Hibbett Sports 2006 Annual Report Download

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What is our secret
?
HIBBETT SPORTING GOODS
2006 Annual Report

Table of contents

  • Page 1
    What is our secret ? 2006 Annual Report HIBBETT SPORTING GOODS

  • Page 2
    ... format is Hibbett Sports, a 5,000-square-foot store located in enclosed malls or in strip centers which are generally the center of commerce within the area and which are usually anchored by a Wal-Mart store. Hibbett is the only sporting goods chain committed to serving small markets. With a low...

  • Page 3
    ... 2006 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Net Sales (In Millions) EARNINGS PER DILUTED SHARE(1) TOTAL STORES (In Millions) (1) 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...

  • Page 4
    ... significant addition to our team in fiscal 2006 with the hiring of Brian Priddy as President in August 2005. A 25-year retail veteran, Brian has demonstrated exceptional skill and leadership in store operations, human resources and real estate. Brian has fit in well with the Hibbett culture, and we...

  • Page 5
    ... per share and open 80 to 85 new stores. We have an ambitious plan for Hibbett's growth over the next several years, and we have the right team, culture and growth strategy to execute this plan for the continued benefit of our many loyal customers and stockholders. I look forward to reporting our...

  • Page 6
    ... business strategy within all areas of the company, we have shared a few of our secrets in this year's annual report. 1. Recruit, train and retain motivated people who work hard and want to win. As a company, we are only as good as the people in the stores, the distribution center and store support...

  • Page 7
    Fiscal 2006 was our best year ever with 40% growth in earnings per share and a record operating margin of 11.8%.

  • Page 8
    Hibbett has one of the most talented and dedicated group of associates not only in sporting goods but in all of retail.

  • Page 9
    ... commitment to work harder than anybody else in the sporting goods business and to be sincerely interested in our customers' needs. It is also embodied in our dedication to low-cost operations such as recycling boxes in the stores, turning down the thermostat at the store support center during the...

  • Page 10
    ...R E C T O R S Board of Directors Michael J. Newsome Chairman of the Board and Chief Executive Officer Hibbett Sporting Goods, Inc. Clyde B. Anderson Chairman of the Board Books-A-Million, Inc. Carl Kirkland Chairman Emeritus Kirkland's, Inc. Ralph T. Parks President RT Parks, Inc. Thomas A. Saunders...

  • Page 11
    ... department. Annual Meeting The 2006 Annual Meeting of Stockholders will be held at the principal executive offices of Hibbett Sporting Goods, Inc., 451 Industrial Lane, Birmingham, Alabama, on Wednesday, May 31, 2006, at 10:00 A.M., local time. Stock Market Information The Company's common stock...

  • Page 12
    ... Commission file number: 000-20969 HIBBETT SPORTING GOODS, INC. (Exact name of registrant as specified in its charter) Delaware (State of incorporation) 451 Industrial Lane Birmingham, Alabama (Address of principal executive offices) Registrant's telephone number, including area code: (205) 942...

  • Page 13
    ... and Executive Officers of Registrant Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions Principal Accounting Fees and Services Exhibits and Consolidated Financial Statement Schedules...

  • Page 14
    ..., and cost associated with, our sources of supply, particularly imported goods; the capacity of our distribution 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...

  • Page 15
    ...we opened Dyess & Hibbett Sporting Goods in Huntsville, Alabama, and hired Mickey Newsome, our current Chief Executive Officer and Chairman of the Board. The next year, we opened another sporting goods store in Birmingham and by the end of 1980, we had stores operating in 12 locations in central and...

  • Page 16
    .... Our clustered expansion program, which calls for opening new stores within a two-hour driving distance of an existing Hibbett location, allows us to take advantage of efficiencies in distribution, marketing and regional management. We believe our distribution center can support Company growth to...

  • Page 17
    ...,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 18
    ... and corporate offices to ensure that we hire and promote the most qualified employees in a non-discriminatory way. One of the most significant programs we have is Hibbett University or "Hibbett U" which is an intensive, four day training session held at our corporate offices for new store managers...

  • Page 19
    ...increasing number of management level sales and other employees. We cannot assure you that we will be able to attract and retain personnel as needed in the future. If we are not able to hire capable store managers and other store-level personnel, we will not be able to open new stores as planned and...

  • Page 20
    ... national chains that focus on athletic footwear, local sporting goods stores, department and discount stores, traditional shoe stores and mass merchandisers. Many of our competitors have greater financial resources than we do. In addition, many of our competitors employ price discounting policies...

  • Page 21
    ... 80 to 85 new Hibbett Sports stores in fiscal year 2007. Our results of operations may vary significantly as a result of the timing of new store openings, the amount and timing of net sales contributed by new stores, the level of pre-operating expenses associated with new stores and the relative...

  • Page 22
    ... number of locations by state as of April 3, 2006: Alabama Arkansas Florida Georgia Iowa Illinois Indiana Kansas Item 3. 73 25 24 69 5 14 15 12 Kentucky Louisiana Missouri Mississippi Nebraska New Mexico N. Carolina Ohio 28 22 19 42 3 4 39 8 Oklahoma S. Carolina Tennessee Texas Virginia W. Virginia...

  • Page 23
    ...31, 2005 January 1, 2006 to January 28, 2006 Quarter ended January 28, 2006 Total Total Number of shares Purchased 2,819,400 20,000 114,000 174,300 308,300 3,127,700 (1) In August 2004, the Board of Directors authorized a plan to repurchase up to $30.0 million of our common stock. In November 2004...

  • Page 24
    ... Income before provision for income taxes Provision for 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: Hibbett Sports Sports & Co. Sports Additions Total $ 440,269...

  • Page 25
    ...broad assortment of quality athletic equipment, footwear and apparel with a high level of customer service. As of January 28, 2006 we operated a total of 549 retail stores composed of 527 Hibbett Sports stores, 18 Sports Additions athletic shoe stores and 4 Sports & Co. superstores in 22 states. Our...

  • Page 26
    ... and cleats were particularly strong performers. Equipment sales were positively impacted in all major hardgood categories, particularly baseball, football, soccer and basketball. Comparable store net sales data for the period reflects sales for our traditional format Hibbett Sports and Sports...

  • Page 27
    ...K-Swiss and New Balance styles were the most popular in the period. Equipment sales were positively impacted by team sports, particularly by baseball and softball as our premium focus began to take effect. These positive gains were somewhat offset by a decline in the demand for fitness equipment and...

  • Page 28
    ... primarily related to the opening of 73 new Hibbett Sports stores and 1 new Sports Additions store, the refurbishing of existing stores and purchasing corporate assets, including automobiles, distribution center equipment and technology upgrades. In fiscal 2006, our management made the decision to...

  • Page 29
    ... annually and could draw down funds when the balance of our main operating account fell below $100,000. As of January 28, 2006, January 29, 2005 and January 31, 2004, we had no debt outstanding under any of these facilities. Based on our current operating and store opening plans, management believes...

  • Page 30
    ...fiscal 2005, general business insurance and health insurance leveraged favorably as a percent to sales. In fiscal 2006, we experienced an increase in general business insurance costs due to raised limits on Directors and Officers insurance and expanded coverage on our distribution center. During the...

  • Page 31
    ... pricing model to estimate the fair value at the date of grant of stock options granted under its stock option plans and stock purchase rights associated with the Employee Stock Purchase Plan. Volatility is estimated as of the date of grant or purchase date based on management's estimate of the time...

  • Page 32
    ... 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...

  • Page 33
    ... 31, 2004 Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm on Supplemental Schedule Valuation and Qualifying Accounts • • • • • All other schedules are omitted because they are not applicable or the required information is shown in the...

  • Page 34
    ... Firm The Board of Directors and Stockholders Hibbett Sporting Goods, Inc.: We have audited the accompanying consolidated balance sheets of Hibbett Sporting Goods, Inc. and subsidiaries (the Company) as of January 28, 2006, and January 29, 2005, and the related consolidated statements of operations...

  • Page 35
    HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share information) January 28, 2006 Assets Current Assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other Deferred income ...

  • Page 36
    HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share information) January 28, 2006 (52 Weeks) Net sales Cost of goods sold, including distribution center and store occupancy costs Gross profit Store operating, selling and ...

  • Page 37
    ... Disclosures of Cash Flow Information: Cash paid during the year for: Interest Income taxes, net of refunds Supplemental Schedule of Non-Cash Financing Activities: Deferred board compensation, pre-tax Shares awarded to satisfy deferred board compensation $ 33,624 Fiscal Year Ended January 29, 2005...

  • Page 38
    ... of shares from the employee stock purchase plan and the exercise of stock options, net of tax benefit $3,023 Purchase of shares under the stock repurchase program Balance-January 28, 2006 34,023,938 $ 340 $ Paid-In Capital 60,056 $ Retained Earnings 35,211 19,642 Treasury Stock Number of Shares...

  • Page 39
    ... FINANCIAL STATEMENTS Years Ended January 28, 2006, January 29, 2005 and January 31, 2004 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Hibbett Sporting Goods, Inc. (the "Company") is an operator of sporting goods retail stores in small to midsized markets...

  • Page 40
    ... in the open market or in negotiated transactions, with the amount and timing of repurchases dependent on market conditions and at the discretion of Company management. The Company repurchased 1,859,600 and 1,268,100 shares of its common stock during the 52-week periods ended January 28, 2006 and...

  • Page 41
    ..., 2006 and January 29, 2005, respectively. Revenue Recognition Retail merchandise sales occur on-site in the Company's retail stores. 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...

  • Page 42
    ... at the time the customer redeems such gift cards and takes possession of the merchandise. 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...

  • Page 43
    ... option pricing model to estimate the fair value at the date of grant of stock options granted under its stock option plans and stock purchase rights associated with the Employee Stock Purchase Plan. Compensation expense is amortized on a straight-line basis over the vesting period of the stock and...

  • Page 44
    ... 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 equity awards, if dilutive, in each respective year...

  • Page 45
    ...-A-Million, Inc., of which Clyde B. Anderson, a director of the Company, is an executive officer, Chairman and stockholder. This sublease agreement expires in June 2008. Minimum lease payments were $191,000 in fiscal 2006, fiscal 2005 and fiscal 2004. Future minimum lease payments under this non...

  • Page 46
    ... the Hibbett Sporting Goods, Inc. 1996 Stock Option Plan, as amended (the "1996 Plan") and the 2005 Equity Incentive Plan (the "Incentive Plan"). The 1996 Plan expired in fiscal 2006 and was replaced by the Incentive Plan. The Incentive Plan authorizes the granting of stock options for the purchase...

  • Page 47
    ...,757 options under the Outside Director Stock Plan at an exercise price of $13.82 (market value at date of grant) pursuant to the annual award to outside directors in January 2004. As of January 28, 2006, 174,812 shares are reserved for future grants. Director options vest immediately and expire on...

  • Page 48
    ... the fiscal 2000 expansion of these facilities. The amended lease rate is $784,000 per year and will expire in December 2014. At January 28, 2006, the future minimum lease payments for leased properties and equipment, excluding maintenance, insurance and real estate taxes, for operating leases...

  • Page 49
    ... for or on behalf of the Company; (c) real estate leases, under which the Company may agree to indemnify the lessors from claims arising from the Company's use of the property; and (d) agreements with the Company's directors, officers and employees, under which the Company may agree to indemnify...

  • Page 50
    ... SCHEDULE The Board of Directors and Stockholders Hibbett Sporting Goods, Inc.: Under date of April 10, 2006, we reported on the consolidated balance sheets of Hibbett Sporting Goods, Inc. and subsidiaries as of January 28, 2006, and January 29, 2005, and the related consolidated statements...

  • Page 51
    HIBBETT SPORTING GOODS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS January 28, 2006 Balance of allowance for doubtful accounts at beginning of period Charged to costs and expenses Write-offs, net of recoveries Balance of allowance for doubtful accounts at end of period $ 59,000 (14,000) ...

  • Page 52
    ...on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of January 28, 2006. (b) Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and...

  • Page 53
    ... statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection...

  • Page 54
    .... Directors and Executive Officers of Registrant The information required is incorporated by reference from the sections entitled "Directors and Executive Officers", "The Board of Directors", "Code of Ethics" and "Certain Relationships and Related Transactions" in the Proxy Statement for the Annual...

  • Page 55
    ... reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1997 (the "1997 10-K")). By-laws of the Company (filed herewith) Material Contracts Salary and incentives approved by Board of Directors to Company Named Executives, dated as of March 9, 2005...

  • Page 56
    ... and Restricted Stock Units to Company CEO dated as of January 27, 2006; incorporated by reference to the Registrant's Form 8-K Filed with the Securities and Exchange Commission on February 1, 2006. Authorization of increase in Initial Award and Annual Award to eligible outside directors dated as...

  • Page 57
    ... 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. By: /s/ Michael J. Newsome Michael J. Newsome Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Pursuant to the...

  • Page 58
    ... OF HIBBETT SPORTING GOODS, INC. ARTICLE 1 OFFICES Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places both within...

  • Page 59
    ...minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer...

  • Page 60
    .... Except as otherwise provided in Delaware Law or the certificate of incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Section 2. Number, Election and Term of Office. The Board of Directors shall consist of not less than...

  • Page 61
    ... by the certificate of incorporation or these bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses; provided that each non-employee director shall be entitled to (a) an annual fee of not less than $18,000, plus (b) for...

  • Page 62
    ... incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors. ARTICLE V GENERAL PROVISIONS Section 1. Fixing the Record Date. (a) In order that the Corporation may determine the stockholders entitled to...

  • Page 63
    ...of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In order that...

  • Page 64
    ...reporting as of January 28, 2006; and (iii) the effectiveness of internal control over financial reporting as of January 28, 2006, which reports appear in the January 28, 2006, Annual Report on Form 10-K of Hibbett Sporting Goods, Inc and subsidiaries. /s/ KPMG LLP Birmingham, Alabama April 10, 2006...

  • Page 65
    ... Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer I, Michael J. Newsome, certify that: 1. I have reviewed this Annual Report on Form 10-K 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...

  • Page 66
    ... 13a-14(a)/15d-14(a) Certification of Chief Financial Officer I, Gary A. Smith, certify that: 1. I have reviewed this Annual Report on Form 10-K 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...

  • Page 67
    ... of Chief Executive Officer In connection with the Annual Report on Form 10-K of Hibbett Sporting Goods, Inc. (the "Company") for the fiscal year ended January 28, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned officer certifies, to...

  • Page 68
    ... of Chief Financial Officer In connection with the Annual Report on Form 10-K of Hibbett Sporting Goods, Inc. (the "Company") for the fiscal year ended January 28, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned officer certifies, to the...

  • Page 69
    Hibbett Sporting Goods, Inc. 451 Industrial Lane Birmingham, Alabama 35211 205.942.4292 www.hibbett.com