participates in various advertising and marketing cooperative programs with its vendors, who, under these programs, reimburse Hibbett for certain costs incurred. A receivable for cooperative advertising to be reimbursed is recorded as a decrease to expense as the reimbursements are earned. Hibbett’s gross advertising costs for the thirteen weeks ended November 2, 2002 and November 3, 2001 were $504,535 and $491,692, respectively. The Company’s gross advertising costs for the thirty-nine weeks ended November 2, 2002 and November 3, 2001 were $1,983,636 and $1,785,926, respectively.

Reportable Segments

Hibbett is an operator of full-line sporting good stores in small to mid-sized markets predominately in the southeastern United States. Given the economic characteristics of the store formats, the similar nature of the products sold, the type of customers and methods of distribution, the operations of Hibbett constitute only one reportable segment.

Customers

No customer accounted for more than 5% of the Company’s sales during the thirteen and thirty-nine week periods ended November 2, 2002 or November 3, 2001.

Store Closing Costs

Hibbett considers individual store closings to be a normal part of operations and expenses all related costs at the time of closing.

Revenue Recognition

During the fourth quarter of fiscal 2002, Hibbett changed its layaway policy from recognizing merchandise revenues at the time of sale to recognizing merchandise revenues at the time the customer takes possession of the merchandise. All merchandise sales occur on-site in the Company’s retail stores, and the customers have the option of paying the full purchase price of the merchandise upon sale or paying a down payment and placing the merchandise on lay away. The customer may make further payments in installments, but the entire purchase price for merchandise placed on lay away must be received by Hibbett within 30 days. The customer takes possession of merchandise placed on lay away upon full payment.

Hibbett records the down payment and any installments as deferred revenue until the customer pays the entire purchase price for the merchandise and takes possession of such merchandise, at which time Hibbett recognizes revenue and eliminates the applicable deferred revenue balance. Previously, Hibbett recorded the purchase price for merchandise placed on lay away as revenue, recorded the initial down payment as cash and recorded an account receivable for the amount the customer still owed for the purchase price of the merchandise. Because all merchandise placed on lay away must be paid in full and delivered to the customer within 30 days of the sale, the change in accounting policy with respect to recognizing revenue at the time the customer takes possession of the merchandise only defers the recognition of revenue for merchandise that is placed on lay away within 30 days of the end of a fiscal quarter which is not paid in full and delivered prior to the end of such fiscal quarter. This change in accounting policy has had an immaterial impact on a quarterly basis on Hibbett’s revenues, gross profit, net income and earnings per share.

The cost of coupon sales incentives are recognized at the time the related revenue is recognized by Hibbett. Proceeds received from the issuance of gift certificates are initially recorded as deferred revenue, and such proceeds are subsequently recognized as revenue at the time the customer redeems such gift certificates and takes possession of the merchandise.

Reclassifications

Certain prior year numbers have been reclassified to conform to current year presentation.

2. Properties

Hibbett currently leases all of its existing 356 store locations and expects that its policy of leasing rather than owning will continue as the Company continues to expand. The Company’s leases typically provide for terms of five to seven years with options on the part of Hibbett to extend. Most leases also contain a three-year early termination option if projected sales levels are not met. Hibbett believes that this lease strategy enhances its flexibility to pursue various expansion opportunities resulting from changing market conditions and to periodically re-evaluate store locations. The Company’s 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, Hibbett believes that it will be able either to obtain lease renewals for present store locations or to obtain leases for equivalent or better locations in the same general area. For the most part, the Company has not experienced any significant difficulty in either renewing leases for existing locations or securing leases for suitable locations for new stores. However, in the second quarter of fiscal 2003, the Company did experience a temporary slow down in available space, which moved some stores previously planned for opening in fiscal 2003 to fiscal 2004. Based on the Company’s belief that it maintains good relations with its landlords, that most of Hibbett’s leases are at market rents and that generally it has been able to secure leases for suitable locations, the Company believes that its lease strategy will not be detrimental to its business, financial condition, or results of operations.

The Company’s offices and its distribution center are leased under an operating lease expiring in 2014. Hibbett Sporting Goods, Inc. owns its Team division’s warehousing and distribution center located in Birmingham, Alabama.

Store Locations

We operate 356 stores in 20 contiguous states. Of these stores, 131 are located in malls and 225 are located in strip shopping centers which are generally the center of commerce within the area and which are generally anchored by a Wal-Mart store. The following table shows the locations in which we operated stores as of November 2, 2002:

ALABAMA - 52

Forrest City

Rome

Henderson

Ocean Springs

Mcalester

Paris

Adamsville

Harrison

Snellville

Hopkinsville

Oxford

Muskogee

Ripley

Athens

Hot Springs

St. Marys

Madisonville

Pascagoula

Miami

Springfield

Auburn

Jonesboro

Statesboro (2)

Mayfield

Pearl

Okmulgee

Tullahoma

Bay Minnette

Magnolia

Thomaston

Morehead

Richland

Owasso

Union City

Bessemer

Paragould

Thomasville

Murray

Senatobia

Ponca City

Winchester

Brewton

Pine Bluff

Thomson

Owensboro

Southhaven

Stillwater

TEXAS - 9

Birmingham (2)

Rogers

Tifton

Paducah

Starkville

Woodward

Cleburne

Calera

Russellville

Toccoa

Richmond

Tupelo

Yukon

College Station

Clanton

Searcy

Valdosta (3)

Somerset

Vicksburg

S. CAROLINA - 20

Early

Cullman

Van Buren

Vidalia

South Williamson

N. CAROLINA - 33

Aiken

Greenville

Daphne

FLORIDA - 14

Villa Rica

Winchester

Albemarle

Anderson

Longview

Decatur

Chiefland

Waycross

LOUISIANA - 10

Asheboro

Camden

Lufkin

Dothan

Destin

IOWA - 1

Bastrop

Boone

Chester

Palestine

Enterprise

Ft. Walton Beach

West Burlington

Crowley

Clinton

Columbia

Paris

Eufaula

Gainsville

ILLINOIS - 8

Deridder

Dunn

Greenville

West Orange

Fairfield (2)

Gulf Breeze

Carbondale

Hammond

Elizabeth City

Greenwood

VIRGINIA - 12

Florence (3)

Lake City

Centralia

Monroe

Elkin

Hartsville

Bristol

Ft. Payne

Lake Wales

Charleston

Natchitoches

Forest City

James Island

Cedar Bluff

Gadsden

Leesburg

Danville

New Iberia

Greenville

Lancaster

Christianburg

Gardendale

Live Oak

Galesburg

Ruston

Hendersonville (2)

Laurens

Covington

Guntersville

Okeechobee

Harrisburg

Thibodaux

Kinston

Lexington

Franklin

Hartselle

Palatka

Mt. Vernon

Winnsboro

Lexington

Marion

Galax

Hoover

Panama City

Quincy

MISSOURI - 11

Lincolnton

Murrells Inlet

Martinsville

Huntsville (2)

Santa Rosa

INDIANA - 10

Hannibal

Lumberton

Myrtle Beach

Norton

Jacksonville

Sebring

Bedford

Jefferson City

Monroe (2)

Newberry

Petersburg

Jasper

GEORGIA - 47

Columbus

Kennett

Morehead City

Orangeburg

South Boston

Leeds

Albany

Corydon

Kirksville

Morganton

Rockhill

Staunton

Madison

Americus

Crawfordsville

Moberly

New Bern

Seneca

Wythville

Montgomery (2)

Athens (2)

Greencastle

Poplar Bluff

Reidsville

York

WEST VIRGINIA - 2

Muscle Shoals

Bainbridge

Greensburg

Rolla

Roanoke Rapids

TENNESSEE - 32

Beckley

Northport

Brunswick

Jasper

Sedalia

Rockingham

Athens

Morgantown

Oneonta

Canton

Madison

Sikeston

Salisbury

Chattanooga

Oxford

Carrollton

Princeton

St. Roberts

Sanford

Cleveland

Parkway City

Cedartown

Seymour

Warrensburg

Shallotte

Columbia

Pelham

Centerville

KANSAS - 6

MISSISSIPPI - 28

Shelby (2)

Cookeville (2)

Phenix City

Columbus (3)

Coffeyville

Batesville

Southern Pines

Crossville

Prattville

Cordele

Dodge City

Clarksdale

Statesville

Dickson

Scottsboro

Cornelia

Emporia

Clinton

Washington

Dyersburg (2)

Selma

Covington

Hays

Columbia

Whiteville

Fayetteville

Talladega

Dalton

Manhattan

Columbus (2)

Wilson

Gallatin

Tillmans Corner

Douglasville

Pittsburg

Corinth

OHIO - 3

Greeneville

Troy

Ft. Olgethrope

KENTUCKY - 23

Flowood

Heath

Jackson (3)

Trussville

Gainesville

Ashland

Greenville

Mt. Vernon

Kimball

Tuscaloosa (3)

Hinesville

Bowling Green

Grenada

New Boston

Kingsport

ARKANSAS - 19

Hiram (2)

Campbellsville

Hattiesburg

OKLAHOMA - 16

Lebanon

Arkadelphia

Jessup

Corbin

Jackson

Ada

Lenoir City

Batesville

La Grange

Danville

Laurel

Altus

Martin

Benton

Macon

Elizabethtown (2)

Magee

Ardmore

Maryville

Blytheville

McDonough

Frankfort

McComb

Bartlesville

McMinnville

Cabot

Milledgeville (2)

Georgetown

Meridian

Chickasha

Morristown

Conway (2)

Moultrie

Glasgow

Natchez

Duncan

Murfreesboro

El Dorado

Newnan

Hazard

New Albany

Enid

Nashville

3. 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 period.

A reconciliation of the weighted average shares for basic and diluted EPS is as follows:

	Thirteen Week Periods Ended		Thirty-Nine Week Periods Ended
	November 2, 2002	November 3, 2001	November 2, 2002	November 3, 2001
Weighted average shares outstanding
Basic	10,056,330	9,884,585	10,023,043	9,861,551
Dilutive effect of stock options	148,616	162,690	201,666	211,851

Diluted	10,204,946	10,047,275	10,224,709	10,073,402

For the thirteen week periods ended November 2, 2002 and November 3, 2001, 155,975 and 224,220 anti-dilutive options, respectively, were excluded from the computation. For the thirty-nine week periods ended November 2, 2002 and November 3, 2001, 18,750 and 128,400 anti-dilutive options, respectively, were excluded from the computation.

4. Stockholders’ Investment

The Company offers participation in stock option plans to certain employees and individuals. Awards typically vest and become exercisable in incremental installments over a period of five years after the date of grant and expire on the tenth anniversary of the date of grant. For the thirty-nine weeks ended November 2, 2002, 127,351 shares were issued upon exercise of options resulting in an increase in Stockholders’ Investment of $1,486,000 and an increase in Paid in Capital of $622,000 attributable to the tax benefit received from the exercise of these shares. For the thirty-nine weeks ended November 2, 2002, 4,976 shares were purchased under the Employee Stock Purchase Plan resulting in an increase in Stockholders’ Investment of $90,000.

5. 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.

6. Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (the “FASB”) issued Statements of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” Under SFAS 141, business combinations initiated after June 30, 2001 must be accounted for under 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. Under SFAS 142, 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. Because we currently lease the substantial majority of our real property, we do not believe that the provisions of SFAS No. 143 will have a material impact on the Condensed Consolidated Financial Statements.

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. 141, SFAS No. 142, SFAS No. 143 and SFAS No. 144 on February 3, 2002. The adoption of these standards had no material impact on the Condensed Consolidated Financial Statements.

In April 2002, the FASB issued SFAS 145, “Rescission of FASB Statements No. 4, 44, 64, Amendment of FASB Statement No. 13, and Technical Corrections,” which rescinds SFAS 4, “Reporting Gains and Losses from Extinguishments of Debt,” SFAS 44, “Accounting for Intangible Assets of Motor Carriers,” and SFAS 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” These rescissions eliminate the requirement to report gains and losses from the extinguishments of debt as an extraordinary item, net of related income tax, and are effective for fiscal years beginning on or after May 15, 2002. This Statement also amends SFAS 13, “Accounting of Leases,” and requires that capital leases that are modified so that the resulting lease agreement is classified as an operating lease be accounted for as a sale-leaseback. This amendment is effective for transactions occurring after May 15, 2002. Finally, this Statement amends several pronouncements to make technical corrections to existing authoritative pronouncements. The Company does not expect this Statement to have a material impact on the Condensed Consolidated Financial Statements.

In July 2002, the FASB issued Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing or other exit or disposal activities initiated after December 31, 2002. The Company does not expect this to have a material impact on the Condensed Consolidated Financial Statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Hibbett Sporting Goods, Inc. (“we” or “Hibbett” or the “Company”) is a rapidly-growing operator of full-line athletic sporting goods stores in small to mid-sized markets predominantly in the southeast, mid-Atlantic and midwest. The Company’s stores offer a broad assortment of quality athletic equipment, footwear and apparel at competitive prices with a high level of customer service. Hibbett’s 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. The Company’s management team believes that its stores are among the primary retail distribution avenues for brand name vendors that seek to penetrate their target markets.

As of November 2, 2002, we operated 336 Hibbett Sports stores, as well as sixteen smaller-format Sports Additions athletic shoe stores and four larger-format Sports & Co. superstores, in 20 states. The Company’s primary retail format and growth vehicle is Hibbett Sports, an approximately 5,000 square foot store located in enclosed malls or in strip shopping centers which are generally the center of commerce within the area and which are generally anchored by a Wal-Mart store. We target markets with county populations that range from 30,000 to 100,000. 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.

Hibbett operates on a 52 or 53 week fiscal year ending on the Saturday nearest to January 31 of each year. Hibbett has been incorporated under the laws of the State of Delaware since October 6, 1996.

Results of Operations

The following table sets forth consolidated statement of operations items expressed as a percentage of net sales for the periods indicated:

	Thirteen Week Period Ended				Thirty-Nine Week Period Ended
	November 2, 2002		November 3, 2001		November 2, 2002		November 3, 2001
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold, including warehouse, distribution and store occupancy costs	69.3		69.5		69.2		69.7

Gross profit	30.7		30.5		30.8		30.3
Store operating, selling, and administrative
Expenses	20.4		20.7		20.4		20.2
Depreciation and amortization	2.6		2.6		2.5		2.5

Operating income	7.7		7.2		7.9		7.6
Interest expense, net	0.0		0.2		0.1		0.2

Income before provision for income taxes	7.7		7.0		7.8		7.4
Provision for income taxes	2.8		2.6		2.8		2.8

Net income	4.9	%	4.4	%	5.0	%	4.6	%

Thirteen Weeks Ended November 2, 2002 Compared to Thirteen Weeks Ended November 3, 2001

Net sales. Net sales increased $9.3 million, or 16.1%, to $67.0 million for the thirteen weeks ended November 2, 2002, from $57.7 million for the comparable period in the prior year. This increase is attributed to the opening of forty-two Hibbett Sports stores, net of store closings, in the 52 week period ended November 2, 2002 and a 5.3% increase in comparable store net sales for the thirteen week period ended November 2, 2002. The increase in comparable store net sales was primarily due to increased sales in apparel and footwear. Apparel sales, mainly college and pro-licensed products and active wear, were driven by college long-sleeve t-shirts, hooded fleece wear, NBA and MLB jerseys, mesh shorts and sleeveless t-shirts. Basketball, New Balance running shoes, Kswiss athletic shoes and the retro-classic look drove footwear sales. Equipment sales were down from last year’s numbers and continue to be affected by the lack of high-volume fitness items. New stores and stores not in the comparable store net sales calculation accounted for $6.5 million of the increase in net sales, and increases in comparable store net sales contributed $2.8 million. Comparable store net sales data for the period reflect sales for our traditional format Hibbett Sports stores open throughout the period and the corresponding period of the prior fiscal year. During the thirteen weeks ended November 2, 2002, we opened ten Hibbett Sports stores and closed one.

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 $20.6 million, or 30.7% of net sales, in the thirteen weeks ended November 2, 2002, as compared to $17.6 million, or 30.5% of net sales, in the same period of the prior fiscal year. The improved gross margin is primarily attributed to a reduction in freight expense of $99,000 this period as compared to the same period last year, a decrease as a percent of net sales of 28 basis points, and a reduction of our warehouse and store occupancy costs as a percent of net sales of 23 basis points this period as compared to the same period last year. The reduction in freight expense is a result of an increase in direct container shipments, an increase in backhauls and an increased percentage of full trailer loads. The reduction in warehouse and store occupancy related costs as a percentage of net sales is a result of leveraging rent and common area maintenance expenses. These improvements were partially offset by an increase in retail reductions as a percentage of net sales of 32 basis points this period compared to the same period last year. This increase is a result of an increase in inventory shortages this period due to the fact that we inventoried all of our stores during the second quarter of this year and estimated inventories for the third quarter this year as opposed to performing an actual inventory and making corresponding adjustments in inventory for the same period last year.

Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $13.7 million, or 20.5% of net sales, for the thirteen weeks ended November 2, 2002, as compared to $12.0 million, or 20.7% of net sales, for the comparable period a year ago. The decrease in store operating, selling and administrative expenses as a percentage of net sales in the thirteen weeks ended November 2, 2002, is attributed to the leveraging of advertising and new store costs. Advertising costs decreased as a percentage of net sales by 22 basis points this period compared to the same thirteen weeks last year due to increased vendor participation. New store costs decreased as a percentage of net sales by 29 basis points this period as compared to the same period last year as a result of opening five fewer stores this quarter compared to third quarter last year. These reductions were partially offset by an increase in property and casualty insurance of $238,000 this period as compared to the same period last year, an increase as a percentage of net sales of 33 basis points. This increase was due to increased premiums post September 11, 2001.

Depreciation and amortization. Depreciation and amortization as a percentage of net sales remained constant year over year at 2.6% for the thirteen weeks ended November 2, 2002 and the thirteen weeks ended November 3, 2001.

Interest expense. Net interest expense for the thirteen weeks ended November 2, 2002, was $21,000 compared to $137,000 in the prior year period. The decrease is attributable to lower borrowing rates and lower levels of borrowing under the Company’s credit facilities.

Thirty-Nine Weeks Ended November 2, 2002 Compared to Thirty-Nine Weeks Ended November 3, 2001

Net sales. Net sales increased $30.0 million, or 17.3%, to $203.7 million for the thirty-nine weeks ended November 2, 2002, from $173.7 million for the comparable period in the prior year. This increase is attributed to the opening of forty-two Hibbett Sports stores, net of store closings, in the 52 week period ended November 2, 2002, and a 4.5% increase in comparable store net sales for the thirty-nine week period ended November 2, 2002. The increase in comparable store net sales year over year was primarily due to increased footwear and apparel sales as discussed above. New stores and stores not in the comparable store net sales calculation accounted for $23.3 million of the increase in net sales, and increases in comparable store net sales contributed $6.7 million. Comparable store net sales data for the period reflect sales for our traditional format Hibbett Sports stores open throughout the period and the corresponding

period of the prior fiscal year. During the thirty-nine weeks ended November 2, 2002, we opened twenty-nine Hibbett Sports stores and closed two.

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 $62.7 million, or 30.8% of net sales, in the thirty-nine weeks ended November 2, 2002, as compared to $52.7 million, or 30.3% of net sales, in the same period of the prior fiscal year. The improved gross margin is primarily attributed to a $437,000 reduction in freight expense, a difference as a percent of net sales this year compared to the same period last year of 35 basis points, and a reduction of store occupancy related costs as a percent of net sales of 24 basis points this year compared to the same period last year. The reduction in freight expense is a result of an increase in direct container shipments, an increase in backhauls and an increased percentage of full trailer loads. The decrease of store occupancy related costs as a percentage of net sales is primarily attributed to the positive leveraging of rent and common area maintenance expenses.

Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $41.5 million, or 20.4% of net sales, for the thirty-nine weeks ended November 2, 2002, as compared to $35.1 million, or 20.2% of net sales, for the comparable period a year ago. The increase in store operating, selling and administrative expenses as a percentage of net sales in the thirty-nine weeks ended November 2, 2002, is attributed to an increase in property and casualty insurance costs and the cost associated with the store inventories, primarily those incurred during the second quarter related to the implementation of our new warehouse system. Property and casualty insurance increased $678,000, a difference as a percent of net sales this year compared to the same period last year of 30 basis points. This increase is due to an increase in premiums post September 11, 2001. The cost to inventory the stores during the thirty-nine week period accounted for an increase as a percent of net sales this year compared to last year of 7 basis points. The increases in expenses were partially offset by the decreases as a percentage of net sales of advertising expense, a difference of 9 basis points, and retail store labor, a difference of 14 basis points, this year as compared to the same period last year.

Depreciation and amortization. Depreciation and amortization as a percentage of net sales remained constant year over year at 2.5% for the thirty-nine weeks ended November 2, 2002 and the thirty-nine weeks ended November 3, 2001.

Interest expense. Net interest expense for the thirty-nine weeks ended November 2, 2002, was $172,000 compared to $484,000 in the prior year period. The decrease is attributable to lower borrowing rates and lower levels of borrowing under the Company’s credit facilities.

Liquidity and Capital Resources

Our capital requirements relate primarily to new store openings and working capital requirements. Our working capital needs 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 flows from operations and borrowings under our revolving credit facilities.

Net cash provided by (used in) operating activities has historically been driven by net income levels combined with fluctuations in inventory and accounts payable balances. Inventory levels increased during the thirty-nine weeks ended November 2, 2002 as the number of stores increased. However, inventory levels on a per store basis have decreased. We financed this increase in total inventory primarily through cash generated from operations. Accordingly, net cash provided by operating activities was $2.8 million for the thirty-nine week period ended November 2, 2002 as compared to net cash used in operating activities of $0.7 million for the thirty-nine week period ended November 3, 2001.

With respect to cash flows used in investing activities, capital expenditures were $4.5 million in the thirty-nine week period ended November 2, 2002 compared to $5.6 million for the comparable period in the prior year. Capital expenditures in the thirty-nine weeks ended November 2, 2002 were primarily related to the opening of twenty-nine new stores, the refurbishing of existing stores and various corporate additions, including automobiles and warehouse equipment.

Net cash used in financing activities was $0.2 million in the thirty-nine week period ended November 2, 2002 compared with $5.2 million provided by financing activities in the prior year period. Financing activities primarily relate to borrowings under our credit facilities and proceeds from stock options exercised.

The Company estimates capital expenditures in fiscal 2003 to be approximately $7.5 million, which includes resources budgeted to (i) fund the opening of approximately 47 to 49 Hibbett Sports stores, net of store closings, (ii) remodel selected existing stores and (iii) fund corporate headquarters and distribution center related capital expenditures.

Hibbett maintains an unsecured revolving credit facility, which will expire November 5, 2003 and allows borrowings up to $35.0 million. We also maintain an unsecured working capital line of credit for $7.0 million, which is subject to annual renewal each November. As of November 2, 2002, the Company had $2.1 million outstanding under these facilities; nothing outstanding under the revolving credit facility and $2.1 million under the working capital facility, as compared to $14.0 million outstanding under these facilities, $9.0 under the revolving credit facility and $5.0 million under the working capital facility, on November 3, 2001. Based on our current operating and store opening plans, management believes that we can fund our cash needs for the foreseeable future through borrowings under the revolving credit facility, the working capital facility and cash generated from operations.

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 reduced to some extent 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.

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, the effect of competitive pressures from other retailers and the ability to attract and retain qualified personnel. 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 May 3, 2002, and any amendments thereto.

QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 facility, 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 the thirteen week period ended November 2, 2002, was $1,054,449, the maximum amount outstanding was $5,438,846 and the weighted average interest rate was 2.08%. The average amount of borrowings outstanding under these agreements during the thirty-nine week period ended November 2, 2002, was $4,638,876, the maximum amount outstanding was $11,823,019 and the weighted average interest rate was 2.96%. 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.

CONTROLS AND PROCEDURES

Hibbett maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Office and Chief Financial

Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Within 90 days prior to the date of this Quarterly Report, Hibbett carried out an evaluation, under the supervision and with the participation of Hibbett’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of Hibbett’s disclosure controls and procedures. Based on the foregoing, Hibbett’s Chief Executive Officer and Chief Financial Officer concluded that Hibbett’s disclosure controls and procedures were effective.

There have been no significant changes in Hibbett’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date Hibbett completed its evaluation.

PART II OTHER INFORMATION

ITEM 1: Legal Proceedings

ITEM 2: Changes in Securities and Use of Proceeds

None

ITEM 3: Defaults Upon Senior Securities

None

ITEM 4: Submission of Matters to Vote of Security-Holders

None

ITEM 5: Other Information

None

ITEM 6: Exhibits and Reports on Form 8-K

(A) Exhibits

None

(B) Reports on Form 8-K

The Company filed with the Commission a Current Report on Form 8-K dated August 22, 2002, to report, under Item 5, the naming of Ralph Parks to its Board of Directors, and under Item 7, its financial results for the quarter ended August 2, 2002.

The Company filed with the Commission a Current Report on Form 8-K dated September 17, 2002, to submit, under Item 9, the certifications from the Chief Executive Officer and the Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

HIBBETT SPORTING GOODS, INC.

Date:		December 10, 2002		By:		/s/ Gary A. Smith
						Gary A. Smith Vice President & Chief Financial Officer

CERTIFICATIONS

I, Michael J. Newsome, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hibbett Sporting Goods, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:

December 10, 2002

/s/ Michael J. Newsome

Michael J. Newsome

Chief Executive Officer

I, Gary A. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hibbett Sporting Goods, Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date:

December 10, 2002

/s/ Gary A. Smith

Gary A. Smith

Chief Financial Officer

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents