UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -------- EXCHANGE ACT OF 1934.
For the quarterly period ended: May 4, 2002
-----------
- 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
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(Address of principal executive offices) (Zip code)
(205)-942-4292
--------------
(Registrant's telephone number including area code)
NONE
----
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
-----
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of June 12, 2002 were 10,048,248 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 May 4, 2002 and
February 2, 2002 2
Unaudited Condensed Consolidated Statements of Operations for the Thirteen
Week Periods Ended May 4, 2002 and May 5, 2001 3
Unaudited Condensed Consolidated Statements of Cash Flows for the Thirteen
Week Periods Ended May 4, 2002 and May 5, 2001 4
Notes to Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to Vote of Security-Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
1
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
--------------- -------------
May 4, February 2,
2002 2002
--------------- -------------
Assets
Current Assets:
Cash and cash equivalents $ 936 $ 1,972
Accounts receivable, net 2,068 2,352
Inventories 87,031 81,082
Prepaid expenses and other 3,240 902
Refundable income tax 94 -
Deferred income taxes 1,360 1,375
--------------- -------------
Total current assets 94,729 87,683
--------------- -------------
Property and equipment, net 26,071 26,471
--------------- -------------
Noncurrent Assets:
Deferred income taxes 973 945
Other, net 214 216
--------------- -------------
Total noncurrent assets 1,187 1,161
--------------- -------------
Total Assets $ 121,987 $ 115,315
=============== =============
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 23,659 $ 23,721
Accrued income taxes 2,830 2,308
Accrued expenses:
Payroll-related 2,735 2,954
Other 2,509 2,366
--------------- -------------
Total current liabilities 31,733 31,349
--------------- -------------
Long-Term Debt 4,127 3,903
--------------- -------------
Stockholders' Investment:
Preferred stock, $.01 par value 1,000,000 shares
authorized, no shares outstanding - -
Common stock, $.01 par value, 12,000,000 shares
authorized, 10,040,133 shares issued and
outstanding at May 4, 2002 and 9,927,317
shares issued and outstanding at February 2, 2002 100 99
Paid-in capital 59,585 57,739
Retained earnings 26,442 22,225
--------------- -------------
Total stockholders' investment 86,127 80,063
--------------- -------------
Total Liabilities and Stockholders' Investment $ 121,987 $ 115,315
=============== =============
See notes to unaudited condensed consolidated financial statements.
2
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Share and Per Share Amounts)
Thirteen Weeks Ended
---------------------------------
May 4, May 5,
2002 2001
-------------- ---------------
Net sales $ 70,790 $ 60,345
Cost of goods sold,
including warehouse, distribution
and store occupancy costs 48,792 41,881
-------------- ---------------
Gross profit 21,998 18,464
Store operating, selling, and
administrative expenses 13,622 11,437
Depreciation and amortization 1,671 1,382
-------------- ---------------
Operating income 6,705 5,645
Interest expense, net 64 152
-------------- ---------------
Income before provision for income taxes 6,641 5,493
Provision for income taxes 2,424 2,074
-------------- ---------------
Net income $ 4,217 $ 3,419
============== ===============
Basic earnings per common share $ 0.42 $ 0.35
============== ===============
Diluted earnings per common share $ 0.41 $ 0.34
============== ===============
Weighted average shares outstanding:
Basic 9,964,309 9,822,342
============== ===============
Diluted 10,210,554 10,048,299
============== ===============
See notes to unaudited condensed consolidated financial statements.
3
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
Thirteen Weeks Ended
-------------------------------------
May 4, May 5,
2002 2001
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,217 $ 3,419
---------------- ----------------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,671 1,382
Deferred income taxes (13) (13)
Loss on disposal of assets 30 (3)
Change in operating assets and liabilities (7,187) 1,285
---------------- ----------------
Total adjustments (5,499) 2,651
---------------- ----------------
Net cash provided by (used in) operating activities (1,282) 6,070
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,299) (1,467)
Proceeds from sale of property and equipment 9 7
---------------- ----------------
Net cash used in investing activities (1,290) (1,460)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Revolving loan activity, net 224 (5,134)
Proceeds from options exercised and purchase
of shares under employee stock purchase plan 1,312 689
---------------- ----------------
Net cash provided by (used in) financing activities 1,536 (4,445)
---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,036) 165
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,972 1,884
---------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 936 $ 2,049
================ ================
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 44 $ 150
---------------- ----------------
Income taxes, net of refunds $ 1,474 $ 1,566
---------------- ----------------
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 of America for interim financial information and
are presented in accordance with the requirements of Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the consolidated financial statements and notes thereto for the fiscal year
ended February 2, 2002. In the opinion of management, the unaudited condensed
consolidated financial statements included herein contain all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of the Company's financial position as of May 4, 2002 and May
5, 2001, and the results of its operations and cash flows for the periods
presented.
The Company has experienced and expects to continue to experience
seasonal fluctuations in its net sales and operating income. Therefore, the
results of the interim periods presented herein are not necessarily indicative
of the results to be expected for any other interim period or the full year.
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
-----------------------------------------
May 4, 2002 May 5, 2001
------------------- ------------------
Weighted average shares outstanding:
Basic 9,964,309 9,822,342
Dilutive effect of stock options 246,245 225,957
------------------- ------------------
Diluted 10,210,554 10,048,299
=================== ==================
For the thirteen week period ended May 4, 2002, there were no
anti-dilutive options. For the thirteen week period ended May 5, 2001, 135,450
anti-dilutive options were appropriately excluded from the computation.
3. Stockholders' Investment
The Company offers participation in stock option plans to certain
employees and individuals. Awards typically vest and become exercisable in
incremental installments over a period of five years and expire on the tenth
anniversary of the date of grant. For the thirteen weeks ended May 4, 2002,
111,315 shares were issued upon exercise of options resulting in an increase in
Stockholders' Investment of $1,271,000, and an increase in Paid in Capital of
$549,000 related to the tax benefit. For the thirteen weeks ended May 4, 2002,
1,501 shares were purchased under the Employee Stock Purchase Plan resulting in
an increase in Stockholders' Investment of $26,000.
4. 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
5. Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets ".
Business combinations initiated after June 30, 2001, must be accounted for under
the provisions of these two statements. The principal provisions of SFAS No. 141
and SFAS No. 142 are as follows:
. All business combinations initiated after June 30, 2001, will be
accounted for using the "purchase" method, under which the identifiable
assets and liabilities of the acquired business are recorded at their
respective fair market values with the residual amount being recorded
as goodwill. The "pooling-of-interests" method, under which the
financial statements of the acquirer and the acquiree were combined as
if the two businesses had always been one, will no longer be used.
. Goodwill and identifiable intangible assets will no longer be
amortized over a maximum period of forty years. Goodwill will not be
amortized but will instead be tested for impairment annually or upon
the occurrence of certain "triggering events." Identifiable intangible
assets will be amortized over their expected useful lives; those with
indefinite expected useful lives will not be amortized. Identifiable
intangible assets will continue to be tested for impairment under
previously existing accounting standards.
Additionally, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" during 2001. SFAS No. 143 relates to obligations
which generally are incurred in connection with the ownership of real property.
We currently lease the substantial majority of our real property and, therefore,
do not believe that the provisions of SFAS No. 143 apply to our current
operations.
SFAS No. 144 superseded SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. SFAS No.
144 also amended Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary.
We adopted SFAS No. 141, SFAS No. 142, SFAS No. 143 and SFAS No. 144 on
February 3, 2002. The adoption of these standards had no material impact on our
financial condition, results of operations or cash flows.
6. Reclassifications
Certain prior year numbers have been reclassified to conform to current
year presentation.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Hibbett Sporting Goods, Inc. ("we" or "Hibbett" or the "Company") is a
rapidly-growing operator of full-line athletic sporting goods stores in small to
mid-sized markets predominantly in the southeast, mid-Atlantic and midwest. The
Company's stores offer a broad assortment of quality athletic equipment,
footwear and apparel at competitive prices with superior customer service.
Hibbett's merchandise assortment features a broad selection of brand name
merchandise emphasizing team and individual sports complemented by a selection
of localized apparel and accessories designed to appeal to a wide range of
customers within each market. The Company's management team believes that their
stores are among the primary retail distribution avenue for brand name vendors
that seek to penetrate their target markets.
As of May 4, 2002, we operated 318 Hibbett Sports stores as well as
sixteen smaller-format Sports Additions athletic shoe stores and four
larger-format Sports & Co. superstores in 20 states. The Company's primary
retail format and growth vehicle is Hibbett Sports, an approximately 5,000
square foot store located in enclosed malls and dominant power 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
Period Ended
----------------------------
May 4, 2002 May 5, 2001
----------- -----------
Net sales 100.0% 100.0%
Cost of goods sold, including warehouse,
Distribution and store occupancy costs 68.9 69.4
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Gross profit 31.1 30.6
Store operating, selling, and administrative
Expenses 19.2 18.9
Depreciation and amortization 2.4 2.3
------ ------
Operating income 9.5 9.4
Interest expense, net 0.1 0.3
------ ------
Income before provision for income taxes 9.4 9.1
Provision for income taxes 3.4 3.4
------ ------
Net income 6.0% 5.7%
====== ======
7
Thirteen Weeks Ended May 4, 2002 Compared to Thirteen Weeks Ended May 5, 2001
Net sales. Net sales increased $10.5 million, or 17.3%, to $70.8
million for the thirteen weeks ended May 4, 2002, from $60.3 million for the
comparable period in the prior year. This increase is attributed to the opening
of a net of fifty Hibbett Sports stores in the 52 week period ended May 4, 2002,
and a 3.9% increase in comparable store net sales for the quarter ended May 4,
2002. The increase in comparable store net sales was primarily due to increased
footwear and apparel sales. New stores and stores not in the comparable store
net sales calculation accounted for $8.3 million of the increase in net sales,
and increases in comparable store net sales contributed $2.2 million. Comparable
store net sales data for the period 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 thirteen weeks ended May 4, 2002, we opened
nine new stores as compared to the thirteen weeks ended May 5, 2001, in which we
opened seven new 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 $22.0 million, or 31.1% of net sales, in
the thirteen weeks ended May 4, 2002, as compared to $18.5 million, or 30.6% of
net sales, in the same period of the prior fiscal year. The improved gross
margin was due to higher product margins, a result of increased vendor discounts
and reduced freight costs, and improved leveraging of occupancy costs over a
larger store base in the current year period.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $13.6 million, or 19.2% of net sales,
for the thirteen weeks ended May 4, 2002, as compared to $11.4 million, or 18.9%
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 May 4, 2002 is attributable to an increase in business
insurance costs.
Depreciation and amortization. Depreciation and amortization expenses
were $1.7 million, or 2.4% of net sales, for the thirteen week period ended May
4, 2002, compared to $1.4 million, or 2.3% of net sales for the same thirteen
week period in the prior year. The increase in costs is associated with the
opening of new stores and the implementation of the new Point-of-Sale system and
the Manhattan warehouse inventory system.
Interest expense, net. Net interest expense for the thirteen weeks
ended May 4, 2002 was $64,000 compared to net interest expense of $152,000 in
the prior year period. The decrease is attributable to lower borrowing rates and
lower levels of borrowings on our revolving credit facilities in the current
year period.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings and
working capital requirements. Our working capital needs are somewhat seasonal in
nature and typically reach their peak near the end of the third and the
beginning of the fourth quarter of our fiscal year. Historically, we have funded
our cash requirements primarily through cash flows from operations and
borrowings under our revolving credit facilities.
Net cash provided by (used in) operating activities has historically
been driven by net income levels combined with fluctuations in inventory and
accounts payable balances. We have continued to increase our inventory levels in
the thirteen weeks ended May 4, 2002 as the number of stores has increased,
which is partially offset by reductions in our inventory on a per store basis.
We have financed this increase primarily through increased net income.
Accordingly, net cash used in operating activities was $1.3 million for the
thirteen week period ending May 4, 2002 as compared to net cash provided by
operating activities of $6.1 million for the thirteen week period ending May 5,
2001.
With respect to cash flows used in investing activities, capital
expenditures were $1.3 million in the thirteen week period ended May 4, 2002
compared to $1.5 million for the comparable period in the prior year. Capital
expenditures in the thirteen weeks ended May 4, 2002 were primarily related to
the opening of nine new stores, the refurbishing of existing stores and various
corporate additions.
Net cash provided by financing activities was $1.5 million in the
thirteen week period ended May 4, 2002 compared with $4.4 million used in
financing activities in the prior year period. Financing activities primarily
relate to borrowings and repayments under our credit facilities and proceeds
from stock options exercised.
8
The Company estimates capital expenditures in fiscal 2003 to be
approximately $8.9 million which includes resources budgeted to (i) fund the
opening of approximately 65 Hibbett Sports stores, (ii) remodel selected
existing stores and (iii) fund headquarters and distribution center related
capital expenditures.
Hibbett maintains an unsecured revolving credit facility, which will
expire November 5, 2003 and allows borrowings up to $35 million. We also
maintain an unsecured working capital line of credit for $7 million, which is
subject to annual renewal each November. As of May 4, 2002, the Company had $4.1
million outstanding under these facilities, $3.0 million under the revolving
credit facility and $1.1 million under the working capital facility. 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 reduced to some extent by the strong product demand in
the spring, summer and back-to-school sales periods. The Company's quarterly
results of operations may also fluctuate significantly as a result of a variety
of factors, including the timing of new store openings, the amount and timing of
net sales contributed by new stores, the level of pre-opening expenses
associated with new stores, the relative proportion of new stores to mature
stores, merchandise mix, the relative proportion of stores represented by each
of the Company's three store concepts and demand for apparel and accessories
driven by local interest in sporting events.
Special Note Regarding Forward Looking Statements
The statements contained in this report that are not purely historical
or which might be considered an opinion or projection concerning the Company or
its business, whether express or implied, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements may include statements regarding the Company's expectations,
intentions, plans or strategies regarding the future. All forward-looking
statements included in this document are based upon information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statements. It is important to note that the Company's
actual results could differ materially from those described or implied in such
forward-looking statements because of, among other factors, the ability of the
Company to execute its expansion plans, a shift in demand for the merchandise
offered by the Company, the Company's ability to obtain brand name merchandise
at competitive prices, the effect of regional or national economic conditions,
the effect of competitive pressures from other retailers and the ability to
attract and retain qualified personnel. In addition, the reader should consider
the risk factors described from time to time in the Company's other documents
and reports, including the factors described under "Risk Factors" in the
Company's Registration Statement on Form S-3, filed with the Securities and
Exchange Commission on January 16, 2002, and any amendments thereto.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial condition, results of operations and cash flows
are subject to market risk from interest rate fluctuations on its revolving
credit facility and working capital 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 the thirteen week
period ended May 4, 2002, was $4,903,810, the maximum amount outstanding was
$9,357,902 and the weighted average interest rate was 3.91%. A 10% increase or
decrease in market interest rates would not have a material impact on the
Company's financial condition, results of operations or cash flows.
9
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
No reports on Form 8-K were filed by us during the three months ended
May 4, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
HIBBETT SPORTING GOODS, INC.
Date: June 14, 2002 By: /s/ Gary A. Smith
-------------------- -------------------------------------
Gary A. Smith
Vice President & Chief Financial Officer
10