Hibbett Sports 2005 Annual Report Download

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THIS IS A
FOOTBALL.
How Hibbett Sporting Goods has become
one of the nation’s leading sporting goods retailers.
ANNUAL REPORT 2005

Table of contents

  • Page 1
    THIS IS A FOOTBALL. How Hibbett Sporting Goods has become one of the nation's leading sporting goods retailers. ANNUAL REPORT 2005

  • Page 2
    ...With a low-cost operating philosophy and a commitment to providing a high level of customer ser vice, Hibbett has successfully grown its store base at a compounded annual growth rate of 25% over the last nine years. About the Cover All the quotes we have featured in the annual report are from Vince...

  • Page 3
    ...$377.5 01 Sales, Earnings and Store Growth 02 Letter to Stockholders 12 Store Locations 13 Financial Statements NET SALES (In millions) 01 02 03 04 05 $0.49 $0.51 $0.62 $0.83 $1.06 (1)(2) EARNINGS PER DILUTED SHARE 01 02 03 04 05 282 329 371 428 482 TOTAL STORES (1) (2) Fiscal years 2004 and...

  • Page 4
    ... contributions of 4,100 associates in 482 stores and in our store support center as well as the continued execution of a very disciplined growth strategy. In this year's annual report, we have featured several quotes from NFL Hall of Fame football coach Vince Lombardi. We hope they will help provide...

  • Page 5
    "Winning is not everything, but wanting to win is."

  • Page 6
    ...turns. The merchandising team bring our new managers to our store suppor t center for an intensive, four-day training session that we call Hibbett University and provide video training in every store for the latest in technical details of new products and new operational successfully executed this...

  • Page 7
    "Individual commitment to a group effort - that is what makes a team work."

  • Page 8
    ... stalwart for us in fiscal 2005 with high singledigit to double-digit increases in comparable store sales throughout the year. The strength in this business was led by technical, performance shoes and classics. The technology in running and basketball shoes, such as Nike Shox, and their popularity...

  • Page 9
    "The only place success comes before work is in the dictionary."

  • Page 10
    ... us to leverage our distribution capabilities and focus on the smaller markets where we thrive. During fiscal 2005 we opened a total of 63 stores, with two of those stores located in New Mexico, our 22nd state. Although this total was slightly less than our original goal, we have targeted a net...

  • Page 11
    "People that work together will win."

  • Page 12
    ... fiscal 2005 were fewer dollars than the previous year. Low-cost operations have always been a part of the Hibbett culture and one of the main reasons why we can thrive in smaller markets when others occupancy costs, increased cross-docking at our distribution center and vendor assisted management...

  • Page 13
    ...markets and stay tight geographically. Our major goals for fiscal 2006 are a minimum 15% store growth and 20% earnings growth. Over a seven-year period, we have averaged...fiscal 2005. Our capital structure is a competitive advantage for us in executing our new store growth plans. During fiscal 2005, ...

  • Page 14
    ...18 17 66 60 37 28 6 4 12 F I N A N C I A L S TAT E M E N T S 13 Selected Consolidated Financial and Operating Data 14 Management's Discussion and Analysis 28 Consolidated Balance Sheets 30 Consolidated Statements of Operations 31 Consolidated Statements of Cash Flows 32 Consolidated Statements of...

  • Page 15
    ... income taxes Net income Earnings per common share: Basic: Diluted: Weighted average shares outstanding: Basic: Diluted: Selected Operating Data: Number of stores open at end of period: Sports & Co. Sports Additions Total Balance Sheet Data: Working capital Total assets Long-term debt Stockholders...

  • Page 16
    ...offer a broad assortment of quality athletic equipment, footwear and apparel with a high level of customer service. As of January 29, 2005, we operated a total of 482 retail stores composed of 461 Hibbett Sports stores, 17 Sports Additions athletic shoe stores and four Sports & Co. superstores in 22...

  • Page 17
    ... to the following factors: • We opened 62 Hibbett Sports stores and 1 Sports Additions store and closed 9 Hibbett Sports stores for a net stores opened of 54 stores in the 52 weeks ended January 29, 2005. New stores and stores not in the comparable store net sales calculation accounted for $40...

  • Page 18
    ... running shoes, and the children's shoe categories. Performance and retro styles such as Nike Shox, Nike Air Force 1, Nike Impax, Nike Miler, K-Swiss and New Balance styles were the most popular in the period. • Equipment sales were positively impacted by team sports, particularly by baseball...

  • Page 19
    ... Armour and Nike Dri-Fit performance wear, women's active wear and college apparel and cheerleading shorts. • Footwear was led by basketball, New Balance running shoes, Nike Shox, K-Swiss athletic shoes and the retro-classic look. • Equipment sales were down from prior year's numbers, primarily...

  • Page 20
    ... by 13 basis points year over year due to above average comparable store sales gains. Warehouse costs improved by 18 basis points, primarily due to the leveraging of salaries and benefits. Store operating, selling and administrative expenses. Store operating, selling and administrative expenses...

  • Page 21
    ... for the 52 weeks ended January 29, 2005, were primarily related to the opening of 62 new Hibbett Sports stores and 1 new Sports Additions store, the refurbishing of existing stores and purchasing corporate assets, including automobiles, warehouse equipment and technology upgrades. We estimate the...

  • Page 22
    ... will expire November 5, 2005. The credit facility is subject to renewal every two years. Under the provisions of this facility, we pay a commitment fee of $10,000 annually and can draw down funds when the balance of our main operating account falls below $100,000. We plan to renew this facility...

  • Page 23
    ... payroll costs. In prior years, proposals increasing the federal minimum wage by at least $1.00 per hour have narrowly failed to pass both houses of Congress. Insurance Costs. During fiscal 2004, property, casualty and health insurance costs increased significantly. In fiscal 2005, general business...

  • Page 24
    ... granted pursuant to certain employee stock purchase plans, using a fair-value based method and the recording of such expense in the consolidated statement of operations. The accounting provisions of SFAS No. 123R are effective for reporting periods beginning after June 15, 2005. Accordingly, we are...

  • Page 25
    ... detailed below. Revenue Recognition. Retail merchandise sales occur on-site in our retail stores. 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...

  • Page 26
    ... performed and reconciled to the general ledger. Store counts are performed on a cyclical basis and the distribution center's counts are performed mid-year and at the end of December or in early January every year. Our management believes that the application of the retail inventory method results...

  • Page 27
    ... 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...

  • Page 28
    ...the restated quarters by fiscal year. This information should be read in conjunction with Note 2 to the Consolidated Financial Statements: First Quarter (dollars in thousands) Fiscal 2005 Net Income As previously reported Cost of goods sold Store operating expenses Depreciation Provision for income...

  • Page 29
    ... center; • our ability to renew or replace store leases satisfactorily; and • our expectations regarding competition. You should assume that the information appearing in this annual report is accurate only as of the date it was issued. Our business, financial condition, results of operations...

  • Page 30
    ..., except share and per share information) January 29, 2005 ASSETS Current Assets: Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other Deferred income taxes Total current assets Property and Equipment: Land and building Equipment Furniture and fixtures Leasehold...

  • Page 31
    ... o n t . (in thousands, except share and per share information) January 29, 2005 LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities: Accounts payable Accrued income taxes Accrued expenses: Payroll-related Deferred rent Other Total current liabilities Non-current liabilities: Deferred rent...

  • Page 32
    ... share and per share information) For the Fiscal Years Ended January 29, January 31, February 1, 2005 2004 2003 (as restated) (as restated) Net sales Cost of goods sold, including warehouse, distribution and store occupancy costs Gross profit Store operating, selling and administrative expenses...

  • Page 33
    ... Capital expenditures Proceeds from sales of property and equipment Net cash used in investing activities Cash flows from financing activities: Cash used for stock repurchase Proceeds from options exercised and purchase of 2 shares under the employee stock purchase plan Revolving loan borrowings and...

  • Page 34
    ... 31, 2004 (as restated) 23,229,660 Net income -Issuance of shares from the employee stock purchase plan and the exercise of stock options, net of tax benefit $1,569 259,005 Purchase of shares under the stock repurchase program -BALANCE, January 29, 2005 23,488,665 224 -- 57,614 -- 20,977 14,234...

  • Page 35
    ... audited the accompanying consolidated balance sheets of Hibbett Sporting Goods, Inc. and subsidiaries (the Company) as of January 29, 2005, and January 31, 2004, and the related consolidated statements of operations, stockholders' investment, and cash flows for each of the years in the threeyear...

  • Page 36
    ...SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Hibbett Sporting Goods, Inc. (the "Company") is an operator of sporting goods retail stores in small to mid-sized markets predominately in the Southeast, Mid-Atlantic and Midwest. The Company's fiscal year ends on the Saturday closest to January 31...

  • Page 37
    ... of the Company's advertising expense (in thousands): For the Fiscal Years Ended January 29, January 31, February 1, 2005 2004 2003 $4,471 $3,533 $2,948 (2,785) (1,921) (1,396) $1,686 $1,612 $1,552 Gross advertising costs Advertising reimbursements Net advertising costs Stock Repurchase Plan In...

  • Page 38
    ... 2005, 2004 and 2003, respectively. Property and Equipment Property and equipment are recorded at cost. It is the Company's policy to depreciate assets acquired prior to January 28, 1995, using accelerated and straight-line methods over their estimated service lives (3 to 10 years for equipment...

  • Page 39
    ... payroll expenses, training costs and straight line rent expenses. All pre-opening costs are included in store operating, selling and administrative expenses as a part of operating expenses. The Company considers individual store closings to be a normal part of operations and regularly reviews store...

  • Page 40
    ... Accounting Standards." At January 29, 2005, the Company had three active stock-based plans: the Amended and Restated 1996 Stock Option Plan, the Employee Stock Purchase Plan and the Stock Plan for Outside Directors. The Company uses the Black-Scholes option pricing model to estimate the fair value...

  • Page 41
    ... No. 148, as well as a comparison of as reported in the consolidated statements of operations and pro forma basic and diluted EPS follows (in thousands, except per share information): For the Fiscal Years Ended January 29, January 31, February 1, 2005 2004 2003 (as restated) (as restated) $25,147...

  • Page 42
    ...of the effects of the Company's results of operations in the future. In addition, the compensation expense estimates utilize an option pricing model developed for traded options with relatively short lives. Hibbett stock option grants typically have a life of up to ten years and are not transferable...

  • Page 43
    ...balance of long-lived assets and intangibles may be impaired and not recoverable. The Company's policy...Entities," (FIN 46R), which addresses how a business enterprise should evaluate whether it ... the Interpretation was applied beginning on January 1, 2005. For any VIEs that must be consolidated under ...

  • Page 44
    ...per forming it fiscal 2005 year-end repor ting control processes, the Company per formed a comprehensive review of its lease accounting practices. Historically, the Company recorded rent expense on a straight-line basis over the initial non-cancelable lease term commencing upon location opening. The...

  • Page 45
    ...is not material to any quarterly or annual period; however, the cumulative effect of these corrections is material to the fourth quarter of fiscal 2005. As a result, the Company has recorded the cumulative effect as of the beginning of fiscal year 2003 and has restated previously issued consolidated...

  • Page 46
    ... of these changes on the consolidated balance sheet and the consolidated statement of operations for the fiscal year ended January 31, 2004 (in thousands, except per share information): As Previously Reported Consolidated Balance Sheet Equipment Furniture and fixtures Leasehold improvements Property...

  • Page 47
    ... of these changes on the consolidated balance sheet and the consolidated statement of operations for fiscal year ended February 1, 2003 (in thousands, except per share information): As Previously Reported Consolidated Balance Sheet Equipment Furniture and fixtures Leasehold improvements Property...

  • Page 48
    ..., the Company pays a commitment fee of $10,000 annually and can draw down on the line of credit when its main operating account balance falls below $100,000. The following table sets forth a summary of key information for the credit facility as of the periods indicated: For the Fiscal Years Ended...

  • Page 49
    ... advisory services to the Company. Such services included, but were not necessarily limited to, advice and assistance concerning any and all aspects of the operation, planning and financing of the Company. There were no management fees associated with this arrangement in fiscal 2005. Management fee...

  • Page 50
    ... on the amount of income taxes paid in prior years. 7. STOCK OPTION AND STOCK PURCHASE PLANS Stock Option Plans The Company maintains the Hibbett Sporting Goods, Inc. 1996 Stock Option Plan, as amended (the "1996 Option Plan"). The 1996 Option Plan authorizes the granting of stock options for the...

  • Page 51
    ...-- The tax benefit associated with the exercise of stock options is credited to paid-in capital and amounted to approximately $1,569,000 in fiscal 2005, $1,510,000 in fiscal 2004 and $706,000 in fiscal 2003. Other Plans The Company maintains an Employee Stock Purchase Plan and an Outside Director...

  • Page 52
    ... for its retail sporting goods stores under non-cancelable operating leases having initial or remaining terms of more than one year. Many of its leases contain scheduled increases in annual rent payments and the majority of its leases also require it to pay maintenance, insurance and real estate...

  • Page 53
    ... for all operating leases consisted of the following (in thousands): January 29, 2005 Minimum rentals Contingent rentals $ 24,086 1,230 $ 25,316 Fiscal Year Ended January 31, 2004 $ 20,066 1,553 $ 21,619 February 1, 2003 $ 17,189 1,342 $ 18,531 Most of the Company's retail store leases contain...

  • Page 54
    ... reported for annual rent expense and depreciation expense were understated. On March 9, 2005, the Company announced its decision to restate its financial statements as of and for the years ended January 31, 2004 and February 1, 2003, and for the previously issued interim financial information...

  • Page 55
    ...likely to materially affect, its internal control over financial reporting. Subsequent to January 29, 2005, and in response to the material weakness in internal control over financial reporting noted above, the Company has implemented additional review procedures over the selection and monitoring of...

  • Page 56
    ...'s assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting), that Hibbett Sporting Goods, Inc. and subsidiaries (the Company) did not maintain effective internal control over financial repor ting as of Januar y 29, 2005, because of the effect of the...

  • Page 57
    ... Company Accounting Oversight Board (United States), the consolidated balance sheets of Hibbett Sporting Goods, Inc. and subsidiaries as of January 29, 2005, and January 31, 2004, and the related consolidated statements of operations, stockholders' investment, and cash flows for each of the years...

  • Page 58
    ... Officer Hibbett Sporting Goods, Inc. Clyde B. Anderson Chairman of the Board Books-A-Million, Inc. H. Ray Compton Former Executive Vice President Dollar Tree Stores, Inc. Carl Kirkland Chairman Emeritus Kirkland's, Inc. Ralph T. Parks Former President and Chief Executive Officer FOOTACTION USA...

  • Page 59
    ... seeking information concerning stock transfers, change of address, and lost certificates should contact SunTrust directly. Annual Report on Form 10-K A copy of the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2005, as filed with the Securities and Exchange Commission...

  • Page 60
    Hibbett Sporting Goods, Inc. 451 Industrial Lane Birmingham, Alabama 35211 205.942.4292 www.hibbett.com