10-Q 1 d10q.txt QUARTERLY REPORT FOR PERIOD ENDING 8-4-2001 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: August 4, 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 incorporation or organization) Identification No.) 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 September 14, 2001 were 6,588,105 shares. HIBBETT SPORTING GOODS, INC. INDEX
Page No. ------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at August 4, 2001 and February 3, 2001 2 Condensed Consolidated Statements of Operations for the Thirteen Week and Twenty-Six Week Periods Ended August 4, 2001 and July 29, 2000 3 Condensed Consolidated Statements of Cash Flows for the Twenty-Six Week Periods Ended August 4, 2001 and July 29, 2000 4 Notes to 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 10 Item 6. Exhibits and Reports on Form 8-K 10
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars In Thousands)
August 4, 2001 February 3, 2001 ------------------- ------------------ Assets Current Assets: Cash and cash equivalents $ 3,671 $ 1,884 Accounts receivable, net 2,840 2,649 Inventories 82,881 70,058 Prepaid expenses and other 2,788 822 Refundable income tax 460 - Deferred income taxes 1,080 1,110 ------------------- ------------------ Total current assets 93,720 76,523 ------------------- ------------------ Property and equipment, net 24,588 23,710 ------------------- ------------------ Noncurrent Assets: Deferred income taxes 797 741 Other, net 269 278 ------------------- ------------------ Total noncurrent assets 1,066 1,019 ------------------- ------------------ Total Assets $ 119,374 $ 101,252 =================== ================== Liabilities and Stockholders' Investment Current Liabilities: Accounts payable $ 29,367 $ 18,268 Accrued income taxes - 1,859 Accrued expenses: Payroll-related 1,989 2,640 Other 2,622 2,072 ------------------- ------------------ Total current liabilities 33,978 24,839 ------------------- ------------------ Long-Term Debt 12,044 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, 6,588,105 shares issued and outstanding at August 4, 2001 and 6,532,885 shares issued and outstanding at February 3, 2001 66 65 Paid-in capital 57,150 55,928 Retained earnings (deficit) 16,136 10,672 ------------------- ------------------ Total stockholders' investment 73,352 66,665 ------------------- ------------------ Total Liabilities and Stockholders' Investment $ 119,374 $ 101,252 =================== ==================
See notes to 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 Twenty-Six Weeks Ended ------------------------------------ ----------------------------------- August 4, 2001 July 29, 2000 August 4, 2001 July 29, 2000 ----------------- ---------------- ---------------- --------------- Net sales $ 55,633 $ 46,626 $ 115,978 $ 97,148 Cost of goods sold, including warehouse, distribution and store occupancy costs 39,027 32,933 80,908 68,063 ----------------- ---------------- ---------------- --------------- Gross profit 16,606 13,693 35,070 29,085 Store operating, selling, and administrative expenses 11,681 9,122 23,118 18,838 Depreciation and amortization 1,444 1,135 2,826 2,270 ----------------- ---------------- ---------------- --------------- Operating income 3,481 3,436 9,126 7,977 Interest expense 195 191 347 260 ----------------- ---------------- ---------------- --------------- Income before provision for income taxes 3,286 3,245 8,779 7,717 Provision for income taxes 1,240 1,225 3,314 2,936 ----------------- ---------------- ---------------- --------------- Net income $ 2,046 $ 2,020 $ 5,465 $ 4,781 ================= ================ ================ =============== Basic earnings per common share $ 0.31 $ 0.31 $ 0.83 $ 0.74 ================= ================ ================ =============== Diluted earnings per common share $ 0.30 $ 0.31 $ 0.81 $ 0.73 ================= ================ ================ =============== Weighted average shares outstanding: Basic 6,584,545 6 ,446,276 6,566,386 6 ,441,277 ================= ================ ================ =============== Diluted 6,766,620 6 ,607,439 6,733,149 6 ,572,101 ================= ================ ================ ===============
See notes to condensed consolidated financial statements. 3 HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars In Thousands)
Twenty-Six Weeks Ended ------------------------------------ August 4, 2001 July 29, 2000 ---------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,465 $ 4,781 ---------------- -------------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,826 2,270 Deferred income taxes (26) (27) Loss on disposal of assets 44 16 Change in assets and liabilities (6,310) (8,761) ---------------- -------------- Total adjustments (3,466) (6,502) ---------------- -------------- Net cash provided by (used in) operating activities 1,999 (1,721) ---------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,745) (3,161) Proceeds from sale of property 14 22 ---------------- -------------- Net cash (used in) investing activities (3,731) (3,139) ---------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Revolving loan activity, net 2,296 5,609 Proceeds from options exercised and purchase of shares under employee stock purchase plan, including tax benefit. 1,223 245 ---------------- -------------- Net cash provided by financing activities 3,519 5,854 ---------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 1,787 994 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,884 860 ---------------- -------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,671 $ 1,854 ================ ============== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $ 310 $ 203 ----------------- -------------- Income taxes, net of refunds $ 5,561 $ 3,691 ----------------- --------------
See notes to condensed consolidated financial statements. 4 HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO 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 August 4, 2001 and July 29, 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 Twenty-Six Week Period Ended ------------------------------------------------------------------------------ August 4, July 29, August 4, July 29, 2001 2000 2001 2000 ------------ -------------- ------------- -------------- Weighted average shares outstanding Basic 6,584,545 6,446,276 6,566,386 6,441,277 Dilutive effect of stock options 182,075 161,163 166,763 130,824 ------------- -------------- ------------- -------------- Diluted 6,766,620 6,607,439 6,733,149 6,572,101 ============= ============== ============= ==============
For the thirteen week periods ended August 4, 2001 and July 29, 2000, 7,500 and 79,600 anti-dilutive options, respectively, were appropriately excluded from the computation. For the twenty-six week periods ended August 4, 2001 and July 29, 2000, 7,500 and 84,600 anti-dilutive options, respectively, 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 either three or five years and expire on the tenth anniversary of the date of grant. For the twenty-six weeks ended August 4, 2001, 56,182 shares were exercised resulting in increase to Stockholders' Investment of $1,223,000, including a related tax benefit of $278,000. 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 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 August 4, 2001, we operated 280 Hibbett Sports stores as well as sixteen smaller-format Sports Additions athletic shoe stores and four larger- format Sports & Co. superstores in 19 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 Twenty-Six Week Period Ended Period Ended ------------------------------ -------------------------------- August 4, 2001 July 29, 2000 August 4, 2001 July 29, 2000 -------------- ------------- -------------- ------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold, including warehouse, distribution and store occupancy costs 70.1 70.6 69.8 70.1 ------ ------ ------ ------ Gross profit 29.9 29.4 30.2 29.9 Store operating, selling, and administrative Expenses 21.0 19.6 19.9 19.4 Depreciation and amortization 2.6 2.4 2.4 2.3 ------ ------ ------ ------ Operating income 6.3 7.4 7.9 8.2 Interest expense, net 0.4 0.4 0.3 0.3 ------ ------ ------ ------ Income before provision for income taxes 5.9 7.0 7.6 7.9 Provision for income taxes 2.2 2.7 2.9 3.0 ------ ------ ------ ------ Net income 3.7% 4.3% 4.7% 4.9% ======= ======= ======= =======
6 Thirteen Weeks Ended August 4, 2001 Compared to Thirteen Weeks Ended July 29, 2000 Net sales. Net sales increased $9.0 million, or 19.3%, to $55.6 million for the thirteen weeks ended August 4, 2001, from $46.6 million for the comparable period in the prior year. This increase is attributed to the opening of a net of fifty-six Hibbett Sports stores and one Sports Additions store in the 52 week period ended August 4, 2001, and a 4.6% increase in comparable store net sales. The increase in comparable store net sales was primarily due to increased sales in footwear, team hard goods and accessories. New stores and stores not in the comparable store net sales calculation accounted for $7.1 million of the increase in net sales, and increases in comparable store net sales contributed $1.9 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 thirteen weeks ended August 4, 2001, we opened sixteen Hibbett Sports 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 $16.6 million, or 29.9% of net sales, in the thirteen weeks ended August 4, 2001, as compared to $13.7 million, or 29.4% of net sales, in the same period of the prior fiscal year. The improved gross margin was due to higher product margins. Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $11.7 million, or 21.0% of net sales, for the thirteen weeks ended August 4, 2001, as compared to $9.1 million, or 19.6% 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 August 4, 2001, is attributable to lower than expected sales volumes from the F2001 store class. Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.6% in the thirteen weeks ended August 4, 2001, compared to 2.4% in the thirteen weeks ended July 29, 2000. The increase as a percent to sales is primarily attributable to an increase in new store openings over the prior year period and less than expected sales volumes from the new stores. Interest expense. Interest expense for the thirteen weeks ended August 4, 2001, was $195,000 compared to $191,000 in the prior year period. The increase is attributable to higher levels of borrowing under the Company's credit facilities in the current year to fund working capital requirements. Twenty-Six Weeks Ended August 4, 2001 Compared to Twenty-Six Weeks Ended July 29, 2000 Net sales. Net sales increased $18.8 million, or 19.4%, to $116.0 million for the twenty-six weeks ended August 4, 2001, from $97.1 million for the comparable period in the prior year. This increase is attributed to the opening of a net of fifty-six Hibbett Sports stores and one Sports Additions store in the 52 week period ended August 4, 2001, and a 4.1% increase in comparable store net sales. The increase in comparable store net sales was primarily due to increased equipment, accessory, and footwear sales. New stores and stores not in the comparable store net sales calculation accounted for $15.4 million of the increase in net sales, and increases in comparable store net sales contributed $3.4 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 twenty-six weeks ended August 4, 2001, we opened twenty-three Hibbett Sports 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 $35.1 million, or 30.2% of net sales, in the twenty-six weeks ended August 4, 2001, as compared to $29.1 million, or 29.9% of net sales, in the same period of the prior fiscal year. The improved gross margin was due to higher product margins and improved leveraging of distribution center costs over a larger store base in the current year period. Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $23.1 million, or 19.9% of net sales, for the twenty-six weeks ended August 4, 2001, as compared to $18.8 million, or 19.4% 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 twenty-six weeks ended August 4, 2001, is attributable to less than expected sales volumes from our newer stores. 7 Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.4% in the twenty-six weeks ended August 4, 2001, compared to 2.3% in the twenty-six weeks ended July 29, 2000. The increase as a percent to sales is primarily attributable to an increase in new store openings over the prior year period and lower than expected sales volumes from our newer stores. Interest expense. Interest expense for the twenty-six weeks ended August 4, 2001, was $347,000 compared to $260,000 in the prior year period. The increase is attributable to higher market interest rates and higher levels of borrowing on the Company's credit facilities in the current year to fund new stores and working capital requirements. 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 provided by operating activities was $2.0 million for the twenty-six week period ending August 4, 2001 as compared to net cash used in operating activities of $1.7 million for the twenty-six week period ending July 29, 2001. We have continued to increase our inventory levels in the twenty-six weeks ended August 4, 2001, and July 29, 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 $3.7 million in the twenty-six week period ended August 4, 2001, compared to $3.2 million for the comparable period in the prior year. Capital expenditures in the twenty-six weeks ended August 4, 2001, primarily related to the opening of twenty-three new stores and certain office and distribution center-related expenditures. In the prior year period, we opened twenty new stores. 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 $3.5 million in the twenty-six week period ended August 4, 2001, compared with $5.9 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. 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. As of August 4, 2001, the Company had $12.0 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. 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 8 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-1, filed with the Securities and Exchange Commission on October 1, 1997, and any amendments thereto. 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 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. 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 The Company's Annual Meeting of Shareholders was held June 6, 2001. The following individuals were re-elected to the Board of Directors: Votes For Votes Withheld --------------- ---------------- Carl Kirkland 5,989,900 181,636 Michael J. Newsome 5,944,016 227,520 Thomas A. Saunders, III 5,987,100 184,436 As Class II directors, Messrs Kirkland, Newsome, and Saunders will serve until the Annual Meeting of Shareholders to be held in 2004 or until their successors are elected and qualified. Arthur Andersen LLP was approved by the Board as the independent public accountants of the Company for the fiscal year ending February 2, 2002. 9 ITEM 5: Other Information None ITEM 6: Exhibits and Reports on Form 8-K (A) Exhibits 10.1.4 Third Amendment to Credit Agreement dated as of June 15, 2001, between the Company, Hibbett Team Sales, Inc., Sports Wholesale, Inc., Bank of America, N.A., Fleet National Bank, and AmSouth Bank. 10.2.5 Fourth Amendment to Credit Agreement dated as of June 15, 2001, between the Company, Hibbett Team Sales, Inc., Sports Wholesale, Inc., and AmSouth Bank. (B) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three months ended August 4, 2001. 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: September 14, 2001 By: /s/ Gary A. Smith ---------------------- ------------------------- Gary A. Smith Vice President and Chief Financial Officer 10