UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --------- SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended: November 3, 2001
----------------
- OR -
- --------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transaction period from _________ to ________
COMMISSION FILE NUMBER 000-20969
HIBBETT SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-1074067
-------- ----------
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
451 Industrial Lane, Birmingham, Alabama 35211
---------------------------------------- -----
(Address of principal executive offices) (Zip code)
(205)-942-4292
--------------
(Registrant's telephone number including area code)
NONE
----
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of December 13, 2001 were 6,617,397 shares.
HIBBETT SPORTING GOODS, INC.
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets at November 3, 2001 and
February 3, 2001 2
Unaudited Condensed Consolidated Statements of Operations for the Thirteen Week and
Thirty-Nine Week Periods Ended November 3, 2001 and October 28, 2000 3
Unaudited Condensed Consolidated Statements of Cash Flows for the Thirty-Nine
Week Periods Ended November 3, 2001 and October 28, 2000 4
Notes to Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to Vote of Security-Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
1
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
-------------- -------------
November 3, February 3,
2001 2001
-------------- -------------
Assets
Current Assets:
Cash and cash equivalents $ 796 $ 1,884
Accounts receivable, net 2,654 2,649
Inventories 90,521 70,058
Prepaid expenses and other 2,854 822
Refundable income tax 117 -
Deferred income taxes 1,065 1,110
-------- --------
Total current assets 98,007 76,523
-------- --------
Property and equipment, net 24,979 23,710
-------- --------
Noncurrent Assets:
Deferred income taxes 825 741
Other, net 255 278
-------- --------
Total noncurrent assets 1,080 1,019
-------- --------
Total Assets $124,066 $101,252
======== ========
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 28,200 $ 18,268
Accrued income taxes 1,105 1,859
Accrued expenses:
Payroll-related 2,311 2,640
Other 2,547 2,072
-------- --------
Total current liabilities 34,163 24,839
-------- --------
Long-Term Debt 13,996 9,748
-------- --------
Stockholders' Investment:
Preferred stock, $.01 par value 1,000,000 shares
authorized, no shares outstanding - -
Common stock, $.01 par value, 12,000,000 shares
authorized, 6,590,697 shares issued and
outstanding at November 3, 2001 and 6,532,885
shares issued and outstanding at February 3, 2001 66 65
Paid-in capital 57,181 55,928
Retained earnings (deficit) 18,660 10,672
-------- --------
Total stockholders' investment 75,907 66,665
-------- --------
Total Liabilities and Stockholders' Investment $124,066 $101,252
======== ========
See notes to unaudited condensed consolidated financial statements.
2
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Amounts)
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------------------- ---------------------------------
November 3, October 28, November 3, October 28,
2001 2000 2001 2000
-------------- --------------- --------------- ---------------
Net sales $ 57,737 $ 52,075 $ 173,715 $ 149,224
Cost of goods sold,
including warehouse, distribution
and store occupancy costs 40,127 36,242 121,036 104,305
---------- ---------- ---------- ----------
Gross profit 17,610 15,833 52,679 44,919
Store operating, selling, and
administrative expenses 11,973 10,147 35,090 28,986
Depreciation and amortization 1,499 1,252 4,325 3,522
---------- ---------- ---------- ----------
Operating income 4,138 4,434 13,264 12,411
Interest expense 137 195 484 455
---------- ---------- ---------- ----------
Income before provision for income taxes 4,001 4,239 12,780 11,956
Provision for income taxes 1,478 1,600 4,792 4,536
---------- ---------- ---------- ----------
Net income $ 2,523 $ 2,639 $ 7,988 $ 7,420
========== ========== ========== ==========
Basic earnings per common share $ 0.38 $ 0.41 $ 1.21 $ 1.15
========== ========== ========== ==========
Diluted earnings per common share $ 0.38 $ 0.40 $ 1.19 $ 1.13
========== ========== ========== ==========
Weighted average shares outstanding:
Basic 6,589,723 6,469,122 6,574,367 6,450,559
========== ========== ========== ==========
Diluted 6,698,183 6,629,707 6,715,601 6,593,340
========== ========== ========== ==========
See notes to unaudited condensed consolidated financial statements.
3
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Thirty-nine Weeks Ended
----------------------------------
November 3, October 28,
2001 2000
---------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,988 $ 7,420
-------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,325 3,522
Deferred income taxes (39) (38)
Loss on disposal of assets 64 13
Change in assets and liabilities (13,302) (11,923)
-------- --------
Total adjustments (8,952) (8,426)
-------- --------
Net cash used in operating activities (964) (1,006)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,646) (5,721)
Proceeds from sale of property 20 25
-------- --------
Net cash used in investing activities (5,626) (5,696)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan activity, net 4,248 6,608
Proceeds from options exercised and purchase
of shares under employee stock purchase plan,
including tax benefit 1,254 326
-------- --------
Net cash provided by financing activities 5,502 6,934
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,088) 232
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,884 860
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 796 $ 1,092
======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 431 $ 373
-------- --------
Income taxes, net of refunds $ 5,606 $ 4,182
-------- --------
See notes to unaudited condensed consolidated financial statements.
4
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Hibbett Sporting Goods, Inc. and its wholly-owned subsidiaries (the
"Company") have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and are
presented in accordance with the requirements of Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the consolidated financial statements and notes thereto for the fiscal year
ended February 3, 2001. In the opinion of management, the condensed consolidated
financial statements included herein contain all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation of
the Company's financial position as of November 3, 2001 and October 28, 2000,
and the results of its operations and cash flows for the periods presented.
The Company has experienced and expects to continue to experience
seasonal fluctuations in its net sales and operating income. Therefore, the
results of the interim periods presented herein are not necessarily indicative
of the results to be expected for any other interim period or the full year.
2. Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in earnings. Diluted EPS has been computed based on the weighted average number
of shares outstanding, including the effect of outstanding stock options, if
dilutive, in each respective period.
A reconciliation of the weighted average shares for basic and diluted
EPS is as follows:
Thirteen Week Period Ended Thirty-Nine Week Period Ended
------------------------------------- ---------------------------------------
November 3, October 28, November 3, October 28,
2001 2000 2001 2000
---------------- --------------- ----------------- -----------------
Weighted average shares outstanding:
Basic 6,589,723 6,469,122 6,574,367 6,450,559
Dilutive effect of stock options 108,460 160,585 141,234 142,781
------------- ------------- -------------- --------------
Diluted 6,698,183 6,629,707 6,715,601 6,593,340
============= ============= ============== ==============
For the thirteen week periods ended November 3, 2001 and October 28,
2000, 149,480 and 79,600 anti-dilutive options, respectively, were appropriately
excluded from the computation. For the thirty-nine week periods ended November
3, 2001 and October 28, 2000, 85,600 and 84,600 anti-dilutive options,
respectively, were appropriately excluded from the computation.
3. Contingencies
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Hibbett Sporting Goods, Inc. ("we" or "Hibbett" or the "Company") is a
rapidly-growing operator of full-line sporting goods stores in small to
mid-sized markets predominantly in the southeastern United States. Our stores
offer a broad assortment of quality athletic equipment, footwear and apparel at
competitive prices with superior customer service. Our merchandise assortment
features a broad selection of brand name merchandise emphasizing team and
individual sports complemented by a selection of localized apparel and
accessories designed to appeal to a wide range of customers within each market.
Our management team believes that our stores are among the primary retail
distribution alternatives for brand name vendors that seek to reach our target
markets.
As of November 3, 2001, we operated 294 Hibbett Sports stores as well
as sixteen smaller-format Sports Additions athletic shoe stores and four
larger-format Sports & Co. superstores in 20 states. Our primary retail format
and growth vehicle is Hibbett Sports a 5,000 square foot store located in
enclosed malls and dominant strip centers. We target markets with county
populations that range from 30,000 to 250,000. By targeting smaller markets, we
believe that we achieve significant strategic advantages, including numerous
expansion opportunities, comparatively low operating costs and a more limited
competitive environment than generally faced in larger markets. In addition, we
establish greater customer and vendor recognition as the leading full-line
sporting goods retailer in these local communities. Although competitors in some
markets may carry similar product lines and national brands, we believe that the
Hibbett Sports stores are typically the primary, full-line sporting goods
retailers in their markets due to the extensive selection of traditional team
and individual sports merchandise offered and a high level of customer service.
Hibbett operates on a 52 or 53 week fiscal year ending on the Saturday
nearest to January 31 of each year. Hibbett is incorporated under the laws of
the State of Delaware.
Results of Operations
The following table sets forth consolidated statement of operations
items expressed as a percentage of net sales for the periods indicated:
Thirteen Week Thirty-Nine Week
Period Ended Period Ended
-------------------------------- --------------------------------
November 3, October 28, November 3, October 28,
----------- ----------- ----------- -----------
2001 2000 2001 2000
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution and store occupancy costs 69.5 69.6 69.7 69.9
----- ----- ----- -----
Gross profit 30.5 30.4 30.3 30.1
Store operating, selling, and administrative
expenses 20.7 19.5 20.2 19.4
Depreciation and amortization 2.6 2.4 2.5 2.4
----- ----- ----- -----
Operating income 7.2 8.5 7.6 8.3
Interest expense, net 0.2 0.4 0.2 0.3
----- ----- ----- -----
Income before provision for income taxes 7.0 8.1 7.4 8.0
Provision for income taxes 2.6 3.1 2.8 3.0
----- ----- ----- -----
Net income 4.4% 5.0% 4.6% 5.0%
===== ===== ===== =====
6
Thirteen Weeks Ended November 3, 2001 Compared to Thirteen Weeks Ended
October 28, 2000
Net sales. Net sales increased $5.6 million, or 10.9%, to $57.7 million
for the thirteen weeks ended November 3, 2001, from $52.1 million for the
comparable period in the prior year. This increase is attributed to the opening
of a net of forty-seven Hibbett Sports stores in the 52 week period ended
November 3, 2001. Comparable store sales decreased 3.9% during the thirteen
weeks due to the unfavorable shift in the retail fiscal calendar, which shifted
an important back-to-school week out of the third quarter into the second. On a
calendar day to calendar day basis, comparable store sales increased 2.8% during
the thirteen week period. New stores and stores not in the comparable store net
sales calculation accounted for a $7.5 million increase in net sales, while
decreases in comparable store net sales accounted for a loss of $1.8 million in
net sales. Overall, approximately $1 million of lost sales is attributable to
slower traffic in the weeks following September 11. Comparable store net sales
data for the period reflect sales for our traditional format stores open
throughout the period and the corresponding period of the prior fiscal year.
During the thirteen weeks ended November 3, 2001, we opened fifteen Hibbett
Sports stores and closed one.
Gross profit. Cost of goods sold includes the cost of inventory,
occupancy costs for stores and occupancy and operating costs for the
distribution center. Gross profit was $17.6 million, or 30.5% of net sales, in
the thirteen weeks ended November 3, 2001, as compared to $15.8 million, or
30.4% of net sales, in the same period of the prior fiscal year. The improved
gross margin was due to higher vendor discounts, lower markdown rates and
reduced freight costs.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $12.0 million, or 20.7% of net sales,
for the thirteen weeks ended November 3, 2001, as compared to $10.1 million, or
19.5% of net sales, for the comparable period a year ago. The increase in store
operating, selling and administrative expenses as a percentage of net sales in
the thirteen weeks ended November 3, 2001, is attributable to unfavorable comp
store sales and lower than expected productivity from some of our smaller format
stores.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales was 2.6% in the thirteen weeks ended November 3, 2001,
compared to 2.4% in the thirteen weeks ended October 28, 2000. The increase as a
percent to sales is primarily attributable to depreciation associated with the
rollout of the new Point-of-Sale software system and the new registers.
Interest expense. Interest expense for the thirteen weeks ended
November 3, 2001, was $137,000 compared to $195,000 in the prior year period.
The decrease is attributable to lower interest rates associated with the
borrowings under the Company's credit facilities in the current year to fund
working capital requirements and new store growth.
Thirty-Nine Weeks Ended November 3, 2001 Compared to Thirty-Nine Weeks Ended
October 28, 2000
Net sales. Net sales increased $24.5 million, or 16.4%, to $173.7
million for the thirty-nine weeks ended November 3, 2001, from $149.2 million
for the comparable period in the prior year. This increase is attributed to the
opening of a net of forty-seven Hibbett Sports stores in the 52 week period
ended November 3, 2001, and a 1.2% increase in comparable store net sales. The
increase in comparable store net sales was primarily due to increased sales in
both footwear and team sports. New stores and stores not in the comparable store
net sales calculation accounted for $22.9 million of the increase in net sales,
and increases in comparable store net sales contributed $1.6 million. Comparable
store net sales data for the period reflect sales for our traditional format
stores open throughout the period and the corresponding period of the prior
fiscal year. During the thirty-nine weeks ended November 3, 2001, we opened
thirty-eight Hibbett Sports stores and closed six.
Gross profit. Cost of goods sold includes the cost of inventory,
occupancy costs for stores and occupancy and operating costs for the
distribution center. Gross profit was $52.7 million, or 30.3% of net sales, in
the thirty-nine weeks ended November 3, 2001, as compared to $44.9 million, or
30.1% of net sales, in the same period of the prior fiscal year. The improved
gross margin was primarily due to higher vendor discounts, lower markdown rates
and reduced freight costs.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $35.1 million, or 20.2% of net sales,
for the thirty-nine weeks ended November 3, 2001, as compared to $29.0 million,
or 19.4% of net sales, for the comparable period a year ago. The increase in
store operating, selling and administrative
7
expenses as a percentage of net sales in the thirty-nine weeks ended November 3,
2001, is attributable to lower productivity from some of our smaller format
stores and less than anticipated same store sales growth.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales was 2.5% in the thirty-nine weeks ended November 3,
2001, compared to 2.4% in the thirty-nine weeks ended October 28, 2000. The
increase as a percent to sales is primarily attributable to depreciation
associated with the rollout of the new POS software system and the new
registers.
Interest expense. Interest expense for the thirty-nine weeks ended
November 3, 2001, was $484,000 compared to $455,000 in the prior year period.
The increase is attributable to higher levels of borrowing on the Company's
credit facilities to fund new stores and working capital requirements. This was
offset by lower borrowing rates.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings and
working capital requirements. Our working capital needs are somewhat seasonal in
nature and typically reach their peak near the end of the third and the
beginning of the fourth quarter of our fiscal year. Historically, we have funded
our cash requirements primarily through cash flows from operations and
borrowings under our revolving loan facilities.
Net cash provided by (used in) operating activities for the periods
presented was primarily driven by net income levels combined with fluctuations
in inventory and accounts payable balances. Net cash used in operating
activities was $1.0 million for the thirty-nine week period ended November 3,
2001, which is equal to the net cash used in operating activities for the
thirty-nine week period ended October 28, 2000. We have continued to increase
our inventory levels in the thirty-nine weeks ended November 3, 2001 and October
28, 2000, as the number of stores has increased. The Company typically finances
these increases through increased net income, increases in accounts payable
balances and borrowings under our revolving credit facilities.
With respect to cash flows from investing activities, capital
expenditures were $5.6 million in the thirty-nine week period ended November 3,
2001 compared to $5.7 million for the comparable period in the prior year.
Capital expenditures in the thirty-nine weeks ended November 3, 2001, primarily
related to the opening of thirty-eight new stores, certain store remodels, and
certain office and distribution center-related expenditures.
The Company estimates capital expenditures in fiscal 2002 to be
approximately $9.9 million which includes resources budgeted to (i) fund the
opening of approximately 55 Hibbett Sports stores, (ii) remodel selected
existing stores and (iii) fund headquarters and distribution center related
capital expenditures.
Net cash provided by financing activities was $5.5 million in the
thirty-nine week period ended November 3, 2001, compared with $6.9 million in
the prior year period. Financing activities in the current year and prior year
periods were primarily the result of borrowings under our credit facilities.
These borrowings were used to fund new stores and working capital requirements.
We maintain an unsecured revolving credit facility, which will expire
on November 5, 2003 and allows borrowings up to $35 million. We also maintain an
unsecured working capital line of credit for $7 million which is subject to
annual renewal each November. As of November 3, 2001, the Company had
approximately $14 million outstanding under these facilities. Based on our
current operating and store opening plans, management believes that we can fund
our cash needs for the foreseeable future through borrowings under the credit
facility, the working capital line of credit and cash generated from operations.
Quarterly Fluctuations
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its net sales and operating income. The
Company's net sales and operating income are typically higher in the fourth
quarter due to sales increases during the holiday selling season. However, the
seasonal fluctuations are mitigated by the strong product demand in the spring,
summer and back-to-school sales periods. The Company's quarterly results of
operations may also fluctuate significantly as a result of a variety of factors,
including the timing of new store openings, the amount
8
and timing of net sales contributed by new stores, the level of pre-opening
expenses associated with new stores, the relative proportion of new stores to
mature stores, merchandise mix, the relative proportion of stores represented by
each of the Company's three store concepts and demand for apparel and
accessories driven by local interest in sporting events.
Special Note Regarding Forward Looking Statements
The statements contained in this report that are not purely historical
or which might be considered an opinion or projection concerning the Company or
its business, whether express or implied, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements may include statements regarding the Company's expectations,
intentions, plans or strategies regarding the future. All forward-looking
statements included in this document are based upon information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statements. It is important to note that the Company's
actual results could differ materially from those described or implied in such
forward-looking statements because of, among other factors, the ability of the
Company to execute its expansion plans, a shift in demand for the merchandise
offered by the Company, the Company's ability to obtain brand name merchandise
at competitive prices, the effect of regional or national economic conditions
and the effect of competitive pressures from other retailers. In addition, the
reader should consider the risk factors described from time to time in the
Company's other documents and reports, including the factors described under
"Risk Factors" in the Company's Registration Statement on Form S-3, filed with
the Securities and Exchange Commission on November 23, 2001, and any amendments
thereto.
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
ITEM 2: Changes in Securities
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to Vote of Security-Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
None
(B) Reports on Form 8-K
None
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
HIBBETT SPORTING GOODS, INC.
Date: December 14, 2001 By: /s/ Gary A. Smith
---------------------------- ---------------------------
Gary A. Smith
Vice President and
Chief Financial Officer
10