Hibbett Sports 2010 Annual Report Download

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GOOD
SPORTS
An Inspiring Story of Growth in the Sporting Goods Industry
2010 Annual Report to Stockholders
Hibbett Sports, Inc.

Table of contents

  • Page 1
    An Inspiring Story of Growth in the Sporting Goods Industry GOOD SPORTS 2010 Annual Report to Stockholders Hibbett Sports, Inc.

  • Page 2
    ... 2008 2009 2010 NET SALES (In Millions) EARNINGS PER DILUTED SHARE(1) TOTAL STORES (1) Except for fiscal 2007 which includes 53 weeks, all fiscal years presented are comprised of 52 weeks. All share and per share information has been revised to reflect the effects of the 3-for-2 stock split...

  • Page 3
    ...We currently have over 1 million Hibbett Sports MVP reward members, up from 600,000 this time a year ago. In our search for new loyal customers, we have begun to expand our presence in the outdoor category by adding The North Face and Columbia to our vendor line-up in both apparel and footwear while...

  • Page 4
    ..., our Chief Financial Officer, Cathy Pryor, our Vice President of Store Operations, and Becky Jones to Senior Vice Presidents. In March 2010, Mickey Newsome became the Executive Chairman of the Board and Jeff was promoted to President and Chief Executive Officer. Jeff has been with Hibbett for 12...

  • Page 5
    ...451 Industrial Lane, Birmingham, Alabama 35211 (Address of principal executive offices, including zip code) 205-942-4292 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.01 Par Value Per Share Title of Class Securities...

  • Page 6
    ...closing sale price of $18.41 at July 31, 2009 for the common stock on such date on the NASDAQ Global Select Market. The number of shares outstanding of the Registrant's common stock, as of March 22, 2010 was 28,745,777. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement...

  • Page 7
    .... Directors, Executive Officers and Corporate Governance. Executive Compensation. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Certain Relationships and Related Transactions, and Director Independence. Principal Accounting Fees and Services. 51 51...

  • Page 8
    ...our future capital expenditures and working capital requirements; our ability and plans to renew or increase our revolving credit facilities; our seasonal sales patterns and assumptions concerning customer buying behavior; our expectations regarding competition; our ability to renew or replace store...

  • Page 9
    ... Mickey Newsome, our current Executive Chairman of the Board. The next year, we opened another sporting goods store in Birmingham and by the end of 1980, we had 12 stores in central and northwest Alabama with a distribution center located in Birmingham and our central accounting office in Florence...

  • Page 10
    ...no plans to open any superstores in the future. Team Sales Hibbett Team Sales, Inc. (Team Sales), a wholly-owned subsidiary of the Company, is a leading supplier of customized athletic apparel, equipment and footwear to school, athletic and youth programs primarily in Alabama and North Georgia. Team...

  • Page 11
    ...,000 square foot distribution center in Birmingham, Alabama, which services our existing stores. The distribution process is centrally managed from our corporate headquarters, which is located in the same building as the distribution center. We believe strong distribution support for our stores is...

  • Page 12
    ... that focus on athletic footwear, local sporting goods stores, department and discount stores, traditional shoe stores and mass merchandisers. On a limited basis, we have competition from national sporting goods chains in some of our mid-sized markets. Although we face competition from a variety of...

  • Page 13
    ... timing of new store openings, the amount and timing of net sales contributed by new stores, merchandise mix and demand for apparel and accessories driven by local interest in sporting events. Item 1A. Risk Factors. You should carefully consider the following risks, as well as the other information...

  • Page 14
    may also face new competitive, distribution and merchandising challenges different from those we currently face. We cannot give any assurances that we will be able to continue our expansion plans successfully; that we will be able to achieve results similar to those achieved with prior locations; or...

  • Page 15
    ... on athletic footwear, local sporting goods stores, department and discount stores, traditional shoe stores and mass merchandisers and, on a limited basis, national sporting goods stores. Many of our competitors have greater financial resources than we do. In addition, many of our competitors employ...

  • Page 16
    ... store openings, the amount and timing of net sales contributed by new stores, merchandise mix, demand for apparel and accessories driven by local interest in sporting events, the demise of sports superstars key to certain product promotions or strikes or lockouts involving professional sports teams...

  • Page 17
    ... appropriate level of personnel in both field operations and corporate functions. Our compensation packages are designed to provide benefits commensurate with our level of expected service. However, within our retail operations, we face the challenge of filling many positions at wage scales that are...

  • Page 18
    ...other factors, we face many external risks and internal factors in meeting our labor needs, including competition for qualified personnel, overall unemployment levels, prevailing wage rates, as well as rising employee benefit costs, including insurance costs and compensation programs. We also engage...

  • Page 19
    ... January 30, 2010: Alabama Arizona Arkansas Florida Georgia Iowa 79 7 39 36 85 6 Illinois Indiana Kansas Kentucky Louisiana Missouri 18 19 18 37 43 24 Mississippi Nebraska New Mexico North Carolina Ohio Oklahoma 54 5 9 45 20 32 South Carolina Tennessee Texas Virginia West Virginia Wisconsin TOTAL 31...

  • Page 20
    ... Purchases of Equity Securities. Our common stock is traded on the NASDAQ Global Select Market (NASDAQ/GS) under the symbol HIBB. The following table sets forth, for the periods indicated, the high and low sales prices of shares of our Common Stock as reported by NASDAQ. High Fiscal 2010: First...

  • Page 21
    ...reinvestment of dividends. Fiscal year ending January 31. Dividend Policy. We have never declared or paid any dividends on our common stock. We currently intend to retain our future earnings to finance the growth and development of our business and for our stock repurchase program, and therefore do...

  • Page 22
    ... share: Basic Diluted Weighted average shares outstanding: Basic Diluted Balance Sheet Data: Working capital Total assets Long-term debt and obligations under capital lease Stockholders' investment Selected Operating Data: Number of stores open at end of period: Hibbett Sports Sports & Co. Sports...

  • Page 23
    ... centers versus enclosed malls. We believe Hibbett Sports stores are typically the primary sporting goods retailers in their markets due to the extensive selection of quality brand name merchandise and a high level of customer service. We do not expect that the average size of our stores opening...

  • Page 24
    ...on the consolidated balance sheet and full availability under its $80.0 million unsecured credit facilities. Recent Accounting Pronouncements See Note 2 of Item 8 of this Annual Report on Form 10-K for the fiscal year ended January 30, 2010, for information regarding recent accounting pronouncements...

  • Page 25
    ... sales pay and increases in the minimum wage. Administrative salary and benefit costs decreased slightly, although stock-based compensation increased 7 basis points as the result of the achievement of performance-based awards and a higher stock price at the date of grant as compared to last year...

  • Page 26
    ... Sports stores while closing 12 Hibbett Sports stores for net stores opened of 57 stores in the 52 weeks ended January 31, 2009. New stores and stores not in the comparable store net sales calculation accounted for $41.0 million of the increase in net sales. Store openings and closings are reported...

  • Page 27
    ... activities includes purchases of information technology assets and expenditures for our distribution facility and corporate headquarters. We opened 42 new stores and relocated and/or remodeled 21 existing stores during the 52 weeks ended January 30, 2010. We opened 69 new stores and relocated...

  • Page 28
    ... the remaining 15% related primarily to office expansion, distribution center improvement and security equipment for our stores. As of January 30, 2010, we had an approximate $0.2 million outlay remaining on enhancements to our merchandising system relating to inventory planning. We anticipate these...

  • Page 29
    ... our payroll costs. Congress approved federal minimum wage increases over a three-year period with the first increase of 13.6% taking place during Fiscal 2008, the second increase of 12.0% taking place during Fiscal 2009 and the third increase of 10.7% taking place in Fiscal 2010. Currently, no new...

  • Page 30
    ... accounting policies reflected in the consolidated financial statements are detailed below. Revenue Recognition. We recognize revenue, including gift card and layaway sales, in accordance with ASC Topic 605, Revenue Recognition. Retail merchandise sales occur on-site in our retail stores. Customers...

  • Page 31
    ... valuing non-traded stock options. All estimates and assumptions are regularly evaluated and updated when applicable. Insurance Accruals. We use a combination of insurance and self-insurance for a number of risks including workers' compensation, general liability and employee-related health benefits...

  • Page 32
    ... 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, merchandise mix and demand for apparel and accessories driven by local interest in sporting events. Although our operations are influenced by general economic...

  • Page 33
    ... consolidated financial statements and supplementary data of our Company are included in response to this item Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of January 30, 2010 and January 31, 2009 Consolidated Statements of Operations for the fiscal years...

  • Page 34
    ... Registered Public Accounting Firm The Board of Directors and Stockholders Hibbett Sports, Inc.: We have audited the accompanying consolidated balance sheets of Hibbett Sports, Inc. and subsidiaries (the Company) as of January 30, 2010 and January 31, 2009, and the related consolidated statements...

  • Page 35
    HIBBETT SPORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share information) ASSETS Current Assets: Cash and cash equivalents Short-term investments Trade receivables, net Accounts receivable, other Inventories, net Prepaid expenses and other Deferred ...

  • Page 36
    HIBBETT SPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share information) January 30, 2010 (52 weeks) Net sales Cost of goods sold, including distribution center and store occupancy costs Gross profit Store operating, selling and administrative ...

  • Page 37
    HIBBETT SPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share information) Fiscal Year Ended January 30, January 31, 2010 2009 Cash Flows From Operating Activities: Net income $ 32,549 $ 29,448 Adjustments to reconcile net income to net cash provided by ...

  • Page 38
    HIBBETT SPORTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT (in thousands, except share information) Common Stock Number of Shares Balance-February 3, 2007 Net income Cumulative effect of adopting uncertain tax positions Cumulative effect of change in accounting ...

  • Page 39
    ... for fiscal years ended January 30, 2010, January 31, 2009 and February 2, 2008, include 52 weeks of operations. Our merchandise assortment features a core selection of brand name merchandise emphasizing team sports equipment, athletic and fashion apparel and footwear related accessories. We...

  • Page 40
    ... of our management. We have not made any purchases of our common stock under the Program and have the full $250.0 million available for stock repurchase as of January 30, 2010. Under the old authorization, we repurchased 1,038,700 and 2,416,700 shares of our common stock during the years ended...

  • Page 41
    ...collected within three business days. Cash equivalents related to credit and debit card transactions at January 30, 2010 and January 31, 2009 were $2.8 million and $2.7 million, respectively. Investments All investments with original maturities of greater than 90 days are accounted for in accordance...

  • Page 42
    ... recognize revenue at the time the customer takes possession of the merchandise. Retail sales are recorded net of returns and discounts and exclude sales taxes. In Fiscal 2009, we began a customer loyalty program, the MVP Rewards program, whereby customers enroll in the program and receive points in...

  • Page 43
    ... million, respectively. Prior to Fiscal 2010, we escheated unredeemed gift cards. Store Opening and Closing Costs New store opening costs, including pre-opening costs, are charged to expense as incurred. Store opening costs primarily include payroll expenses, training costs and straight-line rent...

  • Page 44
    ... 2010, Fiscal 2009 and Fiscal 2008 to employees consisted solely of RSUs. We have also awarded PSAs to our Named Executive Officers (NEOs) and expect the Compensation Committee of the Board will continue to grant PSAs to our NEOs in the future. The terms and vesting schedules for stock-based awards...

  • Page 45
    ... excess of the market value over the exercise or purchase price, of stock options exercised and restricted stock awards vested during the period. The actual income tax benefit realized for the deductions considered on our income tax returns for the fiscal year ended January 30, 2010, was from option...

  • Page 46
    ... the fiscal year ended January 30, 2010: Weighted Average Grant Date Fair Value $ 19.95 18.06 18.51 18.90 $ 19.23 Restricted stock awards outstanding at January 31, 2009 Granted Vested Forfeited, cancelled or expired Restricted stock awards outstanding at January 30, 2010 Number of Awards 311,918...

  • Page 47
    ...average fair value at date of grant Expected life (years) Expected volatility Risk-free interest rate Dividend yield The expense related to the ESPP was determined using the Black-Scholes option pricing model and the provisions of ASC Topic 718 as it relates to accounting for certain employee stock...

  • Page 48
    ...earnings per share: January 30, 2010 Net income, in thousands $ 32,549 Fiscal Year Ended January 31, 2009 $ 29,448 February 2, 2008 $ 30,329 Weighted average number of common shares outstanding Dilutive stock options Dilutive restricted stock Weighted average number of common shares outstanding and...

  • Page 49
    ..., our Board of Directors adopted the Hibbett Sports, Inc. Supplemental 401(k) Plan (Supplemental Plan) for the purpose of supplementing the employer matching contribution and salary deferral opportunity available to highly compensated employees whose ability to receive Company matching contributions...

  • Page 50
    ...$191,000 in Fiscal 2010, Fiscal 2009 and Fiscal 2008. Future minimum lease payments under this non-cancelable sublease aggregate approximately $0.7 million. NOTE 8. INCOME TAXES Our effective tax rate is based on our income, statutory tax rates and tax planning opportunities available in the various...

  • Page 51
    ...as a tax deduction or credit in future tax returns or are items of income which have not been recognized for financial statement purposes but were included in the current or prior tax returns for which we have already properly recorded the tax benefit in the consolidated statements of operations. At...

  • Page 52
    ... 2020 as well as various office and transportation equipment. At January 30, 2010, the future minimum lease payments, excluding maintenance, insurance and real estate taxes, for our current operating leases and including the net 22 operating leases added during Fiscal 2010 were as follows (in...

  • Page 53
    ...) The following tables set forth certain unaudited consolidated financial data for the thirteen-week quarters indicated (dollar amounts in thousands, except per share amounts): First 157,700 52,696 17,558 10,912 0.38 0.38 Fiscal Year Ended January 30, 2010 Second Third $ 123,118 $ 145,855 36,788...

  • Page 54
    ...the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of January 30, 2010, based on the Internal Control - Integrated...

  • Page 55
    ... adopted a Code of Business Conduct and Ethics (Code) for all Company employees, including our Named Executive Officers as determined for our Proxy Statement for the Annual Meeting of Stockholders (Proxy Statement). The Code is posted on our website, www.hibbett.com under "Investor Information." We...

  • Page 56
    ...of the Registrant and Independent Registered Public Accounting Firm's Report on such Financial Statements are incorporated by reference from the Registrant's 2010 Annual Report to Stockholders, in Part II, Item 8: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as...

  • Page 57
    ... Fiscal 2010 Annual Report to Stockholders. Subsidiaries of the Registrant List of Company's Subsidiaries: 1) Hibbett Sporting Goods, Inc. 2) Hibbett Team Sales, Inc. 3) Sports Wholesale, Inc. 4) Hibbett Capital Management, Inc. 5) Sports Holdings, Inc. 6) Gift Card Services, LLC 7) Hibbett.com...

  • Page 58
    ..., the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HIBBETT SPORTS, INC. Date: March 26, 2010 By: /s/ Gary A. Smith Gary A. Smith Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting...

  • Page 59
    ... and cash flows for each of the years in the three-year period ended January 30, 2010 and (ii) the effectiveness of internal control over financial reporting as of January 30, 2010, which report appears in the January 30, 2010, Annual Report on Form 10-K of Hibbett Sports, Inc. and subsidiaries. Our...

  • Page 60
    ... 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: March 26, 2010 /s/ Jeffry O. Rosenthal Jeffry O. Rosenthal Chief Executive Officer...

  • Page 61
    ...Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer I, Gary A. Smith, certify that: 1. I have reviewed this annual report on Form 10-K of Hibbett Sports, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material...

  • Page 62
    ... the Annual Report on Form 10-K of Hibbett Sports, Inc. and Subsidiaries (the "Company") for the period ended January 30, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Jeffry O. Rosenthal, Chief Executive Officer, and Gary A. Smith, Chief Financial...

  • Page 63
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  • Page 64
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  • Page 65
    ...to the Company's Investor Relations department. Annual Meeting The 2010 Annual Meeting of Stockholders will be held at the principal executive offices of Hibbett Sports, Inc., 451 Industrial Lane, Birmingham, Alabama, on Thursday, May 27, 2010, at 11:00 A.M., local time. Stock Market Information The...

  • Page 66
    HIBBETT SPORTS, INC. 451 Industrial Lane Birmingham, Alabama 35211 205.942.4292 w w w. h i b b e t t . c o m