UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934.
For the quarterly period ended: May 3, 2003
-----------
- OR -
________ 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 IRS Employee Identification No.)
incorporation or organization)
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 June 11, 2003 were 10,207,296 shares.
HIBBETT SPORTING GOODS, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets
at May 3, 2003 and February 1, 2003 2
Unaudited Condensed Consolidated Statements of
Operations for the Thirteen Week Periods
Ended May 3, 2003 and May 4, 2002 3
Unaudited Condensed Consolidated Statements of
Cash Flows for the Thirteen Week Periods Ended
May 3, 2003 and May 4, 2002 4
Notes to Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
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
1
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
----------- -----------
May 3, February 1,
2003 2003
----------- -----------
Assets
Current Assets:
Cash and cash equivalents $ 21,994 $ 12,016
Accounts receivable, net 3,051 3,371
Inventories 85,806 86,246
Prepaid expenses and other 3,139 760
Deferred income taxes 783 798
-------- --------
Total current assets 114,773 103,191
-------- --------
Property and equipment, net 25,614 26,205
-------- --------
Noncurrent Assets:
Deferred income taxes 88 60
Other, net 141 124
-------- --------
Total noncurrent assets 229 184
-------- --------
Total Assets $140,616 $129,580
======== ========
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 28,902 $ 24,869
Accrued income taxes 1,765 1,338
Accrued expenses:
Payroll-related 3,051 3,520
Other 2,806 2,503
-------- --------
Total current liabilities 36,524 32,230
-------- --------
Long-Term Debt -- --
-------- --------
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, 10,170,687 shares issued and
outstanding at May 3, 2003 and 10,081,167
shares issued and outstanding at February 1, 2003 102 101
Paid-in capital 61,780 60,295
Retained earnings 42,210 36,954
-------- --------
Total stockholders' investment 104,092 97,350
-------- --------
Total Liabilities and Stockholders' Investment $140,616 $129,580
======== ========
See notes to unaudited condensed consolidated financial statements.
2
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Share and Per Share Amounts)
Thirteen Weeks Ended
-----------------------------
May 3, May 4,
2003 2002
------------ ------------
Net sales $ 79,593 $ 70,790
Cost of goods sold,
including warehouse, distribution
and store occupancy costs 54,634 48,792
------------ ------------
Gross profit 24,959 21,998
Store operating, selling, and
administrative expenses 14,952 13,622
Depreciation and amortization 1,754 1,671
------------ ------------
Operating income 8,253 6,705
Interest (income) expense, net (23) 64
------------ ------------
Income before provision for income taxes 8,276 6,641
Provision for income taxes 3,021 2,424
------------ ------------
Net income $ 5,255 $ 4,217
============ ============
Basic earnings per common share $ 0.52 $ 0.42
============ ============
Diluted earnings per common share $ 0.51 $ 0.41
============ ============
Weighted average shares outstanding:
Basic 10,119,244 9,964,309
============ ============
Diluted 10,288,663 10,210,554
============ ============
See notes to unaudited condensed consolidated financial statements.
3
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Thirteen Weeks Ended
----------------------
May 3, May 4,
2003 2002
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,255 $ 4,217
--------- ---------
Adjustments to reconcile net income to net cash
provided by(used in)operating activities:
Depreciation and amortization 1,754 1,671
Deferred income taxes (13) (13)
Loss on disposal of assets 39 30
Change in operating assets and liabilities 3,099 (7,187)
--------- ---------
Total adjustments 4,879 (5,499)
--------- ---------
Net cash provided by (used in) operating activities 10,134 (1,282)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,198) (1,299)
Proceeds from sale of property and equipment 4 9
--------- ---------
Net cash used in investing activities (1,194) (1,290)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan activity, net -- 224
Proceeds from options exercised and purchase
of shares under employee stock purchase plan 1,038 1,312
--------- ---------
Net cash provided by financing activities 1,038 1,536
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,978 (1,036)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,016 1,972
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,994 $ 936
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 13 $ 44
--------- ---------
Income taxes, net of refunds $ 2,157 $ 1,474
--------- ---------
See notes to unaudited condensed consolidated financial statements.
4
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 1, 2003. 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 May 3, 2003 and
February 1, 2003 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 income for the thirteen weeks ended May 3, 2003 was $36,456, shown
net of interest expense of $13,547. Interest expense for the thirteen weeks
ended May 4, 2002 was $65,626, shown net of interest income of $1,529.
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 May 3,
2003 and May 4, 2002 were $731,551 and $934,332, respectively.
Reportable Segments
Hibbett is an operator of full-line sporting good stores in small to
mid-sized markets predominately in the southeast, mid-Atlantic and midwest.
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 week periods ended May 3, 2003 or May 4, 2002.
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
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 layaway. The
customer may make further payments in installments, but the entire purchase
price for merchandise placed on layaway must be received by Hibbett within 30
days. 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. Hibbett recognizes merchandise revenues at the
time the customer takes possession of the merchandise.
5
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
cards are initially recorded as deferred revenue, and such proceeds are
subsequently recognized as revenue at the time the customer redeems such gift
cards and takes possession of the merchandise.
Stock-Based Compensation
Stock-based compensation cost is measured under the intrinsic value method
in accordance with Accounting Principles Bulletin No. 25. 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:
Thirteen Week Period Ended
-------------------------------
May 3, 2003 May 4, 2002
------------- -------------
Net income--as reported $ 5,255 $ 4,217
Net income--pro forma $ 5,013 $ 3,972
Diluted earnings per share--as reported .51 .41
Diluted earnings per share--pro forma .49 .39
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 (2.9% and 4.5% for fiscal 2004 and 2003, respectively), (ii)
an expected stock volatility of 57% and 58% for fiscal 2004 and 2003,
respectively, and (iii) no expected dividend yield.
2. Properties
We currently lease all of our existing 376 store locations and expect that
our policy of leasing rather than owning will continue as we continue to expand.
Our 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 and a kickout clause if
co-tenancy provisions are violated. 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 for present store locations or to obtain leases for equivalent or
better locations in the same general area. For the most part, we have 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, we 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 our belief that we maintain good relations
with our landlords, that most of our leases are at below market rents and that
generally we have been able to secure leases for suitable locations, we believe
that our lease strategy will not be detrimental to our business, financial
condition, or results of operations.
Our offices and our distribution center are leased under an operating lease
expiring in 2014. We own the Team division's warehousing and distribution center
located in Birmingham, Alabama.
6
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 Period Ended
---------------------------------
May 3, 2003 May 4, 2002
-------------- --------------
Weighted average shares outstanding:
Basic 10,119,244 9,964,309
Dilutive effect of stock options 169,419 246,245
-------------- --------------
Diluted 10,288,663 10,210,554
============== ==============
For the thirteen week period ended May 3, 2003, 140,350 anti-dilutive
options were excluded from the computation. For the thirteen week period ended
May 4, 2002, there were no anti-dilutive options.
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 thirteen weeks ended May 3,
2003, 87,945 shares were issued upon exercise of options, resulting in an
increase in Stockholders' Investment of $1,005,000 and an increase in Paid in
Capital of $449,000 attributable to the tax benefit received from the exercise
of these options. For the thirteen weeks ended May 3, 2003, 1,575 shares were
purchased under the Employee Stock Purchase Plan resulting in an increase in
Stockholders' Investment of $33,000.
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 June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 143, "Accounting for Asset Retirement Obligations," and SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." 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; however, we believe that the provisions of SFAS No. 143 have no
material impact on 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 144 during fiscal year
2003. The adoption of SFAS No. 144 had no material impact on our financial
condition, results of operations, or cash flows.
In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt"; SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers"; and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking
7
Fund Requirements." The rescissions eliminate the requirement to report gains
and losses from the extinguishment of debt as an extraordinary item, net of any
related income tax effect. This Statement also amends SFAS No. 13, "Accounting
for Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This Statement also amends other existing authoritative
pronouncements to make technical corrections, clarify meanings, or describe
their applicability under changed conditions. The provisions of this Statement
became effective for fiscal years beginning after May 15, 2002.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This Statement requires the
recognition of 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.
The provisions of this Statement are to be applied prospectively to exit or
disposal activities initiated after December 31, 2002.
We adopted SFAS No. 143, SFAS No. 145, and SFAS No. 146 on February 1,
2003, and expect the adoption of these standards to have no material impact on
our financial condition, results of operations, or cash flows.
In December 2002, the FASB issued SFAS 148, which provides alternative
methods of transition for a voluntary change to the fair value-based method of
accounting for stock-based compensation. In addition, this Statement amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method used on reported
results. Finally, this Statement amends APB Opinion 28, "Interim Financial
Reporting," to require disclosure about those effects in interim financial
information. This Statement is effective for fiscal and interim periods ending
after December 15, 2002. Management does not expect this Statement to have a
material impact on the Consolidated Financial Statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
Statement requires certain financial instruments that embody obligations of the
issuer and have characteristics of both liabilities and equity to be classified
as liabilities. SFAS No. 150 is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. We do not currently
expect the adoption of SFAS No. 150 to have a material impact on our
consolidated results of operations or financial position.
7. Subsequent Events
On June 9, 2003, the Company announced that its Board of Directors has
approved a 3-for-2 stock split. The stock split will be affected in the form of
a 50% stock dividend, and the new shares will be distributed on or about July
15, 2003, to stockholders of record on June 27, 2003. The effect of this split
is not reflected in the accompanying financial statements.
8
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 our target markets.
As of May 3, 2003, we operated 356 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.
Store Locations
We operate 376 stores in 20 contiguous states. Of these stores, 136 are
located in malls and 240 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 May 3, 2003:
9
ALABAMA - 54 El Dorado McDonough Corbin Grenada New Boston Kimball
Adamsville Forrest City Milledgeville (2) Danville Hattiesburg OKLAHOMA - 16 Kingsport
Athens Harrison Moultrie Elizabethtown (2) Jackson Ada Lebanon
Auburn Hot Springs Newnan Frankfort Laurel Altus Lenoir City
Bay Minnette Jonesboro Rome Georgetown Magee Ardmore Martin
Bessemer Little Rock Snellville Glasgow McComb Bartlesville Maryville
Brewton Magnolia St. Marys Hazard Meridian Chickasha McMinnville
Birmingham (2) Monticello Statesboro (2) Henderson Natchez Duncan Morristown
Calera Paragould Thomaston Hopkinsville New Albany Enid Murfreesboro
Clanton Pine Bluff Thomasville Madisonville Ocean Springs McAlester Nashville
Cullman Rogers Thomson Mayfield Oxford Muskogee Paris
Daphne Russellville Tifton Morehead Pascagoula Miami Springfield
Decatur Searcy Toccoa Murray Pearl Okmulgee Tullahoma
Dothan Van Buren Valdosta (3) Owensboro Richland Owasso Union City
Enterprise FLORIDA - 15 Vidalia Paducah Senatobia Ponca City Winchester
Eufaula Chiefland Villa Rica Richmond Starkville Stillwater TEXAS - 11
Fairfield (2) Clewiston Warner Robbins Somerset Tupelo (2) Woodward Cleburne
Florence (3) Destin Waycross South Williamson Vicksburg Yukon College Station
Ft. Payne Ft. Walton Beach IOWA - 2 Winchester Waynesboro S. CAROLINA - 21 Early
Gadsden Gainsville Debuque LOUISIANA - 12 N. CAROLINA - 34 Aiken Greenville
Gardendale Gulf Breeze West Burlington Abbeville Albemarle Anderson Longview
Guntersville Lake City ILLINOIS - 8 Bastrop Asheboro Camden Lufkin
Hartselle Lake Wales Carbondale Crowley Boone Chester Mt. Pleasant
Hoover Leesburg Centralia Deridder Clinton Columbia Palestine
Huntsville (2) Live Oak Charleston Hammond Dunn Conway Paris
Jacksonville Okeechobee Danville Monroe Elizabeth City Greenville Victoria
Jasper Palatka Galesburg Natchitoches Elkin Greenwood Waco
Leeds Panama City Harrisburg New Iberia Forest City Hartsville VIRGINIA - 12
Madison Santa Rosa Mt. Vernon Ruston Greenville Lancaster Bristol
Montgomery (2) Sebring Quincy Thibodaux Hendersonville (2) Laurens Cedar Bluff
Muscle Shoals GEORGIA - 50 INDIANA - 11 West Monroe Jacksonville Lexington Christianburg
Northport Albany Bedford Winnsboro Kinston Marion Covington
Oneonta Americus Columbus MISSOURI - 12 Lexington Murrells Inlet Franklin
Oxford Athens (2) Corydon Fulton Lincolnton Myrtle Beach Galax
Parkway City Bainbridge Crawfordsville Hannibal Lumberton Newberry Martinsville
Pelham Brunswick Greencastle Jefferson City Monroe (2) Orangeburg Norton
Phenix City Canton Greenfield Kennett Morehead City Rockhill Petersburg
Prattville Carrollton Greensburg Kirksville Morganton Seneca South Boston
Roebuck Cedartown Jasper Moberly New Bern Sumter Staunton
Scottsboro Centerville Madison Poplar Bluff Reidsville York Wythville
Selma Columbus (3) Princeton Rolla Roanoke Rapids TENNESSEE - 32 W. VIRGINIA - 3
Talladega Cordele Seymour Sedalia Rockingham Athens Beckley
Tillmans Corner Cornelia KANSAS - 7 Sikeston Salisbury Chattanooga Martinsburg
Troy Covington Coffeyville St. Roberts Sanford Cleveland Morgantown
Trussville Dalton Dodge City Warrensburg Shallotte Columbia
Tuscaloosa (3) Douglasville Emporia MISSISSIPPI - 29 Shelby (2) Cookeville (2)
Valley Ft. Olgethrope Hays Batesville Southern Pines Crossville
ARKANSAS - 21 Gainesville Liberal Clarksdale Statesville Dickson
Arkadelphia Griffin Manhattan Clinton Washington Dyersburg (2)
Batesville Hinesville Pittsburg Columbia Whiteville Fayetteville
Benton Hiram (2) KENTUCKY - 23 Columbus (2) Wilson Franklin
Blytheville Jessup Ashland Corinth OHIO - 3 Gallatin
Cabot La Grange (2) Bowling Green Flowood Heath Greeneville
Conway (2) Macon Campbellsville Greenville Mt. Vernon Jackson (3)
10
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
----------------------------
May 3, 2003 May 4, 2002
----------- -----------
Net sales 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution and store occupancy costs 68.6 68.9
----------- -----------
Gross profit 31.4 31.1
Store operating, selling, and
administrative expenses 18.8 19.2
Depreciation and amortization 2.2 2.4
----------- -----------
Operating income 10.4 9.5
Interest expense, net 0.0 0.1
----------- -----------
Income before provision for income taxes 10.4 9.4
Provision for income taxes 3.8 3.4
----------- -----------
Net income 6.6% 6.0%
=========== ===========
Thirteen Weeks Ended May 3, 2003 Compared to Thirteen Weeks Ended May 4, 2002
Net sales. Net sales increased $8.8 million, or 12.4%, to $79.6 million for
the thirteen weeks ended May 3, 2003, from $70.8 million for the comparable
period in the prior year. This increase is attributed to the opening of
thirty-eight Hibbett Sports stores, net of store closings, in the 52 week period
ended May 3, 2003 and a 4.5% increase in comparable store net sales for the
thirteen week period ended May 3, 2003. 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
ladies college apparel, retro NBA and MLB jerseys, Under Armour and Nike Dri-Fit
performance wear and cheerleading shorts. Basketball, New Balance running shoes,
Nike Shox, 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 $5.8 million of the
increase in net sales, and increases in comparable store net sales contributed
$3.0 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
May 3, 2003, we opened eight Hibbett Sports stores and closed three.
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 $25.0 million, or 31.4% of net sales, in the thirteen weeks
ended May 3, 2003, as compared to $22.0 million, or 31.1% of net sales, in the
same period of the prior fiscal year. A slight increase in product markup was
enhanced by a decrease as a percent of net sales by 39 basis points in retail
reductions (net markdowns and inventory shortages). This was offset by an
increase as a percent of net sales by 19 basis points in freight costs due to
fuel surcharges and rate increases. Warehouse costs decreased as a percent of
net sales by 8 basis points due to improved supply chain initiatives, while
occupancy costs increased as a percent of net sales by 2 basis points versus
last year's rate.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $15.0 million, or 18.8% of net sales,
for the thirteen weeks ended May 3, 2003, as compared to $13.6 million, or 19.2%
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 May 3, 2003, is attributed to the reduction in
advertising and inventory counting expense. Advertising costs decreased as a
percentage of net sales by 37 basis points this period compared to the same
thirteen week period last year due to less promotional advertising. Inventory
counting expenses decreased as a percentage of net sales by 17 basis points this
thirteen week period compared with the same period last year as a result of
moving a portion of store inventories scheduled for the first quarter into the
second quarter due to the conflict of a late Easter. These reductions were
partially offset by an increase in property and casualty insurance of $146,000
this thirteen week period as compared to the same period last year, an increase
as a percentage of net sales of 14 basis points. This increase was due to three
months of increased premiums post September 11, 2001, versus only two months of
higher premiums last year and an increase in auto and general liability base
rates.
11
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales decreased to 2.2% of net sales for the thirteen week
period ended May 3, 2003, compared with 2.4% of net sales for same thirteen week
period last year. The leveraging in depreciation expense is due to fewer capital
expenditure purchases this quarter compared to the same thirteen week period
last year, due to an increase in landlord contributions.
Interest expense. Net interest income for the thirteen weeks ended May 3,
2003, was $23,000 compared to $64,000 of interest expense in the prior year
period. The decrease is attributable to a reduction in working capital needs.
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 decreased during the thirteen week period
ended May 3, 2003 due to enhanced merchandise flow through the distribution
center. Accordingly, net cash provided by operating activities of $10.1 million
for the thirteen week period ended May 3, 2003 compared with net cash used in
operating activities of $1.3 million for the thirteen week period ended May 4,
2002.
With respect to cash flows used in investing activities, capital
expenditures were $1.2 million in the thirteen week period ended May 3, 2003
compared with $1.3 million for the prior year period. Capital expenditures in
the thirteen weeks ended May 3, 2003 were primarily related to the opening of
eight new stores, the refurbishing of existing stores and various corporate
additions, including automobiles and warehouse equipment.
Net cash provided by financing activities was $1.0 million in the thirteen
week period ended May 3, 2003 compared with $1.5 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 2004 to be
approximately $9.4 million, which includes resources budgeted to (i) fund the
opening of approximately 65 Hibbett Sports stores (ii) remodel selected existing
stores and (iii) fund corporate headquarters and distribution center related
capital expenditures.
Hibbett maintains an unsecured revolving credit facility that allows
borrowings up to $35 million and which will expire November 5, 2004 and is
subject to annual renewal each November. We also maintain an unsecured working
capital line of credit for $7.0 million, which is subject to annual renewal each
November. As of May 3, 2003, the Company had no debt outstanding under these
facilities, compared with $3.0 million outstanding under the revolving credit
facility and $1.1 million outstanding under the working capital facility, on May
4, 2002. 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.
12
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 Form 10-K/A dated May 1, 2003, and its Registration Statement on Form
S-3 filed with the Securities and Exchange Commission on August 23, 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 May 3, 2003 was $48,952 and the maximum amount outstanding was $1,980,553.
The total amount of interest paid during the thirteen week period ended May 3,
2003 was less than $500. The average amount of borrowings outstanding under
these agreements during the thirteen week period ended May 4, 2002 was
$4,903,810, the maximum amount outstanding was $9,357,902 and the weighted
average interest rate was 3.91%. 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.
13
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings
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.
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
May 1, 2003, to report, under Item 5, a correction to the prospectus filed as
part of a Registration Statement on Form S-3.
14
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: June 17, 2003 By:/s/ Gary A. Smith
------------- ----------------------------------------
Gary A. Smith
Vice President & Chief Financial Officer
15
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: June 17, 2003
-------------
/s/ Michael J. Newsome
------------------------
Michael J. Newsome
Chief Executive Officer
16
I, Gary A. Smith, 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: June 17, 2003
-------------
/s/ Gary A. Smith
-----------------------
Gary A. Smith
Chief Financial Officer
17