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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
January 31, 2004 000-20969
HIBBETT SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-1074067
(State of other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
451 Industrial Lane
Birmingham, Alabama 35211
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(205) 942-4292
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on
Common Stock, $.01 Par Value Which Registered
Per Share NASDAQ Stock Market
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ___.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act.) Yes X No ___
The aggregate market value of the voting stock held by non-affiliates of
the Registrant (assuming for purposes of this calculation that all executive
officers and directors are "affiliates") was $350,280,380 on August 1, 2003,
based on the closing sale price of $23.09 at August 1, 2003 for the Common Stock
on such date on the Nasdaq National Market.
The number of shares outstanding of the Registrant's Common Stock, as of
April 13, 2004 was 15,594,323.
DOCUMENTS INCORPORATED BY REFERENCE
The information regarding securities authorized for issuance under equity
compensation plans called for in Item 5 of Part II and the information called
for in Items 10, 11, 12, 13 and 14 of Part III are incorporated by reference
from the Company's definitive Proxy Statement for the 2004 Annual Meeting of
Stockholders, to be held June 2, 2004. Registrant's definitive Proxy Statement
will be filed with the Securities and Exchange Commission on or before April 30,
2004.
HIBBETT SPORTING GOODS, INC.
INDEX
PART I
Item 1. Business 4
Item 2. Properties 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 12
Item 6. Selected Consolidated Financial and Operating Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 22
Item 8. Consolidated Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 38
Item 9A. Controls and Procedures 38
PART III
Item 10. Directors and Executive Officers of Registrant 38
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and Management 38
Item 13. Certain Relationships and Related Transactions 38
Item 14. Principal Accounting Fees and Services 39
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 39
A Warning About Forward-Looking Statements
This document contains "forward-looking statements" as that term is used in
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
address future events, developments and results. They include statements
preceded by, followed by or including words such as "believe," "anticipate,"
"expect," "intend," "plan," "target" or "estimate." For example, our
forward-looking statements include statements regarding:
- our anticipated sales, including comparable store net sales, net sales
growth and earnings growth;
- our growth, including our plans to add, expand or relocate stores and
square footage growth;
- the possible effect of inflation and other economic changes on our
costs and profitability;
- our cash needs,
including our ability to fund our future capital expenditures and
working capital requirements;
- our gross profit margin and earnings and our ability to leverage
store operating, selling and administrative expenses and offset
other operating expenses;
- our seasonal sales patterns;
- the future reliability of, and cost associated with, our sources of
supply, particularly imported goods;
- the capacity of our distribution center;
- our ability to renew or replace store leases satisfactorily; and
- our expectations regarding competition.
You should assume that the information appearing in this annual report is
accurate only as of the date it was issued. Our business, financial condition,
results of operations and prospects may have changed since that date.
For a discussion of the risks, uncertainties and assumptions that could
affect our future events, developments or results, you should carefully review
the "Risk Factors" described beginning on page 8, as well as "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
beginning on page 15.
Our forward-looking statements could be wrong in light of these and other
risks, uncertainties and assumptions. The future events, developments or results
described in this report could turn out to be materially different. We have no
obligation to publicly update or revise our forward-looking statements after the
date of this annual report and you should not expect us to do so.
Investors should also be aware that while we do, from time to time,
communicate with securities analysts and others, we do not, by policy,
selectively disclose to them any material nonpublic information or other
confidential commercial information. Accordingly, shareholders should not assume
that we agree with any statement or report issued by any analyst regardless of
the content of the statement or report. We do not, by policy, confirm forecasts
or projections issued by others. Thus, to the extent that reports issued by
securities analysts contain any projections, forecasts or opinions, such reports
are not our responsibility.
2
Introductory Note
Unless otherwise stated, references to "we," "our," "Hibbett" and "Company"
generally refer to Hibbett Sporting Goods, Inc. and its direct and indirect
subsidiaries on a consolidated basis. Unless specifically indicated otherwise,
any reference to "2004" or "Fiscal 2004" relates to as of or for the year ended
January 31, 2004. Any reference to "2003" or "Fiscal 2003" relates to as of or
for the year ended February 1, 2003. Any references to "2002" or "Fiscal 2002"
relates to as of or for the year ended February 2, 2002.
Available Information
The Company maintains an Internet website at the following address:
www.hibbett.com.
We make available on or through our website certain reports that we file
with or furnish to the Securities and Exchange Commission (the "SEC") in
accordance with the Securities Exchange Act of 1934. These include our annual
reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports
on Form 8-K. We make this information available on our website free of charge as
soon as reasonably practicable after we electronically file the information with
or furnish it to the SEC.
Reports filed with or furnished to the SEC are also available free of
charge upon request by contacting our corporate office at (205) 942-4292.
3
PART I
Item 1. Business
General
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. Our
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 sports complemented by localized apparel and accessories
designed to appeal to a wide range of customers within each market. We believe
our stores are among the primary retail distribution avenues for brand name
vendors that seek to penetrate our target markets.
As of January 31, 2004, we operated 408 Hibbett Sports stores as well as
sixteen smaller-format Sports Additions athletic shoe stores and four
larger-format Sports & Co. superstores in 21 states. Over the past two years, we
have increased the number of stores from 329 stores to 428 stores, an increase
in store base of 30%. Our primary retail format and growth vehicle is Hibbett
Sports, a 5,000 square foot store located in enclosed malls or in strip centers
which are generally the center of commerce within the area and which are
generally anchored by a Wal-Mart store. Although competitors in some markets may
carry similar product lines and national brands, we believe the Hibbett Sports
stores are typically the primary, full-line sporting goods retailers in their
markets due to the extensive selection of traditional team and individual sports
merchandise offered and a high level of customer service.
Business Strategy
We target markets with county populations that range from 30,000 to
100,000. By targeting these smaller markets, we believe that we achieve
significant strategic advantages, including numerous expansion opportunities,
comparatively low operating costs and a more limited competitive environment
than generally faced in larger markets. In addition, we establish greater
customer and vendor recognition as the leading full-line sporting goods retailer
in these local communities.
We believe our ability to merchandise to local sporting or community
interests differentiates Hibbett from its national competitors. This strong
regional focus also enables us to achieve significant cost benefits including
lower corporate expenses, reduced distribution costs and increased economies of
scale from marketing activities. Additionally, we also use sophisticated
information systems to maintain tight controls over inventory and operating
costs.
We strive to hire enthusiastic sales personnel with an interest in sports.
Our extensive training program focuses on product knowledge and selling skills
and is conducted through the use of in-store clinics, videos, self-study
courses, and interactive group discussions.
Store Concepts
Hibbett Sports
Our primary retail format is Hibbett Sports, a 5,000 square foot store
located in enclosed malls or in strip centers which are generally the center of
commerce within the area and which are generally anchored by a Wal-Mart store.
We tailor our Hibbett Sports stores to the size, demographics and competitive
conditions of each market. Of these stores, 139 Hibbett Sports stores are
located in enclosed malls, the majority of which are the only enclosed malls in
the county, and the remaining 269 stores are located in strip centers.
4
Hibbett Sports stores offer a core selection of quality, brand name
merchandise with an emphasis on team sports. This merchandise mix is
complemented by a selection of localized apparel and accessories designed to
appeal to a wide range of customers within each market. For example, we believe
that apparel with logos of sports teams of local interest represents a larger
percentage of the merchandise mix in Hibbett Sports stores than it does in the
stores of national chain competitors. In addition, we strive to respond quickly
to major sports events of local interest. Such events in fiscal 2004 included
Louisiana State University's SEC Championship and National Championship title,
the success of Oklahoma's football team and the Carolina Panthers playoff run
and Super Bowl appearance in fiscal 2004.
Sports Additions
Our sixteen Sports Additions stores are small, mall-based stores, averaging
2,500 square feet with approximately 90% of merchandise consisting of athletic
footwear and the remainder consisting of caps and a limited assortment of
apparel. Sports Additions stores offer a broader assortment of athletic
footwear, with a greater emphasis on fashion than the athletic footwear
assortment offered by Hibbett Sports stores. All but four Sports Additions
stores are currently located in malls in which Hibbett Sports stores are also
present.
Sports & Co.
We opened four Sports & Co. superstores between March 1995 and September
1996. Sports & Co. superstores average 25,000 square feet and offer a larger
assortment of athletic footwear, apparel and equipment than Hibbett Sports
stores. Athletic equipment and apparel represent a higher percentage of the
overall merchandise mix at Sports & Co. superstores than they do at Hibbett
Sports stores. Sports & Co. superstores are designed to project the same
exciting and entertaining in-store atmosphere as Hibbett Sports stores but on a
larger scale. For example, Sports & Co. superstores offer customer participation
areas, such as putting greens and basketball hoops, and feature periodic special
events including appearances by well-known athletes.
Team Sales
Hibbett Team Sales, Inc. ("Team Sales"), a wholly-owned subsidiary of
Hibbett, is a leading supplier of customized athletic apparel, equipment and
footwear to school, athletic and youth programs in Alabama. Team Sales sells its
merchandise directly to educational institutions and youth associations. The
operations of Team Sales are independent of the operations of our retail stores.
Team Sales does not meet the materiality reporting requirements of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information.
Expansion Strategy
In fiscal 1994, we began to accelerate our rate of new store openings to
take advantage of the growth opportunities in our target markets. We have
currently identified approximately 400 potential markets for future Hibbett
Sports stores generally within the states in which we operate. Our clustered
expansion program, which calls for opening new stores within a two-hour driving
distance of an existing Hibbett location, allows us to take advantage of
efficiencies in distribution, marketing and regional management. During the last
half of fiscal 2000, we expanded our distribution center to accommodate our
recent growth and continued expansion. We believe the newly expanded facility
can support Company growth up to 850 stores.
In evaluating potential markets, we consider population, economic
conditions, local competitive dynamics and availability of suitable real estate.
Hibbett Sports stores effectively operate in both enclosed mall and strip center
locations, which are generally the center of commerce within the area and which
are generally anchored by a Wal-Mart store.
Our continued growth largely depends upon our ability to open new stores in
a timely manner and to operate them profitably. Additionally, successful
expansion is subject to various contingencies, many of which are beyond our
control. See "Risk Factors."
5
Merchandising
Our merchandising strategy is to provide a broad assortment of quality
athletic equipment, footwear and apparel at competitive prices in a full service
environment. Our stores offer a broad selection of brand name merchandise with
an emphasis on team sports and fitness. This merchandise mix is complemented by
a selection of localized apparel and accessories designed to appeal to a wide
range of customers within each market. Historically, as well as for fiscal 2004,
our leading product category is athletic footwear, followed by apparel and
sporting equipment, ranked according to sales.
Our stores emphasize quality brand name merchandise. We believe that the
breadth and depth of our brand name merchandise selection generally exceeds the
merchandise selection carried by local independent competitors. Many of these
branded products are highly technical and require considerable sales assistance.
We coordinate with our vendors to educate the sales staff at the store level on
new products and trends.
Although the core merchandise assortment tends to be similar for each
Hibbett Sports store, important local or regional differences frequently exist.
Accordingly, our stores regularly offer products that reflect preferences for
particular sporting activities in each community and local interest in college
and professional sports teams. Our knowledge of these interests, combined with
access to leading vendors, enables Hibbett Sports stores to react quickly to
emerging trends or special events, such as college or professional
championships.
Our merchandise staff analyzes current sporting goods trends by maintaining
close relationships with vendors, monitoring sales at competing stores,
communicating with store managers and personnel and reviewing industry trade
publications. The merchandise staff works closely with store personnel to meet
the requirements of individual stores for appropriate merchandise in sufficient
quantities.
Our success depends in part on our ability to anticipate and respond to
changing merchandise trends and consumer demand in a timely manner. See "Risk
Factors".
Vendor Relationships
The sporting goods retail business is very brand name driven. Accordingly,
we maintain relationships with a number of well known sporting goods vendors to
satisfy customer demand. We believe that our stores are among the primary retail
distribution avenues for brand name vendors that seek to penetrate our target
markets. As a result, we are able to attract considerable vendor interest and
establish long-term partnerships with vendors. As our vendors expand their
product lines and grow in popularity, we expand sales and promotions of these
products within our stores. In addition, as we continue to increase our store
base and enter new markets, the vendors have increased their brand presence
within these regions. We also emphasize and work with our vendors to establish
favorable pricing and to receive cooperative marketing funds. We believe that we
maintain very good working relationships with our vendors. For the fiscal year
ended January 31, 2004, Nike, our largest vendor, represented approximately
34.3% of our purchases, Reebok represented approximately 11.0% of our purchases
and New Balance represented approximately 8.9% of our purchases. For the fiscal
year ended February 1, 2003, Nike, our largest vendor, represented approximately
36.0% of our purchases, New Balance represented approximately 11.1% of our
purchases and Reebok represented approximately 9.1% of our purchases.
The loss of key vendor support could be detrimental to our business,
financial condition and results of operations. We believe that we have
long-standing and strong relationships with our vendors and that we have
adequate sources of brand name merchandise on competitive terms; however, we
cannot guarantee that we will be able to acquire such merchandise at competitive
prices or on competitive terms in the future. In this regard, certain
merchandise that is high profile and in high demand may be allocated by vendors
based upon the vendors' internal criteria, which are beyond our control.
6
Advertising and Promotion
We target special advertising opportunities in our markets to increase the
effectiveness of our advertising budget. In particular, we prefer advertising in
local media as a way to further differentiate Hibbett from national chain
competitors. Substantially all of our advertising and promotional spending is
centrally directed. Print advertising, including direct mail to customers and
newspaper inserts, serves as the foundation of our promotional program and
accounted for the majority of our total advertising costs in fiscal 2004. Other
advertising means, such as outdoor billboards and Hibbett trucks, are used to
reinforce Hibbett's name recognition and brand awareness in the community.
Distribution
We maintain a single 220,000 square foot distribution center in Birmingham,
Alabama, which services our existing stores. The distribution process is
centrally managed from our corporate headquarters, which is located in the same
building as the distribution center. To support our continued expansion, we
invested in additional automation and product staging racks in fiscal 2003. We
believe strong distribution support for our stores is a critical element of our
expansion strategy and is central to our ability to maintain a low cost
operating structure. As we continue to expand our store base, we intend to open
new stores in locations that can be supplied from our existing distribution
center. Due to improved technology, increased productivity and the
implementation of a new warehouse system, we believe we can service up to 850
stores out of this distribution center.
We receive substantially all of our merchandise at our distribution center.
For key products, we maintain backstock at the distribution center that is
allocated and distributed to stores through an automatic replenishment program
based on items that are sold. Merchandise is typically delivered to stores
weekly via Company-operated vehicles.
Competition
The business in which we are engaged is highly competitive. Many of the
items we offer in our stores are also sold by local sporting goods stores,
athletic footwear and other specialty athletic stores, traditional shoe stores
and national and regional full-line sporting goods stores. The marketplace for
sporting goods remains highly fragmented as many different retailers compete for
market share by utilizing a variety of store formats and merchandising
strategies. In recent years, there has been significant consolidation of large
format retailers in large metropolitan markets. However, we believe the
competitive environment for sporting goods remains different in small to
mid-sized markets where retail demand may not support larger format stores. In
smaller markets, such as those targeted by Hibbett, national chains compete by
focusing on a specialty category like athletic footwear.
Our stores compete with national chains that focus on athletic footwear,
local sporting goods stores, department and discount stores, traditional shoe
stores and mass merchandisers. Although we face competition from a variety of
competitors, we believe that our stores are able to compete effectively by being
distinguished as full-line sporting goods stores with an emphasis on team sports
and fitness merchandise complemented by a selection of localized apparel and
accessories. Our competitors may carry similar product lines and national brands
and a broader assortment, but we believe the principal competitive factors for
all of our stores, including Sports & Co., Hibbett Sports and Sports Additions
stores, are service, breadth of merchandise offered, availability of brand names
and availability of local merchandise. We believe we compete favorably with
respect to these factors in the small to mid-sized markets predominantly in the
Southeast, Mid-Atlantic and Midwest. However, we cannot guarantee that we will
continue to be able to compete successfully against existing or future
competitors. Expansion into markets served by our competitors, entry of new
competitors or expansion of existing competitors into our markets, could be
detrimental to our business, financial condition and results of operations.
7
Trademarks
Our Company is the owner of trademarks that are very important to our
business. For the most part, trademarks are valid as long as they are in use
and/or their registrations are properly maintained. Registrations of trademarks
can generally be renewed indefinitely as long as the trademarks are in use.
Following is a list of active trademarks registered and owned by the
Company:
- Hibbett Sports
- Sports Additions
The Company also has pending registration on the trademark logo "A Company
Inspired by Sport."
Risk Factors
You should carefully consider the following risks, as well as the other
information contained in this report, before investing in shares of our common
stock. If any of the following risks actually occur, our business could be
harmed. In that case, the trading price of our common stock could decline, and
you might lose all or part of your investment.
We may be unable to achieve our expansion plans for future growth.
We have grown rapidly primarily through opening new stores, growing from 67
stores at the beginning of fiscal year 1997 to 428 stores at January 31, 2004.
We plan to increase our store base by a net of 65 new Hibbett Sports stores in
fiscal year 2005. Our continued growth will depend, in large part, upon our
ability to open new stores in a timely manner and to operate them profitably.
Additionally, successful expansion is subject to various contingencies, many of
which are beyond our control. These contingencies include, among others:
- our ability to identify and secure suitable store sites on a
timely basis;
- our ability to negotiate advantageous lease terms;
- our ability to complete any necessary construction or refurbishment of
these sites; and
- the successful integration of new stores into existing operations.
As our business grows, we will need to attract and retain additional
qualified personnel in a timely manner and develop, train and manage an
increasing number of management level sales and other employees. We cannot
assure you that we will be able to attract and retain personnel as needed in the
future. If we are not able to hire capable store managers and other store-level
personnel, we will not be able to open new stores as planned and our revenue
growth and operating results will suffer.
We cannot give any assurances that we will be able to continue our
expansion plans successfully; that we will be able to achieve results similar to
those achieved with prior locations; or that we will be able to continue to
manage our growth effectively. Our failure to achieve our expansion plans could
materially adversely affect our business, financial condition and results of
operations. In addition, our operating margins may be impacted in periods in
which incremental expenses are incurred as a result of new store openings.
A downturn in the economy may affect consumer purchases of discretionary
items, which could reduce our sales.
In general, our sales represent discretionary spending by our customers.
Discretionary spending is affected by many factors, including, among others,
general business conditions, interest rates, the availability of consumer
credit, taxation and consumer confidence in future economic conditions. Our
customers' purchases of discretionary items, including our products, could
decline during periods when disposable income is lower or periods of actual or
perceived unfavorable economic conditions. If this occurs, our revenues and
profitability will decline. In addition, our sales could be adversely affected
by a downturn in the economic conditions in the markets in which we operate.
8
Our inability to identify, and anticipate changes in, consumer demands and
preferences and our inability to respond to such consumer demands in a timely
manner could reduce our sales.
Our products appeal to a broad range of consumers whose preferences cannot
be predicted with certainty and are subject to rapid change. Our success depends
on our ability to identify product trends as well as to anticipate and respond
to changing merchandise trends and consumer demand in a timely manner. We cannot
assure you that we will be able to continue to offer assortments of products
that appeal to our customers or that we will satisfy changing consumer demands
in the future. Accordingly, our business, financial condition and results of
operations could be materially adversely affected if:
- we are unable to identify and respond to emerging trends;
- we miscalculate either the market for the merchandise in our stores or
our customers' purchasing habits; or
- consumer demand dramatically shifts away from athletic footwear and
apparel.
In addition, we may be faced with significant excess inventory of some
products and missed opportunities for other products, which would decrease our
profitability.
If we lose any of our key vendors or any of our key vendors fail to supply us
with merchandise, we may not be able to meet the demand of our customers and our
sales could decline.
Our business is dependent to a significant degree upon close relationships
with vendors and our ability to purchase brand name merchandise at competitive
prices. During the 52-week period ended January 31, 2004, Nike, our largest
vendor, represented approximately 34.3% of our purchases, Reebok represented
approximately 11.0% of our purchases and New Balance represented approximately
8.9% of our purchases. The loss of key vendor support could have a material
adverse effect on our business, financial condition and results of operations.
We cannot guarantee that we will be able to acquire such merchandise at
competitive prices or on competitive terms in the future. In this regard,
certain merchandise that is in high demand may be allocated by vendors based
upon the vendors' internal criteria which is beyond our control.
In addition, we believe many of our largest vendors source a substantial
majority of their products from China and other foreign countries. Imported
goods are generally less expensive than domestic goods and indirectly contribute
significantly to our favorable profit margins. A disruption in the flow of
imported merchandise or an increase in the cost of those goods may significantly
decrease our sales and profits.
We may experience a disruption or increase in the cost of imported vendor
products at any time for reasons that may not be in our control. If imported
merchandise becomes more expensive or unavailable, the transition to alternative
sources by our vendors may not occur in time to meet our demands. Products from
alternative sources may also be more expensive than those our vendors currently
import. Risks associated with reliance on imported goods include:
o disruptions in the flow of imported goods because of factors such as:
- raw material shortages, work stoppages, strikes and political unrest;
- problems with oceanic shipping;
- economic crises and international disputes; and
o increases in the cost of purchasing or shipping foreign merchandise
resulting from:
- foreign government regulations, changes in currency exchange rates and
local economic conditions; and
- import duties, import quotas and other trade.
Our sales and profitability could decline if vendors are unable to promptly
replace sources providing equally appealing products at a similar cost.
9
Pressure from our competitors may force us to reduce our prices or increase our
spending, which would lower our revenue and profitability.
The business in which we are engaged is highly competitive. The marketplace
for sporting goods remains highly fragmented as many different retailers compete
for market share by utilizing a variety of store formats and merchandising
strategies. Hibbett Sports stores compete with national chains that focus on
athletic footwear, local sporting goods stores, department and discount stores,
traditional shoe stores and mass merchandisers. Many of our competitors have
greater financial resources than we do. In addition, many of our competitors
employ price discounting policies that, if intensified, may make it difficult
for us to reach our sales goals without reducing our prices. As a result of this
competition, we may also need to spend more on advertising and promotion than we
anticipate. We cannot guarantee that we will continue to be able to compete
successfully against existing or future competitors. Expansion into markets
served by our competitors, entry of new competitors or expansion of existing
competitors into our markets could be detrimental to our business, financial
condition and results of operations.
Our operating results are subject to seasonal and quarterly fluctuations, which
could cause the market price of our common stock to decline.
We have historically experienced and expect to continue to experience
seasonal fluctuations in our net sales, operating income and net income. Our net
sales, operating income, and net income are typically higher in the spring, back
to school, and Christmas seasons. An economic downturn during these periods
could adversely affect us to a greater extent than if a downturn occurred at
other times of the year.
Our operating results may fluctuate as we open new stores.
We plan to increase our store base by a net of approximately 65 new Hibbett
Sports stores in fiscal year 2005. We have currently identified approximately
400 potential markets for future Hibbett Sports stores generally within the
states in which we operate. Our results of operations may vary significantly as
a result of the timing of new store openings, the amount and timing of net sales
contributed by new stores, the level of pre-operating expenses associated with
new stores and the relative proportion of new stores to mature stores. Any
significant variation in our results of operations could adversely affect our
stock price.
We would be materially and adversely affected if our single distribution center
were shut down.
We operate a single centralized distribution center in Birmingham, Alabama.
We receive and ship substantially all of our merchandise at our distribution
center. Any natural disaster or other serious disruption to this facility due to
fire, tornado or any other cause would damage a portion of our inventory and
could impair our ability to adequately stock our stores and our sales and
profitability. In addition, we could incur significantly higher costs and longer
lead times associated with distributing our products to our stores during the
time it takes for us to reopen or replace the center.
We depend on key personnel. If we lose the services of any of our principal
executive officers, including Michael J. Newsome, our Chief Executive Officer
and Chairman of the Board, we may not be able to run our business effectively
and operating results could suffer.
We have benefited from the leadership and performance of our senior
management, especially Michael J. Newsome, our Chairman and Chief Executive
Officer. Mr. Newsome has been instrumental in directing our business strategy
within the small to mid-sized markets in the Southeast, Mid-Atlantic and Midwest
and maintaining long-term relationships with our key vendors. Our overall
success and the success of our expansion strategy will depend on our ability to
retain our current management, including Mr. Newsome, and our ability to attract
and retain qualified personnel in the future. As we continue to grow, we will
continue to hire, appoint or otherwise change senior managers and other key
executives. We do not maintain key man life insurance on any of our personnel
nor do we have any employment or non-competition agreements with any of our
executive officers. The loss of services of Mr. Newsome for any reason could
have a material adverse effect on our business, financial condition and results
of operations. In addition, the loss of certain other principal executive
officers could affect our ability to run our business effectively and our
ability to successfully expand our operations.
10
Provisions in our charter documents and Delaware law might deter acquisition
bids for us.
Certain provisions of our certificate of incorporation and bylaws may be
deemed to have anti-takeover effects and may discourage, delay or prevent a
takeover attempt that a stockholder might consider in its best interest. These
provisions, among other things:
- classify our Board of Directors into three classes, each of which
serves for different three year periods;
- provide that a director may be removed by stockholders only for cause
by a vote of the holders of not less than two-thirds of our shares
entitled to vote;
- provide that all vacancies on our Board of Directors, including any
vacancies resulting from an increase in the number of directors, may
be filled by a majority of the remaining directors, even if the number
is less than a quorum;
- provide that special meetings of the stockholders may only be called
by the chairman of the Board of Directors, a majority of the Board of
Directors or upon the demand of the holders of a majority of the
shares entitled to vote at any such special meeting; and
- require a vote of the holders of not less than two-thirds of the
shares entitled to vote in order to amend the foregoing provisions and
certain other provisions of our certificate of incorporation and
bylaws.
In addition, our Board of Directors, without further action of the
stockholders, is permitted to issue and fix the terms of preferred stock which
may have rights senior to those of common stock. We are also subject to the
Delaware business combination statute, which may render a change in control of
us more difficult.
Employees
As of January 31, 2004, we employed approximately 1,200 full-time and
approximately 2,200 part-time employees, none of whom are represented by a labor
union. The number of part-time employees fluctuates depending on seasonal needs.
We cannot guarantee that our employees will not, in the future, elect to be
represented by a union. We consider our relationship with our employees to be
good and have not experienced significant interruptions of operations due to
labor disagreements.
Item 2. Properties
We currently lease all of our existing 428 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 ten 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 kick-out clause
if co-tenancy and exclusivity 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 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. Based
primarily 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.
11
Our offices and our distribution center are leased under an operating lease
expiring in 2014. We own Team division's warehousing and distribution center
located in Birmingham, Alabama.
Store Locations
We operate 428 stores in 21 contiguous states. Of these stores, 155 are
located in malls and 273 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 shows the number of locations by
state as of January 31, 2004:
Alabama - 61 Kansas - 11 Ohio - 5
Arkansas - 23 Kentucky - 24 Oklahoma - 18
Florida - 16 Louisiana - 14 S. Carolina - 21
Georgia - 52 Missouri - 15 Tennessee - 37
Iowa - 3 Mississippi - 35 Texas - 16
Illinois - 10 Nebraska - 2 Virginia - 13
Indiana - 12 N. Carolina - 37 W. Virginia - 3
Item 3. Legal Proceedings
We are party to various legal proceedings incidental to our business. In
the opinion of management, after consultation with legal counsel responsible for
these matters, the ultimate liability, if any, with respect to those proceedings
is not presently expected to materially affect financial position, results of
operations or cash flows of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
Our common stock is traded on the NASDAQ National Market (NASDAQ) under the
symbol HIBB. The following table sets forth, for the periods indicated, the high
and low closing sales prices of shares of our Common Stock as reported by
NASDAQ. Prices quoted are reflective of the stock split affected on July 15,
2003.
Fiscal 2004: High Low
First Quarter (February 2 to May 3) $ 18.96 $ 12.97
Second Quarter (May 4 to August 2) $ 23.13 $ 17.49
Third Quarter (August 3 to November 1) $ 28.78 $ 21.63
Fourth Quarter (November 2 to January 31) $ 33.20 $ 24.35
Fiscal 2003: High Low
First Quarter (February 3 to May 4) $ 18.33 $ 13.83
Second Quarter (May 5 to August 3) $ 19.00 $ 11.65
Third Quarter (August 4 to November 2) $ 15.38 $ 11.70
Fourth Quarter (November 3 to February 1) $ 17.77 $ 14.23
On April 13, 2004, the last reported sale price for our common stock as
quoted by NASDAQ was $37.47 per share. As of April 5, 2004, the Company had
approximately 42 shareholders of record.
12
We have never declared or paid any dividends on our common stock. We
currently intend to retain our future earnings to finance the growth and
development of our business, and therefore we do not anticipate declaring or
paying cash dividends on our common stock for the foreseeable future. Any future
decision to declare or pay dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of
operations, capital requirements, and such other factors as the Board of
Directors deems relevant.
13
Item 6. Selected Consolidated Financial and Operating Data
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
(Dollars In Thousands, Except Per Share Amounts)
January 31, February 1, February 2, February 3, January 29,
2004 2003 2002 2001 2000
--------- --------- --------- --------- ---------
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
Income Statement Data :
Net sales $ 320,964 $ 279,187 $ 241,130 $ 209,626 $ 174,312
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 218,565 193,383 167,402 145,800 121,962
--------- --------- --------- --------- ---------
Gross profit 102,399 85,804 73,728 63,826 52,350
Store operating, selling, and
administrative expenses 63,194 55,529 48,891 40,789 34,142
Depreciation and amortization 7,267 6,866 5,873 4,802 3,762
--------- --------- --------- --------- ---------
Operating income 31,938 23,409 18,964 18,235 14,446
Interest expense, net (106) 214 625 830 422
--------- --------- --------- --------- ---------
Income before provision for income
taxes 32,044 23,195 18,339 17,405 14,024
Provision for income taxes 11,696 8,466 6,786 6,593 5,364
--------- --------- --------- --------- ---------
Net income $ 20,348 $ 14,729 $ 11,553 $ 10,812 $ 8,660
========= ========= ========= ========= =========
Earnings per common share:
Basic: $ 1.33 $ 0.98 $ 0.78 $ 0.74 $ 0.60
Diluted: $ 1.29 $ 0.96 $ 0.76 $ 0.73 $ 0.59
Weighted average shares outstanding:
Basic 15,342,966 15,053,019 14,812,773 14,549,128 14,462,427
Diluted 15,732,039 15,357,012 15,118,560 14,909,365 14,692,456
Selected Operating Data :
Number of stores open at end of period:
Hibbett Sports 408 351 309 261 206
Sports & Co. 4 4 4 4 4
Sports Additions 16 16 16 17 13
--------- --------- --------- --------- ---------
Total 428 371 329 282 223
========= ========= ========= ========= =========
Balance Sheet Data :
Working capital $ 96,446 $ 70,961 $ 56,334 $ 51,684 $ 37,831
Total assets 168,562 129,580 115,315 101,252 83,278
Total debt - - 3,903 9,748 4,391
Stockholders' investment 122,890 97,350 80,063 66,665 54,201
14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Hibbett is a rapidly growing operator of full-line sporting goods stores in
small to mid-sized markets predominantly in the Southeast, Mid-Atlantic and
Midwest. Our stores offer a broad assortment of quality athletic equipment,
footwear and apparel with a high level of customer service. Our merchandise
assortment features a broad selection of brand name merchandise emphasizing team
sports and fitness complemented by a selection of localized apparel and
accessories designed to appeal to a wide range of customers within each market.
We believe our stores are among the primary retail distribution avenues for
brand name vendors that seek to penetrate our target markets.
As of January 31, 2004 we operated 408 Hibbett Sports stores as well as 16
smaller-format Sports Additions athletic shoe stores and four larger-format
Sports & Co. superstores in 21 states. Our primary retail format and growth
vehicle is Hibbett Sports, a 5,000-square-foot store located in enclosed malls
and dominant strip centers 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 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 Hibbett Sports stores are typically the primary, full-line sporting
goods retailers in their markets due to the extensive selection of traditional
team and individual sports merchandise offered and a high level of customer
service.
In fiscal 1994, we began to accelerate our rate of new store-openings to
take advantage of the growth opportunities in our target markets. Since fiscal
1994, we have grown our store base from 49 to 428 stores. Our expansion strategy
is to continue to open Hibbett Sports stores in our target markets. We plan to
open approximately 65 Hibbett Sports stores, net of store closings, in fiscal
2005. We do not expect that the average size of our stores opened in fiscal 2005
will vary significantly from the average size of stores opened in fiscal 2004.
Hibbett historically has comparable store sales in the low to mid-single digit
range and we plan to increase total square footage by approximately 15% in
fiscal year 2005. We believe total sales percentage growth will be in the mid
teens in fiscal 2005.
Over the past three years, we have increased our product margin due to
improved vendor discounts, increased efficiencies in logistics and favorable
leveraging of our store occupancy costs. We expect gross profit to increase 15
to 20 basis points in fiscal 2005.
Due to our increased sales, we have leveraged our store operating, selling
and administrative expenses and offset recent increases in certain expenses
including property, casualty and medical insurance. With our expected sales
increase, we plan to leverage expenses 10 to 20 basis points in fiscal 2005. We
also expect to continue to generate sufficient cash to enable us to expand and
remodel our store base and provide capital expenditures for both warehouse and
information projects while increasing our cash position.
Hibbett operates on a 52- or 53-week fiscal year ending on the Saturday
nearest to January 31 of each year. The consolidated statements of operations
for fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002,
include 52 weeks of operations. Hibbett has been incorporated under the laws of
the State of Delaware since October 6, 1996.
15
Results of Operations
The following table sets forth consolidated statements of operations
expressed as a percentage of net sales for the periods indicated:
Fiscal Year Ended
------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
------ ------ ------
Net sales 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 68.1 69.3 69.4
------ ------ ------
Gross profit 31.9 30.7 30.6
Store operating, selling, and administrative expenses 19.7 19.9 20.3
Depreciation and amortization 2.3 2.4 2.4
------ ------ ------
Operating income 9.9 8.4 7.9
Interest expense, net 0.0 0.1 0.3
------ ------ ------
Income before provision for income taxes 9.9 8.3 7.6
Provision for income taxes 3.6 3.0 2.8
------ ------ ------
Net income 6.3% 5.3% 4.8%
====== ====== ======
Fiscal 2004 Compared to Fiscal 2003
Net sales. Net sales increased to $321.0 million from $279.2 million, an
increase of $41.8 million, or 15.0%, for the 52 weeks ended January 31, 2004 as
compared to the same 52-week period in the prior year. This increase is
attributed to the opening of 63 Hibbett Sports stores and 2 Sports Additions
stores, net of store closings, in the 52-week period ended January 31, 2004, and
a 5.3% increase in comparable store net sales for the 52-week period ended
January 31, 2004. The increase in comparable store net sales was primarily due
to increased sales in apparel. Apparel sales, mainly college and pro-licensed
products and active wear, were driven by retro NBA and NFL jerseys, Under Armour
and Nike Dri-Fit performance wear, women's active wear and college apparel 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, primarily due to category elimination in
racket sports, golf and in-line skates. Our team sports business, which consists
of baseball, basketball, football and soccer, improved during the fourth
quarter, but did not offset the decreases from the eliminated categories and the
softness in the fitness category. New stores and stores not in the comparable
store net sales calculation accounted for $28.7 million of the increase in net
sales, and increases in comparable store net sales contributed $13.1 million.
Comparable store net sales data for the year reflect sales for our Hibbett
Sports and Sports Additions stores open throughout the period and the
corresponding period of the prior fiscal year. During the 52-week period ended
January 31, 2004, we opened 63 Hibbett Sports stores and 2 Sports Additions and
closed 8 stores.
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 $102.4 million, or 31.9% of net sales, in the 52 weeks ended
January 31, 2004, compared with $85.8 million, or 30.7% of net sales, in the
same period of the prior fiscal year. The improved gross margin is primarily
attributed to selling more merchandise at full price, the leveraging of
occupancy and warehouse cost and improved logistics flow. Product margin
improved 89 basis points due to gains in initial mark on, a reduction in mark
down rate and improvements in shrinkage. Occupancy, as a percent of net sales,
improved by 14 basis points year over year due to above average comparable store
sales gains. Warehouse costs improved by 19 basis points, primarily due to the
leveraging of salaries and benefits.
16
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $63.2 million, or 19.7% of net sales,
for the 52-week period ended January 31, 2004, compared with $55.5 million, or
19.9% of net sales, for the comparable period a year ago. Net of the sale on a
leasehold interest in fiscal 2003, store operating, selling and administrative
expenses were 19.7% of net sales versus 20.1% for the same adjusted period last
year. The decrease in store operating, selling and administrative expenses as a
percentage of net sales in the 52 weeks ended January 31, 2004, was attributed
to the leveraging of store labor and other store-related non-payroll expenses.
Retail store labor decreased as a percent of net sales by 16 basis points this
period compared with the same 52-week period last year due to higher than
expected comparable store sales and improved labor controls. Store supplies were
down 10 basis points year over year and net-advertising costs were reduced by 5
basis points this year compared to the same 52-week-period last year.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales was 2.2% in the 52 weeks ended January 31, 2004, and
2.4% in the 52 weeks ended February 1, 2003. The reduction in depreciation and
amortization expense as a percentage of net sales is due to an increase in sales
this year compared to the same 52-week period last year and an increase in
landlord contributions on leasehold improvements.
Provision for income taxes. Provision for income taxes as a percentage of
net sales was 3.6% in the 52 weeks ended January 31, 2004, compared to 3.0% for
the 52 weeks ended February 1, 2003, due to a 160 basis point increase in
pre-tax income. The income tax rate as a percentage of pre-tax income was 36.5%
for fiscal 2004 and fiscal 2003.
Fiscal 2003 Compared to Fiscal 2002
Net sales. Net sales increased to $279.2 million from $241.1 million, an
increase of $38.1 million, or 15.8% for the 52 weeks ended February 1, 2003
compared to the same 52-week period in the prior year. This increase is
attributed to the opening of 42 Hibbett Sports stores, net of store closings, in
the 52-week period ended February 1, 2003, and a 3.9% increase in comparable
store net sales for the 52-week period ended February 1, 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 strong consumer demand for retro pro-licensed jerseys, caps
and jackets, hooded fleece and moisture-wicking performance products. Nike
basketball shoes, New Balance running shoes, K-Swiss athletic shoes and the
retro and classic look drove footwear sales. Equipment sales were down from last
year's numbers due to the industry's inability to produce new high-volume
fitness items, such as the highly advertised ab-roller from previous years. New
stores and stores not in the comparable store net sales calculation accounted
for $30.1 million of the increase in net sales, and increases in comparable
store net sales contributed $8.0 million. Comparable store net sales data for
the year reflect sales for our Hibbett Sports and Sports Additions stores open
throughout the period and the corresponding period of the prior fiscal year.
During the 52-week period ended February 1, 2003, we opened 45 Hibbett Sports
stores and closed 3.
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 $85.8 million, or 30.7% of net sales, in the 52 weeks ended
February 1, 2003, compared with $73.7 million, or 30.6% 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 $205,000 this period compared
with the same period last year, a decrease as a percent of net sales of 19 basis
points, a reduction in warehouse labor-related expenses as a percent of net
sales of 10 basis points this year compared with last year and a reduction in
store occupancy costs as a percent of net sales of 10 basis points this period
compared with 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
labor-related expenses is due to lower inventory levels per store and less
handling of merchandise in the warehouse through increased cross docking. The
reduction in store occupancy-related costs as a percentage of net sales is a
result of leveraging common area maintenance expenses. These improvements were
partially offset by an increase in inventory shortages on a year over year basis
due to better-than-expected performance in the prior year.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $55.5 million, or 19.9% of net sales,
for the 52-week period ended February 1, 2003, compared with $48.9 million, or
20.3% of net sales, for the comparable period a year ago. Net of the sale on a
leasehold interest, store operating, selling and administrative expenses were
20.1% of net sales versus 20.3% for the same period last year. The decrease in
store operating, selling and administrative expenses as a percentage of net
sales in the 52 weeks ended February 1, 2003, is attributed to the leveraging of
store labor and other store-related non-payroll expenses. Retail store labor
decreased as a percent of net sales by 10 basis points during this period
compared with the same 52-week period last year due to higher than expected
comparable store sales and improved labor controls. The improvements in store
labor and other related non-payroll expenses were somewhat offset by an increase
in insurance costs post September 11, 2001. Property and casualty insurance
costs increased by $941,000 year over year, a difference as a percent of net
sales of 32 basis points.
17
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales was 2.5% in the 52 weeks ended February 1, 2003, and
2.4% in the 52 weeks ended February 2, 2002. The increase as a percent to sales
is primarily attributed to a $285,000, or 56% increase, in depreciation of
shorter-lived assets, such as Point-of-Sale software.
Provision for income taxes. Provision for income taxes as a percentage of
net sales was 3.0% in the 52 weeks ended February 1, 2003, compared to 2.8% for
the 52 weeks ended February 2, 2002, due to a 70 basis point increase in pre-tax
income. The income tax rate as a percentage of pre-tax income was 36.5% for
fiscal 2003 compared to 37.0% for fiscal 2002 due to lower state tax rates.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings and working
capital requirements. Our working capital requirements are somewhat seasonal in
nature and typically reach their peak near the end of the third and the
beginning of the fourth quarters of our fiscal year. Historically, we have
funded our cash requirements primarily through cash flow from operations and
borrowings under our revolving credit facilities.
Our Statements of Cash Flows are summarized as follows (in thousands):
Fiscal Year Ended
----------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
--------- --------- ---------
Net cash provided by operating activities $ 33,816 $ 18,203 $ 13,189
========= ========= =========
Cash flows provided by (used in) investing activities
Capital expenditures (7,563) (6,719) (8,726)
Proceeds from sales of property and equipment 12 611 28
--------- --------- ---------
Net cash used in investing activities (7,551) (6,108) (8,698)
========= ========= =========
Cash flows provided by (used in) financing activities
Revolving loan borrowings and repayments, net - (3,903) (5,845)
Proceeds from options exercised and purchase of
shares under the employee stock purchase plan 3,682 1,852 1,442
--------- --------- ---------
Net cash provided by (used in) financing activities $ 3,682 $ (2,051) $ (4,403)
========= ========= =========
Net cash provided by operating activities has historically been driven by
net income levels combined with fluctuations in inventory and accounts payable
balances. Net income has increased in each of the last three fiscal years. In
addition, we have continued to increase our inventory levels throughout these
periods as the number of stores has increased. However, inventory levels on a
per-store basis have decreased. We financed this increase in total inventory
primarily through cash generated from operations in each of the last three
fiscal years. These activities resulted in cash flows provided by operating
activities of $33.8 million, $18.2 million and $13.2 million in fiscal 2004,
fiscal 2003 and fiscal 2002, respectively.
With respect to cash flows from investing activities, capital expenditures
for fiscal 2004 were $7.6 million compared with $6.7 million in fiscal 2003 and
$8.7 million in fiscal 2002. Capital expenditures for the 52-week period ended
January 31, 2004, were primarily related to the opening of 63 new Hibbett Sports
stores and 2 new Sports Additions stores, the refurbishing of existing stores
and purchasing corporate assets, including automobiles and warehouse equipment.
18
We estimate capital expenditures in fiscal 2005 will be approximately $9.8
million, which relate to the opening of approximately 65 Hibbett Sports stores
(exclusive of store closings), remodeling of selected existing stores and
improvements at the Company's headquarters and distribution center.
Net cash provided by (used in) financing activities was $3.7 million, ($2.1
million) and ($4.4 million) in fiscal 2004, fiscal 2003 and fiscal 2002,
respectively. Cash flows from financing activities have historically represented
financing of our long-term growth. In fiscal 2004, we received $3.7 million,
excluding the related tax benefit, from proceeds related to stock options
exercised and shares issued under the employee stock purchase plan.
We negotiated a new unsecured revolving credit facility that allows
borrowings up to $25 million and which will expire November 5, 2005, subject to
renewal every two years. In fiscal 2003, the unsecured revolving credit facility
allowed borrowings up to $35 million and we also maintained an unsecured working
capital line of credit for $7 million, which expired on January 5, 2004 and was
not renewed. As of January 31, 2004 and February 1, 2003, we had no debt
outstanding under any of these facilities. Based on our current operating and
store opening plans, management believes we can adequately fund our cash needs
for the foreseeable future through cash generated from operations and borrowings
under the new credit facility.
The following table lists the aggregate maturities of various classes of
obligations and expiration amounts of various classes of commitments related to
Hibbett Sporting Goods, Inc. at January 31, 2004 (in millions):
Payments due under contractual obligations
F 2005 F 2006 F 2007 F 2008 F 2009 Thereafter Total
--------- --------- --------- --------- --------- ---------- ---------
Long-term debt-revolving credit facility (1) $ - $ - $ - $ - $ - $ - $ -
Operating Leases (2) 23,512 19,916 15,940 12,174 8,086 17,024 96,652
--------- --------- --------- --------- --------- ---------- ---------
$ 23,512 $ 19,916 $ 15,940 $ 12,174 $ 8,086 $ 17,024 $ 96,652
========= ========= ========= ========= ========= ========== =========
(1) See "Long-term Debt" - Financial Statement Note 2.
(2) See ""Leases" - Financial Statement Note 3.
Inflation and other Economic Factors
Our ability to provide quality merchandise on a profitable basis may be
subject to economic factors and influences that we cannot control. National or
international events, including the war on terrorism, could lead to disruptions
in economies in the United States or in foreign countries where a significant
portion of our merchandise is manufactured. These and other factors could
increase our merchandise costs and other costs that are critical to our
operations. Consumer spending could also decline because of economic pressures.
- Merchandise Costs. Based on current economic conditions, we expect that
merchandise costs per unit will remain constant in fiscal 2005.
- Freight Costs. Because of rising fuel costs, we could experience
increases in freight costs. However, we do not expect these increases, if any,
to have a material effect on our results of operations.
- Minimum Wage. An increase in the mandated minimum wage could
significantly increase our payroll costs. In prior years, proposals increasing
the federal minimum wage by $1.00 per hour have narrowly failed to pass both
houses of Congress.
- Insurance Costs. During fiscal 2004, property, casualty and health
insurance costs increased significantly. We expect that these costs will
increase in fiscal 2005, but the increase will not be as significant as it was
in the prior year.
Recent Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46 (revised 2003), "Consolidation of Variable Interest
Entities," which addresses how a business enterprise should evaluate whether it
has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. FIN 46R replaces
Interpretation 46, "Consolidation of Variable Interest Entities,' which was
issued in January 2003. The Company will be required to apply FIN 46R to
variable interests in VIEs created after December 31, 2003. For variable
interests in VIEs created before January 1, 2004, the Interpretation will be
applied beginning on January 1, 2005. For any VIEs that must be consolidated
under FIN 46R that were created before January 1, 2004, the assets, liabilities
and non-controlling interests of the VIE initially would be measured at their
carrying amounts with any difference between the net amount added to the balance
sheet and any previously recognized interest being recognized as the cumulative
effect of an accounting change. If determining the carrying amounts is not
practicable, fair value at the date FIN 46R first applies may be used to measure
the assets, liabilities and non-controlling interest of the VIE. We do not
expect Interpretation 46 or FIN 46R to have any impact on our consolidated
financial statements.
In March 2004, the FASB issued Exposure Draft, "Share-Based Payment". In
this statement, the FASB formally proposed to require companies to recognize the
fair value of stock options and other stock-based compensation to employees for
future reporting periods. It is probable that the Company will be required to
expense options under its current plan in future periods under this Exposure
Draft. However, the Company cannot estimate the impact that expensing options
will have on the final statements until the FASB completes its exposure draft
process and issues its final statement.
SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," was issued in May 2003. This
Statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. The Statement also includes required disclosures for financial
instruments within its scope. For the Company, the Statement was effective for
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, except for mandatorily redeemable financial instruments. For certain
mandatorily redeemable financial instruments, the Statement will be effective
for the Company on January 31, 2005. The effective date has been deferred
indefinitely for certain other types of mandatorily redeemable financial
instruments. The Company currently does not have any financial instruments that
are within the scope of this Statement.
19
Critical Accounting Policies
Revenue Recognition. All retail 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.
The cost of coupon sales incentives is 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.
Inventory Valuation. Cost is assigned to store inventories using the retail
inventory method. In using this method, the valuation of inventories at cost and
the resulting gross margins are computed by applying a calculated cost-to-retail
ratio to the retail value of inventories. The retail method is an averaging
method that has been widely used in the retail industry and results in valuing
inventories at lower of cost or market when markdowns are taken as a reduction
of the retail value of inventories on a timely basis.
Inventory valuation methods require certain significant management
estimates and judgments. These include estimates of merchandise markdowns and
shrinkage, which significantly affect the ending inventory valuation at cost, as
well as the resulting gross margins. The averaging required in applying the
retail inventory valuation method and the estimates of shrink and markdowns may,
under certain circumstances, result in inaccurate cost figures. Inaccurate
inventory cost may be caused by applying the retail inventory to a group of
products that have differing characteristics related to gross margin and
turnover.
We accrue for inventory shrinkage based on the actual historical shrink
results of our most recent physical inventories. These estimates are compared to
actual results as physical inventory counts are performed and reconciled to the
general ledger. Store counts are performed on a cyclical basis and the
distribution center counts are performed at the end of December or in early
January every year.
Management believes that the application of the retail inventory method
results in an inventory valuation that reasonably approximates cost and results
in carrying inventory at the lower of cost or market.
Dividend Policy
We have never declared or paid any dividends on our common stock. We
currently intend to retain our future earnings to finance the growth and
development of our business; and therefore, do not anticipate declaring or
paying cash dividends on our common stock for the foreseeable future. Any future
decision to declare or pay dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of
operations, capital requirements and other factors, as the Board of Directors
deems relevant.
20
Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our 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 our management, including our
Chief Executive Officer and Chief Financial Officer.
Quarterly and Seasonal Fluctuations
We have historically experienced and expect to continue to experience
seasonal fluctuations in our net sales and operating income. Our net sales and
operating income are typically higher in the fourth quarter due to sales
increases during the holiday selling season. However, the seasonal fluctuations
are mitigated by the strong product demand in the spring and back-to-school
sales periods. Our 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 our three store concepts and demand
for apparel and accessories driven by local interest in sporting events.
The following tables set forth certain unaudited financial data for the
quarters indicated:
Unaudited Quarterly Financial Data
(Dollar amounts in thousands, except per share amounts)
Fiscal Year Ended January 31, 2004
-----------------------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
-------- -------- -------- --------
Net sales $ 79,593 $ 71,731 $ 78,418 $ 91,222
Gross profit 24,959 21,987 26,447 29,006
Operating income 8,253 5,086 8,433 10,166
Net income $ 5,255 $ 3,242 $ 5,376 $ 6,475
======== ======== ======== ========
Basic earnings per common share $ 0.35 $ 0.21 $ 0.35 $ 0.42
======== ======== ======== ========
Diluted earnings per common share $ 0.34 $ 0.21 $ 0.34 $ 0.41
======== ======== ======== ========
Fiscal Year Ended February 1, 2003
-----------------------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
-------- -------- -------- --------
Net sales $ 70,790 $ 65,919 $ 67,004 $ 75,474
Gross profit 21,998 20,103 20,600 23,103
Operating income 6,705 4,277 5,152 7,275
Net income $ 4,217 $ 2,661 $ 3,258 $ 4,593
======== ======== ======== ========
Basic earnings per common share $ 0.28 $ 0.18 $ 0.22 $ 0.30
======== ======== ======== ========
Diluted earnings per common share $ 0.28 $ 0.17 $ 0.21 $ 0.30
======== ======== ======== ========
In the opinion of our management, this unaudited information has been prepared on the same basis as the
audited information presented elsewhere herein and includes all adjustments necessary to present fairly
the information set forth therein. The operating results from any quarter are not necessarily indicative
of the results to be expected for any future period.
21
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Our financial condition, results of operations and cash flows are subject
to market risk from interest rate fluctuations on our revolving credit facility
and working capital line of credit, each of which bears interest at rates that
vary with LIBOR, prime or quoted cost of funds rates. The average amount of
borrowings outstanding under these agreements during fiscal 2004 was $1,346,000,
the maximum amount outstanding was approximately $3,943,000 and the weighted
average interest rate was 3.49%. A 2% increase or decrease in market interest
rates would not have a material impact on the Company's financial condition,
results of operations or cash flows.
Item 8. Consolidated Financial Statements and Supplementary Data
Independent Auditors' Report
The Board of Directors
Hibbett Sporting Goods, Inc.
We have audited the accompanying consolidated balance sheets of Hibbett
Sporting Goods, Inc. (a Delaware corporation) and subsidiaries (the Company) as
of January 31, 2004, and February 1, 2003, and the related consolidated
statements of operations, stockholders' investment, and cash flows for each of
the three fiscal years in the period ended January 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hibbett Sporting Goods, Inc.
and subsidiaries as of January 31, 2004 and February 1, 2003, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.
Birmingham, Alabama /s/ KPMG LLP
March 12, 2004
22
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
Jan. 31, Feb. 1,
2004 2003
-------- --------
Assets
Current Assets:
Cash and cash equivalents $ 41,963 $ 12,016
Accounts receivable, net 3,594 3,371
Inventories 94,777 86,246
Prepaid expenses and other 942 760
Deferred income taxes 983 798
-------- --------
Total current assets 142,259 103,191
-------- --------
Property and Equipment:
Land 24 24
Buildings 221 221
Equipment 22,590 20,549
Furniture and fixtures 13,376 12,531
Leasehold improvements 19,721 18,681
Construction in progress 365 862
-------- --------
56,297 52,868
Less accumulated depreciation & amortization 30,124 26,663
-------- --------
Total property and equipment 26,173 26,205
-------- --------
Non-current Assets:
Deferred income taxes - 60
Other, net 130 124
-------- --------
Total non-current assets 130 184
-------- --------
Total Assets $168,562 $129,580
======== ========
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 37,976 $ 24,869
Accrued income taxes - 1,338
Accrued expenses:
Payroll-related 4,284 3,520
Other 2,809 2,503
-------- --------
Total current liabilities 45,069 32,230
-------- --------
Deferred Income Taxes 603 -
-------- --------
Commitments and Contingencies
Stockholders' Investment:
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, no shares outstanding - -
Common Stock, $.01 par value, 50,000,000 shares
authorized, 15,486,440 and 15,121,750 shares
issued and outstanding at January 31, 2004
and February 1, 2003 respectively 155 151
Paid-in capital 65,433 60,245
Retained earnings 57,302 36,954
-------- --------
Total stockholders' investment 122,890 97,350
-------- --------
Total Liabilities and Stockholders' Investment $168,562 $129,580
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
23
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Share and Per Share Amounts)
Fiscal Year Ended
------------------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
(52 Weeks) (52 Weeks) (52 Weeks)
----------- ----------- -----------
Net Sales $ 320,964 $ 279,187 $ 241,130
Cost of Goods Sold, including warehouse,
distribution, and store occupancy costs 218,565 193,383 167,402
---------- ---------- ----------
Gross profit 102,399 85,804 73,728
Store Operating, Selling and Administrative
Expenses 63,194 55,529 48,891
Depreciation and Amortization 7,267 6,866 5,873
---------- ---------- ----------
Operating income 31,938 23,409 18,964
Interest (Income) Expense, net (106) 214 625
---------- ---------- ----------
Income before provision for income taxes 32,044 23,195 18,339
Provision for Income Taxes 11,696 8,466 6,786
---------- ---------- ----------
Net income $ 20,348 $ 14,729 $ 11,553
========== ========== ==========
Basic Earnings Per Share $ 1.33 $ 0.98 $ 0.78
========== ========== ==========
Diluted Earnings Per Share $ 1.29 $ 0.96 $ 0.76
========== ========== ==========
Weighted Average Shares Outstanding:
Basic 15,342,966 15,053,019 14,812,773
========== ========== ==========
Diluted 15,732,039 15,357,012 15,118,560
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
24
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(Dollars In Thousands)
Common Stock
-------------------------
Number of Paid-In Retained
Shares Amount Capital Earnings
---------- ------- ------- --------
BALANCE, February 3, 2001 14,698,992 147 55,845 10,672
Net income - - - 11,553
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
net of tax benefit of $402 191,983 2 1,844 -
---------- ------- ------- --------
BALANCE, February 2, 2002 14,890,975 149 57,689 22,225
Net income - - - 14,729
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
net of tax benefit $706 230,775 2 2,556 -
---------- ------- ------- --------
BALANCE, February 1, 2003 15,121,750 151 60,245 36,954
Net income - - - 20,348
Issuance of shares from the employee stock
purchase plan and the exercise of stock options,
net of tax benefit $1,510 364,690 4 5,188 -
---------- ------- ------- --------
BALANCE, January 31, 2004 15,486,440 155 65,433 $ 57,302
========== ======= ======= ========
The accompanying notes are an integral part of these consolidated financial statements.
25
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Fiscal Year Ended
-------------------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
---------- ---------- ----------
Cash Flows From Operating Activities:
Net income $ 20,348 $ 14,729 $ 11,553
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,267 6,866 5,873
Deferred income taxes 478 1,462 (469)
(Gain)/Loss on disposal of assets 337 (447) 118
(Increase) decrease in operating assets:
Accounts receivable, net (223) (1,019) 297
Inventories (8,531) (5,164) (11,024)
Prepaid expenses and other (182) 140 (90)
Other noncurrent assets (27) 48 19
Increase (decrease) in operating liabilities:
Accounts payable 13,107 1,148 5,453
Accrued income taxes 172 (264) 851
Accrued expenses 1,070 704 608
---------- ---------- ----------
Total adjustments 13,468 3,474 1,636
---------- ---------- ----------
Net cash provided by operating activities 33,816 18,203 13,189
---------- ---------- ----------
Cash Flows From Investing Activities:
Capital expenditures (7,563) (6,719) (8,726)
Proceeds from sales of property and equipment 12 611 28
---------- ---------- ----------
Net cash used in investing activities (7,551) (6,108) (8,698)
---------- ---------- ----------
Cash Flows From Financing Activities:
Revolving loan borrowings and repayments, net - (3,903) (5,845)
Proceeds from options exercised and purchase of shares
under the employee stock purchase plan 3,682 1,852 1,442
---------- ---------- ----------
Net cash provided by (used in) financing activities 3,682 (2,051) (4,403)
---------- ---------- ----------
Net Increase in cash and Cash Equivalents 29,947 10,044 88
Cash and Cash Equivalents at Beginning of Year 12,016 1,972 1,884
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 41,963 $ 12,016 $ 1,972
========== ========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 59 $ 194 $ 580
========== ========== ==========
Income taxes, net of refunds $ 11,120 $ 7,220 $ 6,403
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
26
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2004, FEBRUARY 1, 2003 and FEBRUARY 2, 2002
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Hibbett Sporting Goods, Inc. (the "Company") is an operator of full-line
sporting goods retail stores in small to mid-sized markets predominately in the
Southeast, Mid-Atlantic and Midwest. The Company's fiscal year ends on the
Saturday closest to January 31 of each year. The consolidated statements of
operations for fiscal years ended January 31, 2004, February 1, 2003 and
February 2, 2002, include 52 weeks of operations. The Company's merchandise
assortment features a core selection of brand name merchandise emphasizing team
and individual sports complemented by a selection of localized apparel and
accessories designed to appeal to a wide range of customers within each market.
Principles of Consolidation
The consolidated financial statements of the Company include its accounts
and the accounts of all wholly owned subsidiaries. All significant inter-company
balances and transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect (1) the reported amounts of certain assets
and liabilities and disclosure of certain contingent assets and liabilities at
the date of the financial statements and (2) the reported amounts of certain
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
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
52-week periods ended January 31, 2004, February 1, 2003 or February 2, 2002.
Stock Splits
On June 9, 2003, the Board of Directors declared a 3-for-2 stock split on
the Company's Common Stock to holders of record on June 27, 2003. All share and
per share data has been revised to reflect the effects of the stock split
retroactively for all periods presented. On March 10, 2004, the Board of
Directors declared another 3-for-2 stock split on the Company's Common Stock to
holders of record on April 1, 2004. However, this split will not be affected
until on or after April 16, 2004. Therefore, all share and per share data does
not reflect the effects of this split.
27
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all short-term, highly liquid investments with original maturities of
three months or less to be cash equivalents.
Inventories
Inventories are valued at the lower of cost or market using the retail
inventory method of accounting, with cost determined on a first-in, first-out
basis and market based on the lower of replacement cost or estimated realizable
value. The Company's business is dependent to a significant degree upon close
relationships with its vendors. The Company's largest vendor, Nike, represented
approximately 34%, 36% and 32% of its purchases in fiscal 2004, 2003 and 2002,
respectively. The Company's next largest vendor, Reebok, represented
approximately 11%, 9% and 8% of its purchases in fiscal 2004, 2003 and 2002,
respectively. The Company's third largest vendor, New Balance, represented
approximately 9%, 11% and 11% of its purchases in fiscal 2004, 2003 and 2002,
respectively.
Property and Equipment
Property and equipment are recorded at cost. It is the Company's policy to
depreciate assets acquired prior to January 28, 1995, using accelerated and
straight-line methods over their estimated service lives (3 to 10 years for
equipment, 5 to 10 years for furniture and fixtures and 10 to 31.5 years for
buildings) and to amortize leasehold improvements using the straight-line method
over the periods of the applicable leases. Depreciation on assets acquired
subsequent to January 28, 1995, is provided using the straight-line method over
their estimated service lives (3 to 5 years for equipment, 7 years for furniture
and fixtures and 39 years for buildings) or, in the case of leasehold
improvements, 10 years or over the lives of the respective leases, if shorter.
Maintenance and repairs are charged to expense as incurred. Costs of
renewals and improvements are capitalized by charges to property accounts and
are depreciated using applicable annual rates. The cost and accumulated
depreciation of assets sold, retired or otherwise disposed of are removed from
the accounts and the related gain or loss is credited or charged to income.
Revenue Recognition
All retail 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.
The cost of coupon sales incentives is 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.
Store Opening Costs
Non-capital expenditures incurred in preparation for opening new retail
stores are expensed as incurred.
28
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.
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 52 weeks ended January 31,
2004, February 1, 2003 and February 2, 2002 were $3,533,017, $2,947,576 and
$2,625,150, respectively.
Interest
Interest expense amounts for the 52 weeks ended January 31, 2004, February
1, 2003 and February 2, 2002 were $59,031, $239,813 and $628,304, respectively,
shown net of interest income of $165,398, $26,142 and $3,600, respectively.
Stock-Based Compensation
The Company utilizes the intrinsic value method of accounting for stock
option grants. As the option exercise price is generally equal to the fair value
of the shares of common stock at the date of the option grant, no compensation
cost is recognized.
If the Company had recorded compensation costs in accordance with Statement
of Financial Accounting Standards ("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 estimated pro forma
amounts indicated below:
Fiscal Year Ended
------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
----------- ----------- -----------
Net income--as reported $ 20,348 $ 14,729 $ 11,553
Stock Based Compensation Expense,
net of income taxes $ (1,251) $ (983) $ (597)
----------- ----------- -----------
Net income--pro forma $ 19,097 $ 13,746 $ 10,956
Diluted earnings per share--as reported 1.29 .96 .77
Diluted earnings per share--pro forma 1.21 .89 .72
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 (3.0%, 4.5% and 5.0% for fiscal 2004, 2003 and 2002,
respectively), (ii) an expected stock volatility of 57% and (iii) no expected
dividend yield.
Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments,
management believes that the carrying amount approximates fair value for cash
and cash equivalents, receivables, inventories, short-term borrowings and
accounts payable, because of the short maturities of those instruments.
29
Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in earnings. Diluted EPS has been computed based on the weighted average number
of shares outstanding, including the effect of outstanding stock options, if
dilutive, in each respective year. A reconciliation of the weighted average
shares for basic and diluted EPS is as follows:
Fiscal Year Ended
---------- ---------- ----------
January 31, February 1, February 2,
2004 2003 2002
---------- ---------- ----------
Weighted average shares outstanding:
Basic 15,342,966 15,053,019 14,812,773
Dilutive effect of stock options 389,073 303,993 305,787
---------- ---------- ----------
Diluted 15,732,039 15,357,012 15,118,560
========== ========== ==========
For the 52-week period ended January 31, 2004, 23,445 anti-dilutive options
were appropriately excluded from the computation. For the 52-week period ended
February 1, 2003, 11,250 anti-dilutive options were appropriately excluded from
the computation. For the 52-week period ended February 2, 2002, 209,475
anti-dilutive options were appropriately excluded from the computation.
Accounting for the Impairment of Long-Lived Assets
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining balance of long-lived assets and
intangibles may be impaired and not recoverable. The Company's policy is to
recognize any impairment loss on long-lived assets as a charge to current income
when certain events or changes in circumstances indicate that the carrying value
of the assets may not be recoverable and such carrying amount exceeds the assets
estimated fair value.
Recent Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46 (revised 2003), "Consolidation of Variable Interest
Entities," which addresses how a business enterprise should evaluate whether it
has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. FIN 46R replaces
Interpretation 46, "Consolidation of Variable Interest Entities,' which was
issued in January 2003. The Company will be required to apply FIN 46R to
variable interests in VIEs created after December 31, 2003. For variable
interests in VIEs created before January 1, 2004, the Interpretation will be
applied beginning on January 1, 2005. For any VIEs that must be consolidated
under FIN 46R that were created before January 1, 2004, the assets, liabilities
and non-controlling interests of the VIE initially would be measured at their
carrying amounts with any difference between the net amount added to the balance
sheet and any previously recognized interest being recognized as the cumulative
effect of an accounting change. If determining the carrying amounts is not
practicable, fair value at the date FIN 46R first applies may be used to measure
the assets, liabilities and non-controlling interest of the VIE. We do not
expect Interpretation 46 or FIN 46R to have any impact on our consolidated
financial statements.
SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity," was issued in May 2003. This
Statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. The Statement also includes required disclosures for financial
instruments within its scope. For the Company, the Statement was effective for
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, except for mandatorily redeemable financial instruments. For certain
mandatorily redeemable financial instruments, the Statement will be effective
for the Company on January 31, 2005. The effective date has been deferred
indefinitely for certain other types of mandatorily redeemable financial
instruments. The Company currently does not have any financial instruments that
are within the scope of this Statement.
30
2. LONG-TERM DEBT
The Company negotiated a new unsecured revolving credit facility, which
will expire November 5, 2005, and allows borrowings up to $25 million. As of
January 31, 2004, the Company had no borrowings outstanding under this facility.
The average amount of borrowings outstanding during fiscal 2004 was $1,346,000,
the maximum outstanding was $3,943,000 and the weighted average interest rate
was 3.49%. The average amount of borrowings outstanding during fiscal 2003 was
$4,283,000, the maximum outstanding was $11,823,000 and the weighted average
interest rate was 4.08%. The average amount of borrowings outstanding during
fiscal 2002 was $10,304,000, the maximum outstanding was $18,860,000 and the
weighted average interest rate was 5.21%.
The Company's revolving credit facility contains certain restrictive
covenants common to such agreements. The Company was in compliance with respect
to its covenants at January 31, 2004.
3. LEASES
The Company leases the premises for its retail sporting goods stores under
operating leases which expire in various years through the year 2014. Many of
these leases contain renewal options and require the Company to pay executory
costs (such as property taxes, maintenance and insurance). Rental payments
typically include minimum rentals plus contingent rentals based on sales.
In February 1996, the Company entered into a sale-leaseback transaction to
finance its warehouse and office facilities. In December 1999, the related
operating lease was amended to include the fiscal 2000 expansion of these
facilities. The amended lease rate is $784,000 per year and will expire in
December 2014.
Future minimum rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of January 31, 2004, are as follows:
Fiscal Year Ending
2005 $ 23,512,000
2006 19,916,000
2007 15,940,000
2008 12,174,000
2009 8,086,000
Thereafter 17,024,000
------------
$ 96,652,000
============
Rental expense for all operating leases consisted of the following:
Fiscal Year Ended
--------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
----------- ------------ -----------
Minimum rentals $21,046,000 $18,143,000 $15,906,000
Contingent rentals 1,553,000 1,342,000 1,011,000
----------- ------------ -----------
$22,599,000 $19,485,000 $16,917,000
=========== =========== ===========
31
4. PROFIT-SHARING PLAN
The Company maintains a 401(k) profit-sharing plan (the "Plan") which
permits participants to make pretax contributions to the Plan. The Plan covers
all employees who have completed one year of service and who are at least 21
years of age. Participants of the Plan may voluntarily contribute from 1% to
100% of their compensation subject to certain yearly dollar limitations as
allowed by law. These elective contributions are made under the provisions of
Section 401(k) of the Internal Revenue Code which allows deferral of income
taxes on the amount contributed to the Plan. The Company's contribution to the
Plan equals (1) an amount determined at the discretion of the Board of Directors
plus (2) a matching contribution equal to a discretionary percentage of up to 6%
of a participant's compensation. For fiscal 2004, the Company matched 75% of
contributions made to the plan by the employees up to 6% of the employee's
compensation. Contribution expense amounts for fiscal years 2004, 2003 and 2002
were $366,000, $404,000 and $242,000, respectively.
5. RELATED-PARTY TRANSACTIONS
The Company's former largest stockholder, The SK Equity Fund, L.P. and SK
Investment Fund, L.P., diluted their holdings in the Company with a public
offering on May 1, 2003, and the subsequent exercise of the underwriters' over
allotment option on May 13, 2003. Prior to then, The SK Equity Fund, L.P. and SK
Investment Fund, L.P., provided financial advisory services to the Company. Such
services included, but were not necessarily limited to, advice and assistance
concerning any and all aspects of the operation, planning and financing of the
Company. Management fee expense under this arrangement was $50,000 in fiscal
2004 and $200,000 in fiscal 2003 and fiscal 2002.
The Company leases one store under a sublease arrangement from
Books-A-Million, Inc. of which Clyde B. Anderson, a director of Hibbett, is
Chairman of the Board and a shareholder. This sublease agreement expires in June
2008. Minimum lease payments were $191,000 in fiscal 2004, fiscal 2003 and
fiscal 2002. Future minimum lease payments under this non-cancelable sublease
aggregate approximately $842,000.
6. INCOME TAXES
A summary of the components of the provision (benefit) for income taxes is
as follows:
Fiscal Year Ended
-------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
----------- ----------- -----------
Federal:
Current $10,442,000 $6,536,000 $6,439,000
Deferred 377,000 1,272,000 (384,000)
----------- ----------- -----------
10,819,000 7,808,000 6,055,000
----------- ----------- -----------
State:
Current 776,000 468,000 816,000
Deferred 101,000 190,000 (85,000)
----------- ----------- -----------
877,000 658,000 731,000
----------- ----------- -----------
Provision for income taxes $11,696,000 $8,466,000 $6,786,000
=========== =========== ===========
32
The provision for income taxes differs from the amounts computed by
applying federal statutory rates due to the following:
Fiscal Year Ended
------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
----------- ----------- -----------
Tax provision computed at the federal
statutory rate $11,215,000 $8,120,000 $6,235,000
Effect of state income taxes, net
of federal benefits 570,000 313,000 520,000
Other (89,000) 33,000 31,000
----------- ----------- -----------
$11,696,000 $8,466,000 $6,786,000
=========== =========== ===========
During the year, the Company settled favorably an examination with state
taxing authorities. A tax contingency liability had been provided in previous
years. As a result of the settlement, state tax expense has been reduced by
approximately $700,000.
Temporary differences that create deferred taxes are detailed below:
January 31, 2004 February 1, 2003
------------------------- -------------------------
Current Noncurrent Current Noncurrent
--------- ----------- --------- ----------
Depreciation $ --- $ (603,000) $ --- $ 60,000
Inventory 349,000 --- 381,000 ---
Accruals 710,000 --- 505,000 ---
Other (76,000) --- (88,000) ---
--------- ----------- --------- ----------
Deferred taxes $ 983,000 $ (603,000) $ 798,000 $ 60,000
========= =========== ========= ==========
The Company has not recorded a valuation allowance for deferred taxes
as realization is considered more likely than not based on the amount of income
taxes paid in prior years.
7. STOCK OPTION AND STOCK PURCHASE PLANS
Stock Option Plans
The Hibbett Sporting Goods, Inc. Employee Stock Option Plan, as amended
(the "Original Option Plan"), authorizes the granting of stock options for the
purchase of up to 149,292 shares of common stock. All of the 149,292 options
available under the Original Option Plan have been granted and all such options
have been exercised.
The Company maintains the Hibbett Sporting Goods, Inc. 1996 Stock Option
Plan, as amended (the "1996 Option Plan"). The 1996 Option Plan authorizes the
granting of stock options for the purchase of up to 1,999,273 shares of common
stock, including an amendment to the plan in fiscal 2002 which authorized the
granting of an additional 787,500 stock options. Options granted vest over a
five-year period and expire on the tenth anniversary of the date of grant.
33
A summary of the status of the Company's stock option plans is as follows:
Fiscal Year Ended
------------------------------------------------------------------------------
January 31, 2004 February 1, 2003 February 2, 2002
---------------------- ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding at beginning of --------- --------- --------- --------- --------- ---------
year 806,857 $11.00 862,456 $ 9.42 887,973 $ 8.00
Granted 199,274 16.67 206,512 14.74 185,850 13.28
Exercised (334,284) 9.75 (221,094) 7.76 (154,850) 6.86
Forfeited (5,280) 14.53 (41,017) 11.50 (56,517) 8.26
--------- --------- --------- --------- --------- ---------
Outstanding at end of year 666,567 $13.30 806,857 $11.00 862,456 $ 9.42
========= ========= ========= ========= ========= =========
Exercisable at end of year 104,882 $11.22 261,382 $ 9.54 314,919 $ 8.76
========= ========= ========= ========= ========= =========
Weighted average fair value
of options granted $11.12 $10.24 $ 7.32
========= ========= =========
The following table summarizes information about stock options outstanding at
January 31, 2004:
Options Outstanding Options Exercisable
----------------------------------------------- ----------------------------------
Weighted
Number Average Number
Outstanding Remaining Weighted Exercisable at Weighted
Range of at January Contractual Average January 31, Average
Exercise Prices 31, 2004 Life (Years) Exercise Price 2004 Exercise Price
- ---------------- ----------- ------------ -------------- -------------- --------------
$2.71 6,348 2.2 $2.71 6,348 $2.71
$6.67 to $9.03 136,991 5.6 $7.37 26,628 $7.37
$11.11 to $13.72 153,530 6.6 $13.11 52,459 $12.89
$14.73 to $16.67 369,698 8.6 $15.77 19,447 $14.74
The tax benefit associated with the exercise of stock options is credited
to paid-in capital and amounted to $1,510,000 in fiscal 2004, $706,000 in fiscal
2003 and $402,000 in fiscal 2002.
Other Plans
The Company maintains an Employee Stock Purchase Plan and an Outside
Director Stock Plan and has reserved 168,750 shares and 262,500 shares of the
Company's common stock, respectively, for purchase by the employees and
directors at 85% and 100% of the fair value of the common stock, respectively.
During fiscal 2004, the Company granted a total of 23,445 options under the
Outside Director Stock Plan at an exercise price of $31.10 (market value at date
of grant). During fiscal 2003, the Company granted 33,750 options under the
Outside Director Stock Plan. On January 31, 2003, the Company granted 22,500
options at an exercise price of $14.27 (market value at date of grant) and on
June 5, 2002, the Company granted 11,250 options at an exercise price of $17.32
(market value at date of grant). These options vest immediately and expire on
the earlier of the tenth anniversary of the grant or one year from the date on
which an optionee ceases to be an Eligible Director. The Employee Stock Purchase
Plan became effective on April 1, 1997, and as of January 31, 2004, 65,066
shares have been issued and 103,684 shares are reserved for future purchase.
34
8. COMMITMENTS AND CONTINGENCIES
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel
responsible for such matters, the ultimate liability, if any, with respect to
those proceedings is not presently expected to materially affect the financial
position, results of operations or cash flows of the Company.
35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
The Board of Directors
Hibbett Sporting Goods, Inc.
We have audited in accordance with auditing standards generally accepted in
the United States of America, the consolidated financial statements of Hibbett
Sporting Goods, Inc. (a Delaware corporation) and Subsidiaries, included in this
Form 10-K and have issued our report thereon dated March 12, 2004. Our audit was
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. Schedule II included in Item 14 of the Form 10-K is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
KPMG LLP
Birmingham, Alabama
March 12, 2004
36
HIBBETT SPORTING GOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 31, 2004, FEBRUARY 1, 2003 AND FEBRUARY 2, 2002
Fiscal Year Ended
-------------------------------------------
January 31, February 1, February 2,
2004 2003 2002
------------ ------------- ------------
Balance of allowance for doubtful
accounts at beginning of period $ 133,000 $ 196,000 $ 255,000
Charged to costs and expenses - - -
Write-offs, net of recoveries (26,000) (63,000) (59,000)
------------ ------------- ------------
Balance of allowance for doubtful accounts
at end of period $ 107,000 $ 133,000 $ 196,000
============ ============= ============
37
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Item 9A. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our 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 our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, we recognize 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 is required to apply our judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Pursuant to Securities Exchange Act Rule 13a-15, we carried out an
evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, our Chief Executive Officer and our
Chief Financial Officer concluded that as of the date of our evaluation, the
Company's disclosure controls and procedures (as defined in Rule 13a-14(c) under
the Exchange Act) are effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
During the period covered by this Annual Report, there have been no changes
in our internal controls over financial reporting that have materially affected,
or is reasonably likely to materially affect, our internal controls over
financial reporting.
PART III
Item 10. Directors and Executive Officers of Registrant
The information required is incorporated by reference from the sections
entitled "Directors and Executive Officers", "The Board of Directors", "Code of
Ethics" and "Certain Relationships and Related Transactions" in the Proxy
Statement for the Annual Meeting of Stockholders to be held June 2, 2004 (the
"Proxy Statement"), which is to be filed with the Securities and Exchange
Commission.
Item 11. Executive Compensation
The information required is incorporated by reference from the section
entitled "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required is incorporated by reference from the sections
entitled "Security Ownership of Certain Beneficial Owners" and "Directors and
Executive Officers" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required is incorporated by reference from the section
entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.
38
Item 14. Principal Accounting Fees and Services
The information required is incorporated by reference from the section
entitled "Principal Accounting Fees and Services" in the Proxy Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report:
1. Financial Statements:
The following Financial Statements and Supplementary Data of the Registrant
and Independent Auditors' Report on such Financial Statements are incorporated
by reference from the Company's 2004 Annual Report to Stockholders, in Part II,
Item 8:
Consolidated Balance Sheets as of January 31, 2004 and February 1, 2003
Consolidated Statements of Operations for the fiscal years ended
January 31, 2004, February 1, 2003 and February 2, 2002
Consolidated Statements of Stockholders' Investment for the fiscal years
ended January 31, 2004, February 1, 2003 and February 2, 2002
Consolidated Statements of Cash Flows for the fiscal years ended January
31, 2004, February 1, 2003 and February 2, 2002
Notes to Consolidated Financial Statements
Reports of Independent Public Accountants
2. Financial Statement Schedules:
The following consolidated financial statement schedule of Hibbett Sporting
Goods, Inc. is attached hereto:
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are not applicable, and
therefore have been omitted.
3. Exhibits.
The Exhibits listed on the accompanying Exhibits Index are filed as part
of, or incorporated by reference into, this report.
EXHIBITS INDEX
Exhibit #
3.1 Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K
for the fiscal year ended February 1, 1997 (the "1997 10-K")).
3.2 Bylaws of the Company (incorporated herein by reference to Exhibit 3.2
of the 1997 10-K).
39
10.1 Amended and Restated Credit Agreement dated as of December 31, 2003,
between the Company, Hibbett Team Sales, Inc., Sports Wholesale, Inc.,
Hibbett Capital Management, Inc., Illinois Hibbett, LLC, AmSouth Bank
and Bank of America, N.A.(incorporated by reference to Exhibit 10.1.1
of the Company's Current Report on Form 8-K dated December 31, 2003).
13.1 Fiscal 2004 Annual Report to Shareholders.
21 List of Company's Subsidiaries (incorporated herein by reference to
Exhibit 21 of the 1996 S-1).
23.1 + Consent of KPMG, LLP
31.1 + Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2 + Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1 + Section 1350 Certification of Chief Executive Officer
32.2 + Section 1350 Certification of Chief Financial Officer
+ Filed herewith
(b) Reports on Form 8-K:
The Company filed with the Commission a Current Report on Form 8-K dated
March 10, 2004, to report, under Item 9, a copy of its press release announcing
the naming of Michael J. Newsome, Hibbett's current President and Chief
Executive Officer, as Chairman of the Board effective March 10, 2004, and under
Item 12, a copy of its press release announcing its financial results for the
fourth fiscal quarter and year ended January 31, 2004.
40
The Company filed with the Commission a Current Report on Form 8-K dated
January 6, 2004, to report, under Item 5, a copy of its press release announcing
that it had extended the term of its unsecured revolving credit facility to
November 2005 and that it had reduced the size of the facility from $42 million
to $25 million. The amended and restated agreement was filed with the commission
in its entirety.
The Company filed with the Commission a Current Report on Form 8-K dated
November 20, 2003, to report, under Item 12, a copy of its press release
announcing its financial results for the third fiscal quarter ended November 1,
2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HIBBETT SPORTING GOODS, INC.
By: /s/ Michael J. Newsome
-----------------------------------
Michael J. Newsome, President & CEO
41
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Michael J. Newsome Principal Executive Officer April 15, 2004
- --------------------------- and Chairman of the Board
Michael J. Newsome
/s/ Gary A. Smith Principal Financial and April 15, 2004
- --------------------------- Accounting Officer
Gary A. Smith
/s/ Clyde B. Anderson Director April 15, 2004
- ---------------------------
Clyde B. Anderson
/s/ H. Ray Compton Director April 15, 2004
- ---------------------------
H. Ray Compton
/s/ F. Barron Fletcher, III Director April 15, 2004
- ---------------------------
F. Barron Fletcher, III
/s/ Carl Kirkland Director April 15, 2004
- ---------------------------
Carl Kirkland
/s/ Thomas A. Saunders, III Director April 15, 2004
- ---------------------------
Thomas A. Saunders, III
/s/ Ralph T. Parks Director April 15, 2004
- ---------------------------
Ralph T. Parks
42
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Hibbett Sporting Goods, Inc.
We consent to incorporation by reference in the registration statements on
Nos. 333-21299, 333-21301, 333-21303, 333-21305, 333-28515, 333-63094 and
333-96755 of Hibbett Sporting Goods, Inc. of our report dated March 12, 2004,
with respect to the consolidated balance sheets of Hibbett Sporting Goods, Inc.
and subsidiaries as of January 31, 2004 and February 1, 2003, and the related
consolidated statements of operations, stockholders' investment, and cash flows
for each of the three fiscal years in the period ended January 31, 2004, and the
related financial statement schedule, which report appears in the January 31,
2004 Annual Report on Form 10-K of Hibbett Sporting Goods, Inc.
Birmingham, Alabama KPMG LLP
April 13, 2004
43
Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
I, Michael J. Newsome, certify that:
1. I have reviewed this annual report on Form 10-K of Hibbett Sporting
Goods, Inc;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: April 15, 2004
/s/ Michael J. Newsome
----------------------------
Michael J. Newsome
Chief Executive Officer
44
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
I, Gary A. Smith, certify that:
1. I have reviewed this annual report on Form 10-K of Hibbett Sporting
Goods, Inc;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this 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 report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: April 15, 2004
/s/ Gary A. Smith
---------------------------
Gary A. Smith
Chief Financial Officer
45
Exhibit 32.1
Section 1350 Certification of Chief Executive Officer
Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Hibbett Sporting Goods,
Inc. (the "Company") hereby certifies, to the best of such officer's knowledge,
that:
(i) the accompanying Annual Report on Form 10-K of the Company for the
period ended January 31, 2004 (the "Report") fully complies with the
requirements of Section 13(a) or Section 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: April 15, 2004 /s/ Michael J. Newsome
---------------------------
Michael J. Newsome
Chief Executive Officer
46
Exhibit 32.2
Section 1350 Certification of Chief Financial Officer
Pursuant to 18 U.S.C. ss. 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of Hibbett Sporting Goods,
Inc. (the "Company") hereby certifies, to the best of such officer's knowledge,
that:
(i) the accompanying Annual Report on Form 10-K of the Company for the
period ended January 31, 2004 (the "Report") fully complies with the
requirements of Section 13(a) or Section 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
Dated: April 15, 2004 /s/ Gary A. Smith
------------------------------
Gary A. Smith
Chief Financial Officer
47