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 1, 2004
-----------
- OR -
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition 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 Employer 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes X No ______
-----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: Shares of common stock, par
value $.01 per share, outstanding as of June 8, 2004 were 23,439,093 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 1, 2004 and January 31, 2004 2
Unaudited Condensed Consolidated Statements of
Operations for the Thirteen-Week Periods Ended
May 1, 2004 and May 3, 2003 3
Unaudited Condensed Consolidated Statements of
Cash Flows for the Thirteen-Week Periods Ended
May 1, 2004 and May 3, 2003 4
Notes to Unaudited Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Item 4. Controls and Procedures 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to Vote of Security-Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
1
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
--------- -----------
May 1, January 31,
2004 2004
--------- -----------
Assets
Current Assets:
Cash and cash equivalents $ 44,422 $ 41,963
Accounts receivable, net 2,752 3,594
Inventories 95,416 94,777
Prepaid expenses and other 3,833 942
Deferred income taxes 968 983
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Total current assets 147,391 142,259
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Property and equipment, net 25,684 26,173
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Noncurrent Assets:
Deferred income taxes 28 -
Other, net 188 130
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Total noncurrent assets 216 130
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Total Assets $ 173,291 $ 168,562
========= ===========
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 29,475 $ 37,976
Accrued expenses:
Payroll-related 3,233 4,284
Other 6,840 2,809
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Total current liabilities 39,548 45,069
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Deferred income taxes 603 603
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, 23,394,089 shares
issued and outstanding at May 1, 2004 and
23,229,660 shares issued and outstanding at
January 31, 2004 234 232
Paid-in capital 67,543 65,356
Retained earnings 65,363 57,302
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Total stockholders' investment 133,140 122,890
--------- -----------
Total Liabilities and Stockholders' Investment $ 173,291 $ 168,562
========= ============
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 1, May 3,
2004 2003
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Net sales $ 96,519 $ 79,593
Cost of goods sold,
including warehouse, distribution
and store occupancy costs 64,788 54,634
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Gross profit 31,731 24,959
Store operating, selling and
administrative expenses 17,119 14,952
Depreciation and amortization 1,841 1,754
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Operating income 12,771 8,253
Interest income, net of expense 74 23
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Income before provision for income taxes 12,845 8,276
Provision for income taxes 4,785 3,021
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Net income $ 8,060 $ 5,255
========== ==========
Basic earnings per common share $ 0.35 $ 0.23
========== ==========
Diluted earnings per common share $ 0.34 $ 0.23
========== ==========
Weighted average shares outstanding:
Basic 23,333,168 22,768,299
========== ==========
Diluted 23,987,903 23,149,492
========== ==========
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 1, May 3,
2004 2003
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Cash Flows From Operating Activities:
Net income $ 8,060 $ 5,255
------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,841 1,754
Deferred income taxes (13) (13)
Loss on disposal of assets 98 39
Change in assets and liabilities (7,310) 3,099
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Total adjustments (5,384) 4,879
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Net cash provided by operating activities 2,676 10,134
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Cash Flows From Investing Activities:
Capital expenditures (1,471) (1,198)
Proceeds from sale of property 24 4
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Net cash used in investing activities (1,447) (1,194)
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Cash Flows From Financing Activities:
Proceeds from options exercised and purchase
of shares under employee stock purchase plan 1,230 1,038
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Net cash provided by financing activities 1,230 1,038
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Net Increase in Cash and Cash Equivalents 2,459 9,978
Cash and Cash Equivalents, Beginning of Period 41,963 12,016
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Cash and Cash Equivalents, End of Period $44,422 $21,994
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 8 $ 13
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Income taxes, net of refunds $ 305 $ 2,157
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See notes to unaudited condensed consolidated financial statements.
4
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation & Accounting Policies
The accompanying unaudited condensed consolidated financial statements of
Hibbett Sporting Goods, Inc. and its wholly-owned subsidiaries (the "Company" or
"we" or "Hibbett") 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 January 31, 2004. In our opinion, the unaudited condensed
consolidated financial statements included herein contain all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of our financial position as of May 1, 2004 and May 3, 2003
and the results of our operations and cash flows for the periods presented.
We have experienced and expect to continue to experience seasonal
fluctuations in our net sales and operating income. Therefore, the results of
the interim periods presented herein are not necessarily indicative of the
results to be expected for any other interim period or the full year.
Interest
Interest income for the thirteen-weeks ended May 1, 2004 was $82,975, shown
net of interest expense of $9,121. Interest income for the thirteen-weeks ended
May 3, 2003 was $36,456, shown net of interest expense of $13,457.
Advertising
We participate in various advertising and marketing cooperative programs
with our vendors, who, under these programs, reimburse us for certain costs
incurred. A receivable for cooperative advertising to be reimbursed is recorded
as a decrease to expense as the reimbursements are earned. Our gross advertising
costs for the thirteen-weeks ended May 1, 2004 and May 3, 2003 were $889,719 and
$731,551, respectively.
Reportable Segments
We are 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, our operations
constitute only one reportable segment.
Customers
No customer accounted for more than 5% of our sales during the
thirteen-week periods ended May 1, 2004 or May 3, 2003.
Vendors
For the thirteen-week period ended May 1, 2004, Nike, our largest vendor,
represented approximately 37.7% of our purchases, Reebok represented
approximately 8.6% of our purchases and New Balance represented approximately
7.7% of our purchases. For the thirteen-week period ended May 3, 2003, Nike, our
largest vendor, represented approximately 36.5% of our purchases, New Balance
represented approximately 9.1% of our purchases and Reebok represented
approximately 8.6% of our purchases.
Store Closing Costs
We consider individual store closings to be a normal part of operations
and expense all related costs at the time of closing.
5
Revenue Recognition
All merchandise sales occur on-site in our 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 us within 30 days. We record
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. We recognize merchandise revenues at the time the customer takes
possession of the merchandise.
The cost of coupon sales incentives are recognized at the time the related
revenue is recognized by us. Proceeds received from the issuance of gift cards
are initially recorded as deferred revenue, and such proceeds are subsequently
recognized as revenue at the time the customer redeems such gift cards and takes
possession of the merchandise.
Stock-Based Compensation
We utilize 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 we 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), our net income and
earnings per share would have been reduced to the estimated pro forma amounts
indicated below:
Thirteen-Week Period Ended
------------------------------
May 1, 2004 May 3, 2003
----------- -----------
Net income--as reported $ 8,060 $ 5,255
Stock-Based Compensation Expense,
net of income taxes $ (314) $ (242)
----------- -----------
Net income--pro forma $ 7,746 $ 5,013
Diluted earnings per share--as reported .34 .23
Diluted earnings per share--pro forma .32 .22
The weighted average assumptions for determining compensation costs for the
thirteen-week periods ended May 1, 2004 and May 3, 2003, under the fair value
method include (i) a risk-free interest rate based on zero-coupon governmental
issues on each grant date with the maturity equal to the expected term of the
options (2.9% for fiscal 2005 and 2004), (ii) an expected stock volatility of
54% and 57% for fiscal 2005 and 2004, respectively, and (iii) no expected
dividend yield.
2. Properties
We currently lease all of our existing 433 store locations and expect that
our policy of leasing rather than owning will continue as we continue to expand.
Our leases typically provide for terms of five to seven years with options on
the part of Hibbett to extend. Most leases also contain a three-year early
termination option if projected sales levels are not met and a kickout clause if
co-tenancy 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
additional qualified management personnel.
As current leases expire, we believe that we will be able either to obtain
lease renewals for present store locations or to obtain leases for equivalent or
better locations in the same general area. For the most part, we have not
experienced any significant difficulty in either renewing leases for existing
locations or securing leases for suitable locations for new stores. Based on our
belief that we maintain good relations with our landlords, that most of our
leases are at below market rents and that we have generally been able to secure
leases for suitable locations, we believe our lease strategy will not be
detrimental to our business, financial condition or results of operations.
6
Our offices and our distribution center are leased under an operating lease
expiring in 2014. We own the Team division's warehousing and distribution center
located in Birmingham, Alabama.
3. Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in earnings. Diluted EPS has been computed based on the weighted average number
of shares outstanding, including the effect of outstanding stock options, if
dilutive, in each respective period.
A reconciliation of the weighted average shares for basic and diluted EPS
is as follows:
Thirteen-Week Period Ended
---------------------------------
May 1, 2004 May 3, 2003
----------- -----------
Weighted average shares outstanding:
Basic 23,333,168 22,768,299
Dilutive effect of stock options 654,735 381,193
----------- -----------
Diluted 23,987,903 23,149,492
=========== ===========
For the thirteen-week period ended May 1, 2004, there were no anti-dilutive
options excluded from the computation. For the thirteen-week period ended May 3,
2003, 315,787 anti-dilutive options were excluded from the computation.
4. Stockholders' Investment
We offer participation in stock option plans to certain employees and
individuals. Awards typically vest and become exercisable in incremental
installments over a period of five years after the date of grant and expire on
the tenth anniversary of the date of grant. For the thirteen-weeks ended May 1,
2004, 158,781 shares were issued upon exercise of options, resulting in an
increase in Stockholders' Investment of $1,178,000 and an increase in Paid in
Capital of $960,000 attributable to the tax benefit received from the exercise
of these options. For the thirteen-weeks ended May 1, 2004, 3,061 shares were
purchased under the Employee Stock Purchase Plan resulting in an increase in
Stockholders' Investment of $51,000.
5. Stock Split
On March 10, 2004, our Board of Directors declared a 3-for-2 stock split on
our Common Stock to holders of record on April 1, 2004, effective April 16,
2004. All share and per share data presented in this document reflect the
effects of this split.
6. Contingencies
We are party to various legal proceedings incidental to our business. In
our opinion, 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 our Company.
7. 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. We are 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.
7
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 us, 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 us on January 31, 2005. The effective date has been deferred indefinitely
for certain other types of mandatorily redeemable financial instruments. We
currently do not have any financial instruments that are within the scope of
this Statement.
8
ITEM 2. 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. 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 May 1, 2004, we operated 412 Hibbett Sports stores, as well as 17
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 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.
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 433 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 2005. We believe our 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
lower retail reductions, improved vendor discounts, increased efficiencies in
logistics and favorable leveraging of our store occupancy costs. We expect gross
profit to increase at least 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
advances in technology and system development 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. We have been incorporated under the laws of
the State of Delaware since October 6, 1996.
Store Locations
As of May 1, 2004, we operated 433 stores in 21 contiguous states. Of these
stores, 159 are located in malls and 274 are located in strip shopping centers
which are generally the center of commerce within the area and which most are
anchored by a Wal-Mart store.
9
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 1, May 3,
2004 2003
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Net sales 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution and store occupancy costs 67.1 68.6
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Gross profit 32.9 31.4
Store operating, selling and administrative expenses 17.8 18.8
Depreciation and amortization 1.9 2.2
------- -------
Operating income 13.2 10.4
Interest income, net 0.1 0.0
------- -------
Income before provision for income taxes 13.3 10.4
Provision for income taxes 5.0 3.8
------- -------
Net income 8.3% 6.6%
======= =======
Thirteen-Weeks Ended May 1, 2004 Compared to Thirteen-Weeks Ended May 3, 2003
Net sales. Net sales increased to $96.5 million from $79.6 million, an
increase of $16.9 million, or 21.3%, as compared to the same thirteen-week
period in the prior year. This increase is attributed to the opening of 54
Hibbett Sports stores and 3 Sports Additions, net of store closings, in the
52-week period ended May 1, 2004 and a 8.8% increase in comparable store net
sales for the thirteen-week period ended May 1, 2004. New stores and stores not
in the comparable store net sales calculation accounted for $10.4 million of the
increase in net sales, and increases in comparable store net sales contributed
$6.5 million. The increase in comparable store net sales was primarily due to
increased sales in all three of our product categories of apparel, footwear and
equipment. Apparel, which had the largest comparable store sales gain, was
driven by pro-licensed products and active wear. NBA and NFL jerseys from Reebok
and Nike remained strong and Under Armour and Nike active wear drove sales in
both men and women's. Footwear sales were led by increases in ladies running and
kids shoes. New Balance running, Nike Shox, children's Nike and classic white
leather influenced by color pops were also hot items in footwear. Equipment
sales were positively influenced by team sports. Baseball and softball equipment
were especially strong as our premium product focus began to take effect.
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 1, 2004, we opened 7 Hibbett Sports and 1 Sports Additions and closed 3
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 $31.7 million, or 32.9% of net sales, in the thirteen-weeks
ended May 1, 2004, as compared to $25.0 million, or 31.4% of net sales, in the
same period of the prior fiscal year. The improvement in gross profit was driven
by a decrease in the level of markdowns, an increase in product margin and a
favorable product mix, which combined accounted for an 84 basis point
improvement. Occupancy costs decreased as a percent of net sales by 26 basis
points versus last year's rate. Warehouse costs decreased 12 basis points, as a
percentage of net sales, from last year's rate primarily due to reduced labor
and benefit costs. The additional improvement is attributed to the leveraging of
freight costs year over year due to the 21.3% increase in net sales.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $17.1 million, or 17.8% of net sales,
for the thirteen-weeks ended May 1, 2004, as compared to $15.0 million, or 18.8%
of net sales, for the comparable period a year ago. The decrease in store
operating, selling and administrative expenses as a percentage of net sales in
the thirteen-weeks ended May 1, 2004, is attributed to the reduction of labor
and benefit costs, as well as an overall reduction in store operating expenses.
Store labor and benefits cost accounted for a decrease as a percent of net sales
of 76 basis points as compared to the same period last year. The reduction in
the cost of store supplies accounted for a 12 basis point reduction year over
year and other related store-operating expenses accounted for the remaining
decrease in overall store operating, selling and administrative expenses.
10
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales decreased to 1.9% of net sales for the thirteen-week
period ended May 1, 2004, compared with 2.2% of net sales for the same
thirteen-week period last year. An increase in landlord contributions, which
helped to lower the total net investment subject to depreciation, combined with
the initial investment in Point-of-Sale software being fully depreciated
accounted for the reduction in overall depreciation expense.
Provision for income taxes. Provision for income taxes as a percentage of
net sales was 5.0%, in the thirteen-week period ended May 1, 2004, compared to
3.8% for the same thirteen-week period ended May 3, 2003, due to a 291 basis
point increase in pre-tax income. The income tax rate as a percentage for
pre-tax income was 37.3% and 36.5% for the thirteen-week periods ended May 1,
2004 and May 3, 2003, respectively.
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.
Our Statements of Cash Flows are summarized as follows (in thousands):
Thirteen-Weeks Ended
----------------------
May 1, May 3,
2004 2003
--------- ---------
Net cash provided by operating activities $ 2,676 $10,134
--------- ---------
Cash flows provided by (used in) investing activities
Capital expenditures $(1,471) $(1,198)
Proceeds from sales of property and equipment 24 4
--------- ---------
Net cash used in investing activities $(1,447) $(1,194)
--------- ---------
Cash flows provided by financing activities
Proceeds from options exercised and purchase of
shares under the employee stock purchase plan 1,230 1,038
--------- ---------
Net cash provided by financing activities $ 1,230 $ 1,038
--------- ---------
Net cash provided by operating activities has historically been driven by
net income levels combined with fluctuations in inventory and accounts payable
balances. Accounts payable was impacted during the thirteen-week period ended
May 1, 2004, by the advance purchase of product to better stock the stores for
the spring sports season and to take advantage of high traffic patterns. Overall
inventory levels increased during the thirteen-week period ended May 1, 2004,
but decreased on a per store basis due to continued efficiency in merchandise
flow through the distribution center. Accordingly, net cash provided by
operating activities was $2.7 million for the thirteen-week period ended May 1,
2004 compared with net cash provided by operating activities of $10.1 million
for the thirteen-week period ended May 3, 2003.
With respect to cash flows used in investing activities, capital
expenditures were $1.4 million in the thirteen-week period ended May 1, 2004
compared with $1.2 million for the prior year period. Capital expenditures in
the thirteen-weeks ended May 1, 2004 were primarily related to the opening of
eight new stores, the refurbishing of existing stores and various corporate
additions, including automobiles and warehouse equipment.
Net cash provided by financing activities was $1.2 million in the
thirteen-week period ended May 1, 2004 compared with $1.0 million provided by
financing activities in the prior year period. Financing activities relate to
proceeds from stock options exercised.
11
We estimate capital expenditures in fiscal 2005 to 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 our headquarters and distribution center.
We maintain an unsecured revolving credit facility that allows borrowings
up to $25 million and which will expire November 5, 2005, subject to renewal
every two years. As of May 1, 2004 and May 3, 2003, we had no debt outstanding.
Based on our current operating and store opening plans, we believe we can
adequately fund our cash needs for the foreseeable future through cash generated
from operations and borrowings under the revolving credit facility.
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 May 1, 2004.
Recent Accounting Pronouncements
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 we will be required to expense
options under our current plan in future periods under this Exposure Draft.
However, we cannot estimate the impact that expensing options will have on the
financial statements until the FASB completes its exposure draft process and
issues its final statement.
Quarterly 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 reduced to some extent by the strong product demand in the spring, summer
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.
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 growth and growth in product margin;
- - our growth, including our plans to add, expand or relocate stores and square
footage growth;
- - our cash needs, including our ability to fund 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; and
- - our ability to renew or replace store leases satisfactorily.
You should assume that the information appearing in this 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 consider
the risk factors described from time to time in our other documents and reports,
including the factors described under "Risk Factors" in our Form 10-K dated
April 15, 2004.
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 quarterly report and you should not expect us to do so.
12
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 non-public information 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 facility, each of which bears interest at rates that vary
with LIBOR, prime or quoted cost of funds rates. During the thirteen-week period
ended May 1, 2004, we had no borrowings outstanding under our revolving credit
facility. The average amount of borrowings outstanding under these agreements
during the thirteen-week period ended May 3, 2003 was $48,952 and the maximum
amount outstanding was $1,980,553. The total amount of interest paid during the
thirteen-week period ended May 3, 2003 was less than $500. A 10% increase or
decrease in market interest rates would not have a material impact on our
financial condition, results of operations or cash flows.
ITEM 4. 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 Office 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 its 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 as of May 1, 2004, 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,
our 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 report, there have been no changes in our
internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings
We are a party to various legal proceedings incidental to our business. In
our opinion, 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 the financial position, results of
operations or cash flows of our Company.
ITEM 2: Changes in Securities and Use of Proceeds
None
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to Vote of Security-Holders
None
13
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit No.
10.1 Hibbett Sporting Goods, Inc. Stock Plan for Outside Directors (as
amended) (Exhibit A to the Definitive Proxy Statement, filed April
29, 2004, incorporated herein by this reference)
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
(B) Reports on Form 8-K
We filed with the Commission a Current Report on Form 8-K dated March 10,
2004, to report, under Item 9, a copy of our press release announcing that
Mickey Newsome, President and Chief Executive Officer had been named Chairman of
the Board. We also reported, under Item 12, a copy of our press release
announcing our financial results for the fourth quarter and fiscal year ended
January 31, 2004.
We filed with the Commission a Current Report on Form 8-K dated May 20,
2004, to report, under Item 12, a copy of our press release announcing our
financial results for the first quarter ended May 1, 2004.
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 thereunto duly authorized.
HIBBETT SPORTING GOODS, INC.
Date: June 9, 2004 By: /s/ Gary A. Smith
------------ ------------------------------------------
Gary A. Smith
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
Exhibit Index
10.1 Hibbett Sporting Goods, Inc. Stock Plan for Outside Directors (as
amended) (Exhibit A to the Definitive Proxy Statement, filed April 29,
2004, incorporated herein by this reference)
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
15
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 quarterly report on Form 10-Q 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(3)) 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: June 9, 2004
------------
/s/ Michael J. Newsome
-----------------------
Michael J. Newsome
Chief Executive Officer
16
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 quarterly report on Form 10-Q 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(3)) 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: June 9, 2004
------------
/s/ Gary A. Smith
-----------------------
Gary A. Smith
Chief Financial Officer
17
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:
(a) the accompanying Quarterly Report on Form 10-Q of the Company for
the period ended May 1, 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
(b) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Dated: June 9, 2004 /s/ Michael J. Newsome
------------- ---------------------------
Michael J. Newsome
Chief Executive Officer
18
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:
(a) the accompanying Quarterly Report on Form 10-Q of the Company for
the period ended May 1, 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
(b) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the company.
Dated: June 9, 2004 /s/ Gary A. Smith
------------ --------------------------
Gary A. Smith
Chief Financial Officer
19