HIBBETT
HIBBETT
SPORTS
SPORTS
A n n u a l R e p o r t 2 0 0 8
SUCCESS
SUCCESS
is in the
is in the
DETAILS
DETAILS
D E A R F E L L O W S T O C K H O L D E R S :
Hibbett Sports outpaced the industry with double digit store growth by opening 84 new stores
within our 23-state area. Senior management continues to focus on the details that have made
Hibbett a premier growth story in retail sporting goods. This intense focus yielded operating margins
that continue to lead sporting goods retailers. While we were disappointed to report year-over-
year declines in comparable store sales and earnings, we are pleased with how our team is
responding to one of the more challenging retail environments in years.
Our consumer is faced with an uncertain economic outlook – higher fuel and food costs, a declining
dollar and falling housing prices. It’s understandable that retail buying patterns have changed
along with the economic health of our consumer. Although we are not able to predict the pace at
which the economy will recover, we remain confident in the long-term outlook for our industry
and Hibbett. The Olympics, an event which has historically had a positive influence on the sporting
goods industry, could potentially spark a return and bring several innovations to the forefront as
it has in the past.
Nissan Joseph, who joined us in January 2008 as our President and Chief Operating Officer, is
leading a rigorous evaluation and implementation of strategic plans and processes that include
improvements in merchandise assortment, supply chain, customer segmentation and customer
service. These initiatives will drive sales and ensure that we continue to profitably capitalize on
growth opportunities.
In Fiscal 2009 we plan to open 85 to 90 new stores and close 5 to 10 stores. Our long-term growth
plans are aggressive. We have a proven strategy of going to small markets and successfully serving
the needs of the customer in these markets. With 688 stores at fiscal year end, we are confident
we can be a company of 1,200 stores within six years. Our new store model offers attractive
returns, and the ongoing store expansion will drive long-term earnings growth.
The deployment and leveraging of our technology investments remain a focus for us. Over the
last two years, we have invested heavily to improve our systems, and our goal is to be the best
in the industry. Our new systems are designed to improve
merchandise planning, replenishment and markdown
management.
Our efforts in store operations, merchandising, logistics
and strategic planning lead to one goal – maintaining
Hibbett Sports as a premier growth story in sporting goods
retail. We are committed to reaching this goal for our
fellow stockholders.
Thank you for your continued investment in Hibbett
Sports.
Sincerely,
Mickey Newsome
Chairman and Chief Executive Officer
Our vendor partners design their products to precise
specifications. Every detail enhances the product’s
performance. At Hibbett, we believe the success of our
Company has a direct correlation to our attention on
the details.
H
C
T
I
P
T
S
A
F
N
O
S
L
I
W
I
A
D
D
A
S
S
O
C
C
E
R
We are focused on the needs of our customers. For 63
years, Hibbett has studied their individual buying habits
and behaviors. We invest in resources that provide
meaningful insight to our customers and improve our
ability to respond to their desires.
L
L
A
B
E
S
A
B
E
K
N
I
Hibbett is known for its well trained sales associates.
We are adding new dimensions to our training programs
to further improve the customer’s experience. We
provide unrivaled customer service from all members of
our sales team.
At Hibbett, we are all about the brands. We constantly
update our merchandise assortment to offer the latest in
product technology and fashion. We meet the increasingly
diverse needs of our customers’ active lifestyles by
providing a compelling selection of footwear, equipment
and apparel.
B
R
O
O
K
S
R
U
N
N
N
G
I
H
C
T
A
W
L
I
S
S
O
F
Hibbett knows small markets. Our real estate strategy
focuses primarily on strip centers in underserved
locations. We maintain strong relationships with
developers to secure convenient locations for our time-
sensitive customers.
Technology investments will drive our future growth.
These technology improvements will be used to execute
our micro-managed strategy on a continually growing
store base.
U
N
D
E
R
A
R
M
O
U
R
C O R P O R A T E P R O F I L E
Hibbett Sports, Inc. is a rapidly-growing operator of sporting goods stores in small to mid-sized markets pre-
dominantly in the Sunbelt, Mid-Atlantic and lower Midwest. The Company’s primary retail format is Hibbett
Sports, a 5,000-square-foot store located in enclosed malls or in strip centers which are usually anchored by a
Wal-Mart store.
Hibbett is the only sporting goods chain committed to serving small markets. With a low-cost operating phi-
losophy and a commitment to providing a high level of customer service, Hibbett has successfully grown its store
base from 79 stores in 10 states at the time of its initial public offering on October 11, 1996, to 688 stores in 23
states by February 2, 2008.
S T O R E L O C A T I O N S
5
7
4
15
27
66
5
21
16
18
14
33
49
80
84
34
32
52
4
16
44
31
31
We have identified over 350 additional markets for Hibbett stores
in our 23-state area.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:
February 2, 2008
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 SPORTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
State or other jurisdiction of
incorporation or organization
20-8159608
(I.R.S. Employer
Identification No.)
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
NASDAQ Stock Market, LLC
Name of each exchange on which registered
Securities registered pursuant to section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ⌧ No (cid:133)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No ⌧
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 ⌧ No (cid:133)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ____
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large Accelerated Filer ⌧ Accelerated Filer (cid:133) Non-Accelerated filer (cid:133) Smaller Reporting Company (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No ⌧
The aggregate market value of the voting stock held by non-affiliates of the Registrant (assuming for purposes of this calculation that all
executive officers and directors are “affiliates”) was $737,818,499 on August 3, 2007, based on the closing sale price of $23.72 at August 3,
2007 for the Common Stock on such date on the NASDAQ National Market.
The number of shares outstanding of the Registrant’s Common Stock, as of March 28, 2008 was 28,401,206.
DOCUMENTS INCORPORATED BY REFERENCE
The information regarding securities authorized for issuance under equity compensation plans called for in Item 5 of Part II and the information
called for in Items 10, 11, 12, 13 and 14 of Part III are incorporated by reference from the Company’s definitive Proxy Statement for the 2008
Annual Meeting of Stockholders, to be held June 2, 2008. Registrant’s definitive Proxy Statement will be filed with the Securities and
Exchange Commission on or before April 24, 2008.
HIBBETT SPORTS, INC.
INDEX
PART I
Item
Item
Item
Item
Item
Item
Business.
1.
1A. Risk Factors.
1B. Unresolved Staff Comments.
2.
3.
4.
Properties.
Legal Proceedings.
Submission of Matters to a Vote of Security Holders.
PART II
Item
5.
Item
Item
Item
Item
Item
Item
Item
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
Selected Consolidated Financial Data.
Management’s Discussion and Analysis of Financial Condition and Results of Operation.
6.
7.
7A. Quantitative and Qualitative Disclosures About Market Risk.
Consolidated Financial Statements and Supplementary Data.
8.
Changes in and Disagreements with Independent Registered Public Accounting Firm on
9.
Accounting and Consolidated Financial Disclosure.
9A. Controls and Procedures.
9B. Other Information.
Part III
Item
Item
Item
Item
Item
10.
11.
12.
13.
14.
Part IV
Item
15.
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.
Exhibits and Consolidated Financial Statement Schedules.
Signatures.
Page
4
8
12
12
12
13
14
17
18
26
27
50
50
50
51
51
51
51
51
52
54
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, including comparable store net sales changes, net sales growth and earnings;
our growth, including our plans to add, expand or relocate stores and square footage growth, our market’s ability to
support such growth and the suitability of our distribution facilities;
the possible effect of pending legal actions and other contingencies;
our cash needs, including our ability to fund 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 leases satisfactorily;
our estimates and assumptions as they relate to preferable tax and financial accounting methods, accruals, inventory
valuations, dividends, carrying amount and liquidity of financial instruments and fair value of options and other stock-
based compensation as well as our estimates of economic and useful lives of depreciable assets and leases;
our expectations concerning future stock-based award types;
our expectations concerning employee option exercise behavior;
the possible effect of inflation, market decline and other economic changes on our costs and profitability;
our analyses of trends as related to earnings performance;
our target market presence and its expected impact on our sales growth;
our expectations concerning vendor level purchases and related discounts;
our estimates and assumptions related to income tax liabilities and uncertain tax positions;
the future reliability of, and cost associated with, our sources of supply, particularly imported goods; and
the possible effect of recent accounting pronouncements.
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 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 review the “Risk Factors” described beginning on page 8, as well as “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” beginning on page 18.
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 annual report and you should not expect us to do so.
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 nonpublic information or other confidential commercial information.
Accordingly, stockholders should not assume that we agree 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.
Introductory Note
Unless specifically indicated otherwise, any reference to “2009” or “Fiscal 2009” relates to our year ending January 31,
2009. Any reference to “2008” or “Fiscal 2008” relates to our year ending February 2, 2008. Any reference to “2007” or “Fiscal
2007” relates to our year ended February 3, 2007. Any reference to “2006” or “Fiscal 2006” relates to our year ended January 28,
2006.
- 3 -
Item 1.
Business.
Our Company
PART 1
Our Company was originally organized in 1945 under the name Dixie Supply Company in Florence, Alabama, in the
marine and small aircraft business. In 1951, the Company started targeting school athletic programs in North Alabama and by the
end of the 1950’s had developed a profitable team sales business. In 1960, we sold the marine portion of our business and have been
solely in the athletic business since that time. In 1965, 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 northwest Alabama with a
distribution center located in Birmingham and our central accounting office in Florence. We went public in October 1996 and were
incorporated under the laws of the State of Delaware as Hibbett Sporting Goods, Inc. We incorporated under the laws of the State of
Delaware as Hibbett Sports, Inc. in January 2007 and on February 10, 2007, Hibbett Sports, Inc. became the successor holding
company for Hibbett Sporting Goods, Inc., which is now our operating subsidiary.
Today, we are a rapidly-growing operator of sporting goods stores in small to mid-sized markets predominantly in the
Sunbelt, Mid-Atlantic and lower Midwest. As of February 2, 2008, we operated 666 Hibbett Sports stores as well as 18
smaller-format Sports Additions athletic shoe stores and 4 larger-format Sports & Co. superstores in 23 states. Over the past two
years, we have increased the number of stores from 549 stores to 688 stores, an increase in store base of approximately 25%. Our
primary retail format and growth vehicle is Hibbett Sports, a 5,000 square foot store located primarily in strip centers which are
usually anchored by a Wal-Mart store and in enclosed malls.
Although competitors in some markets may carry similar product lines and national brands as our stores, we believe
that our stores are typically the primary sporting goods retailers in their markets due to the extensive selection of quality branded
merchandise and high level of customer service. Hibbett’s merchandise assortment emphasizes team sports complemented by
localized apparel and accessories designed to appeal to a wide range of customers within each individual market.
Available Information
The Company maintains an Internet website at the following address: www.hibbett.com.
We make available free of charge on or through our website under the heading “Investor Information,” certain reports
that we file with or furnish to the Securities and Exchange Commission (SEC) in accordance with the Securities Exchange Act of
1934. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K.
We make this information available on our website as soon as reasonably practicable after we electronically file the information
with or furnish it to the SEC. In addition to accessing copies of our reports online, you may request a copy of our Annual Report
on Form 10-K for the fiscal year ended February 2, 2008, at no charge, by writing to: Investor Relations, Hibbett Sports, Inc.,
451 Industrial Lane, Birmingham, Alabama 35211.
Reports filed with or furnished to the SEC are also available free of charge upon request by contacting our corporate
office at (205) 942-4292.
The public may also read or copy any materials filed by us with the SEC at the SEC’s Public Reference Room at 100F
Street, N.E., Washington, DC 20549. Information may be obtained on the operation of the Public Reference Room by calling the
SEC at 1-800-732-0330. The SEC also maintains a website that contains reports, proxy and information statements, and other
information regarding issuers that file electronically at www.sec.gov.
Our Business Strategy
We target markets with county populations that range from 30,000 to 100,000. By targeting these smaller markets, we
believe that we achieve important strategic advantages, including many 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 sporting goods retailer in these local communities.
We believe our ability to merchandise to local sporting and community interests differentiates us from our national
competitors. This strong regional focus also enables us to achieve significant cost benefits including lower corporate expenses,
reduced distribution costs and increased economies of scale from marketing activities. Additionally, we also use sophisticated
information systems to maintain tight controls over inventory and operating costs and continually search for ways to improve
efficiencies through information system upgrades, such as the JDA Merchandising System we implemented beginning February 4,
2007.
- 4 -
We strive to hire enthusiastic sales personnel with an interest in sports. Our extensive training program focuses on product
knowledge and selling skills and is conducted through the use of in-store clinics, videos, self-study courses, interactive group
discussions and “Hibbett University” designed specifically for store management.
Our Store Concepts
Hibbett Sports
Our primary retail format is Hibbett Sports, a 5,000 square foot store located primarily in strip centers which are usually
anchored by a Wal-Mart store and in enclosed malls. In considering locations for our Hibbett Sports stores, we take into account the
size, demographics and competitive conditions of each market. Of these stores, 461 Hibbett Sports stores are located in strip centers
with the remaining 205 stores located in enclosed malls, the majority of which are the only enclosed malls in the county.
Hibbett Sports stores offer a core selection of quality, brand name merchandise with an emphasis on team sports. This
merchandise mix is complemented by a selection of localized apparel and accessories designed to appeal to a wide range of
customers within each market. We strive to respond quickly to major sporting events of local interest. Such events in Fiscal 2008
included the LSU Tiger’s victory in the Bowl Championship Series (BCS) national championship game as well as the successful
seasons of the Dallas Cowboys and Jacksonville Jaguars and the enthusiasm surrounding Nick Saban’s return to collegiate coaching
at the University of Alabama.
Sports Additions
Our 18 Sports Additions stores are small, mall-based stores, averaging 2,500 square feet with approximately 90% of
merchandise consisting of athletic footwear and the remainder consisting of caps and a limited assortment of apparel. Sports
Additions stores offer a broader assortment of athletic footwear, with a greater emphasis on fashion than the athletic footwear
assortment offered by our Hibbett Sports stores. All but 4 Sports Additions stores are currently located in malls in which Hibbett
Sports stores are also present.
Sports & Co.
We opened 4 Sports & Co. superstores between March 1995 and September 1996. Sports & Co. superstores average
25,000 square feet and offer a broader assortment of athletic footwear, apparel and equipment than our Hibbett Sports stores. Athletic
equipment and apparel represent a higher percentage of the overall merchandise mix at Sports & Co. superstores than they do at
Hibbett Sports stores. Sports & Co. superstores are designed to project the same in-store atmosphere as our Hibbett Sports stores but
on a larger scale. We have 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. Team Sales sells its
merchandise directly to educational institutions and youth associations. The operations of Team Sales are independent of the
operations of our retail stores. Team Sales does not meet the quantitative or qualitative reporting requirements of the Financial
Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures About
Segments of an Enterprise and Related Information.”
Our Expansion Strategy
In Fiscal 1994, we began to accelerate our rate of new store openings to take advantage of the growth opportunities in our
target markets. We have currently identified over 350 potential markets for future Hibbett Sports stores generally within the states in
which we operate. 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 current distribution center can support over 1,000 stores.
In Fiscal 2009, we plan to open approximately 85 new stores and close 10 stores while we will also remodel and expand
approximately 10 stores we feel have significant sales potential. While we are opening more stores year over year, the percentage
increase will decline slightly from last year’s rate of 12%.
In evaluating potential markets, we consider population, economic conditions, local competitive dynamics, availability of
suitable real estate and proximity to existing Hibbett Stores. Our continued growth largely depends upon our ability to open new
stores in a timely manner, to operate them profitably and to manage them effectively. Additionally, successful expansion is subject to
various contingencies, many of which are beyond our control. See “Risk Factors.”
- 5 -
Our Distribution
We maintain a single 220,000 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 a critical element of our expansion strategy and is central
to our ability to maintain a low cost operating structure.
Previously, we discussed plans to open a second distribution center in or around Dallas, Texas in Fiscal 2008. However,
we have secured additional warehousing space in Birmingham for new store accumulation and have made an additional investment
in our current distribution center that we believe will support our anticipated growth over the next few years primarily in the states
we currently operate. Because of the additional warehousing space and investment in our current distribution center coupled with
improved technology and vendor assistance with cross-docking, we believe we can service over 1,000 stores with our current
infrastructure in Birmingham.
We receive substantially all of our merchandise at our distribution center. For key products, we maintain backstock at the
distribution center that is allocated and distributed to stores through an automatic replenishment program based on items that are
sold. Merchandise is typically delivered to stores weekly via Company-operated vehicles.
Our Merchandising Strategy
Our merchandising strategy is to provide a broad assortment of quality brand name footwear, athletic equipment, and
apparel at competitive prices in a full service environment. Historically, as well as for Fiscal 2008, our most popular consumer item
is athletic footwear, followed by performance and fashion apparel and team sports equipment, ranked according to sales.
We believe that the breadth and depth of our brand name merchandise selection generally exceeds the merchandise
selection carried by local independent competitors. Many of these branded products are highly technical and require considerable
sales assistance. We coordinate with our vendors to educate the sales staff at the store level on new products and trends.
Although the core merchandise assortment tends to be similar for each Hibbett Sports store, important local or regional
differences frequently exist. Accordingly, our stores regularly offer products that reflect preferences for particular sporting activities
in each community and local interests in college and professional sports teams. Our knowledge of these interests, combined with
access to leading vendors, enables our stores to react quickly to emerging trends or special events, such as college or professional
championships.
Our merchandising staff, operations staff and management analyze current sporting goods trends primarily through the
gathering and analyzing of detail daily sales activity available through point-of-sale terminals located in the stores. We also visit
Hibbett and competitor store locations, maintain close relationships with vendors and other retailers, monitor product selection at
competing stores, communicate with district and store managers and review industry trade publications in an effort to recognize
trends. The merchandising staff works closely with store personnel to meet the requirements of individual stores for appropriate
merchandise in sufficient quantities.
Our success depends in part on our ability to anticipate and respond to changing merchandise trends and consumer demand
on a store level in a timely manner. See “Risk Factors.”
Our Vendor Relationships
The sporting goods retail business is very brand name driven. Accordingly, we maintain relationships with a number of
well known sporting goods vendors to satisfy customer demand. We believe that our stores are among the primary retail distribution
avenues for brand name vendors that seek to penetrate our target markets. As a result, we are able to attract considerable vendor
interest and establish long-term partnerships with vendors. As our vendors expand their product lines and grow in popularity, we
expand sales and promotions of these products within our stores. In addition, as we continue to increase our store base and enter new
markets, our vendors increase their brand presence within these regions. We also emphasize and work with our vendors to establish
favorable pricing and to receive cooperative marketing funds. We believe that we maintain good working relationships with our
vendors. For the fiscal year ended February 2, 2008, Nike, our largest vendor, represented approximately 48.5% of our total
purchases while our next largest vendor represented approximately 9.3% of our total purchases. For the fiscal year ended February
3, 2007, Nike, our largest vendor, represented approximately 47.3% of our total purchases while our next largest vendor represented
approximately 9.4% of our total purchases.
The loss of key vendor support could be detrimental to our business, financial condition and results of operations. We
believe that we have long-standing and strong relationships with our vendors and that we have adequate sources of brand name
merchandise on competitive terms; however, we cannot guarantee that we will be able to acquire such merchandise at
competitive prices or on competitive terms in the future. In this regard, certain merchandise that is high profile and in high
demand may be allocated by vendors based upon the vendors’ internal criterion, which is beyond our control. See “Risk Factors.”
- 6 -
Our Advertising and Promotion
We target special advertising opportunities in our markets to increase the effectiveness of our advertising budget. In
particular, we prefer advertising in local media as a way to further differentiate Hibbett from national chain competitors.
Substantially all of our advertising and promotional spending is centrally directed. Print advertising, including direct mail catalogs
and postcards to customers, serves as the foundation of our promotional program and accounted for the majority of our total
advertising costs in Fiscal 2008. Other advertising means, such as television commercials, outdoor billboards, Hibbett trucks, our
MVP loyalty program and the Hibbett website, are used to reinforce Hibbett’s name recognition and brand awareness in the
community.
Our Competition
The business in which we are engaged is highly competitive. Many of the items we offer in our stores are also sold by
local sporting goods stores, athletic footwear and other specialty athletic stores, traditional shoe stores and national and regional
sporting goods stores. The marketplace for sporting goods remains highly fragmented as many different retailers compete for market
share by utilizing a variety of store formats and merchandising strategies. In recent years, there has been significant consolidation of
large format retailers in large metropolitan markets. However, we believe the competitive environment for sporting goods remains
different in smaller markets where retail demand may not support larger format stores. In such markets as those targeted by Hibbett,
national chains compete by focusing on a specialty category like athletic footwear.
Our stores compete with national chains that focus on athletic footwear, local sporting goods stores, department and
discount stores, traditional shoe stores and mass merchandisers. On a limited basis, we are also seeing competition from national
sporting goods chains in some of our mid-sized markets. Although we face competition from a variety of competitors, including on-
line competitors, we believe that our stores are able to compete effectively by being distinguished as sporting goods stores
emphasizing team sports and fitness merchandise complemented by a selection of localized apparel and accessories. Our competitors
may carry similar product lines and national brands, but we believe the principal competitive factors for all of our stores are service,
breadth of merchandise offered, availability of brand names and availability of local merchandise. We believe we compete favorably
with respect to these factors in the smaller markets predominantly in the Sunbelt, Mid-Atlantic and the lower Midwest. However, we
cannot guarantee that we will be able to continue to compete successfully against existing or future competitors. Expansion into
markets served by our competitors, entry of new competitors or expansion of existing competitors into our markets, could be
detrimental to our business, financial condition and results of operations. See “Risk Factors.”
Our Trademarks
Our Company, by and through subsidiaries, is the owner or licensee of trademarks that are very important to our
business. For the most part, trademarks are valid as long as they are in use and/or their registrations are properly maintained.
Registrations of trademarks can generally be renewed indefinitely as long as the trademarks are in use.
Following is a list of active trademarks registered and owned by the Company:
• Hibbett Sports, Registration No. 2717584
•
• Hibbett, Registration No. 78923441
Sports Additions, Registration No. 1767761
Our Employees
As of February 2, 2008, we employed approximately 1,900 full-time and approximately 3,500 part-time employees,
none of whom are represented by a labor union. The number of part-time employees fluctuates depending on seasonal needs. We
cannot guarantee that our employees will not, in the future, elect to be represented by a union. We consider our relationship with
our employees to be good and have not experienced significant interruptions of operations due to labor disagreements.
Employee Development. We develop our training programs in a continuing effort to service the needs of our customers
and employees. These programs are designed to increase employee knowledge and include video training in all stores for the
latest in technical detail of new products and new operational and service techniques. Because we primarily promote or relocate
current employees to serve as managers for new stores, training and assessment of our employees is essential to our sustained
growth.
We have implemented programs in our stores 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 and designed specifically for store
management.
- 7 -
Item 1A. Risk Factors.
You should carefully consider the following risks, as well as the other information contained in this report, before
investing in shares of our common stock. If any of the following risks actually occur, our business could be harmed. In that case, the
trading price of our common stock could decline, and you might lose all or part of your investment.
We may be unable to achieve our expansion plans for future growth.
We have grown rapidly primarily through opening new stores, growing from 67 stores at the beginning of fiscal year 1997
to 688 stores at February 2, 2008. We plan to increase our store base by opening 85 new Hibbett Sports stores while closing 10 stores
in Fiscal 2009. Our continued growth depends, in large part, upon our ability to open new stores in a timely manner and to operate
them profitably. Additionally, successful expansion is subject to various contingencies, many of which are beyond our control. In
order to open and operate new stores successfully, we must:
•
•
•
•
•
•
identify and secure suitable store sites on a timely basis;
negotiate acceptable lease terms, including desired tenant improvement allowances;
complete any necessary construction or refurbishment of these sites as well as furnish and equip the new stores timely;
hire, train and retain competent store personnel;
identify and source sufficient inventories to meet the needs of the new stores and the preferences of the consumers in that
market; and
successfully integrate new stores into our existing operations.
In addition, our expansion strategy may be subject to rising real estate and construction costs that could inhibit our ability
to sustain our rate of growth. We 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 that we will be able to continue to manage our growth effectively.
Our failure to achieve our expansion plans could materially and adversely affect our business, financial condition and results of
operations. In addition, our operating margins may be impacted in periods in which incremental expenses are incurred as a result of
new store openings.
Our stores are concentrated within the Sunbelt, Mid-Atlantic and lower Midwest portions of the United States, which could
subject us to regional risks.
Because our stores are located primarily in a concentrated area of the United States, we are subject to regional risks, such
as the regional economy, weather conditions and natural disasters such as floods, droughts, tornadoes and hurricanes, increasing
costs of electricity, oil and natural gas as well as government regulations specific in the states and localities within which we operate.
We sell a significant amount of team sports merchandise which can be adversely affected by significant weather events that postpone
the start of or shorten sports seasons or that limit participation of fans and sports enthusiasts.
A downturn in the economy could affect consumer purchases of discretionary items, which could reduce our sales.
In general, our sales represent discretionary spending by our customers. Discretionary spending is affected by many
factors, including:
•
•
•
•
•
•
•
•
interest rates and inflation;
the impact of an economic recession;
the impact of natural disasters;
the availability of consumer credit;
consumer debt levels and reduced levels of consumer disposable income;
changes in tax rates and tax policies;
unemployment trends; and
consumer confidence in future economic conditions.
Increasing volatility in financial markets could cause a greater frequency or higher magnitude of change in many of the
factors listed. Our customers’ purchases of discretionary items, including products that we sell, could decline during periods when
disposable income is lower or periods of actual or perceived unfavorable economic conditions. If this occurs, our revenues and
profitability could decline. In addition, our sales could be adversely affected by a downturn in the economic conditions in the markets
in which we operate.
- 8 -
We may be subject to periodic litigation, including the Fair Labor Standards Act lawsuits, which may adversely affect the
Company’s business and financial performance.
From time to time, we are involved in lawsuits, including class action lawsuits brought against us for alleged violations of
the Fair Labor Standards Act. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of
any such proceedings. We may incur losses relating to these claims and, in addition, these proceedings could cause us to incur costs
and may require us to devote resources to defend against these claims which could adversely affect our results of operations. For a
description of current legal proceedings, see Part I, Item 3, Legal Proceedings.
Our inability to identify, and anticipate changes in consumer demands and preferences and our inability to respond to such
consumer demands in a timely manner could reduce our sales.
Our products appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to
rapid change. Our success depends on our ability to identify product trends as well as to anticipate and respond to changing
merchandise trends and consumer demand in a timely manner. We cannot assure you that we will be able to continue to offer
assortments of products that appeal to our customers or that we will satisfy changing consumer demands in the future. Accordingly,
our business, financial condition and results of operations could be materially and adversely affected if:
• we are unable to identify and respond to emerging trends, including shifts in the popularity of certain products;
• we miscalculate either the market for the merchandise in our stores or our customers’ purchasing habits; or
consumer demand unexpectedly shifts away from athletic footwear or our more profitable apparel lines.
•
In addition, we may be faced with significant excess inventory of some products and missed opportunities for other
products, which could decrease our profitability.
If we lose any of our key vendors or any of our key vendors fail to supply us with merchandise, we may not be able to meet the
demand of our customers and our sales could decline.
Our business is dependent to a significant degree upon close relationships with vendors and our ability to purchase brand
name merchandise at competitive prices. In addition, many of our vendors provide us with incentives, such as return privileges,
volume purchasing allowances and cooperative advertising. The loss of key vendor support or decline or discontinuation of vendor
incentives could have a material adverse effect on our business, financial condition and results of operations. We cannot guarantee
that we will be able to acquire such merchandise at competitive prices or on competitive terms in the future. In this regard, certain
merchandise that is in high demand may be allocated by vendors based upon the vendors’ internal criterion which is beyond our
control.
In addition, we believe many of our largest vendors source a substantial majority of their products from China and
other foreign countries. Imported goods are generally less expensive than domestic goods and indirectly contribute significantly
to our favorable profit margins. A disruption in the flow of imported merchandise or an increase in the cost of those goods may
significantly decrease our sales and profits.
We may experience a disruption or increase in the cost of imported vendor products at any time for reasons that may
not be in our control. If imported merchandise becomes more expensive or unavailable, the transition to alternative sources by
our vendors may not occur in time to meet our demands or the demands of our customers. Products from alternative sources may
also be more expensive than those our vendors currently import. Risks associated with reliance on imported goods include:
•
•
disruptions in the flow of imported goods because of factors such as:
•
•
•
raw material shortages, work stoppages, strikes and political unrest;
problems with oceanic shipping;
economic crises and international disputes; and
increases in the cost of purchasing or shipping foreign merchandise resulting from:
•
•
•
foreign government regulations;
changes in currency exchange rates and local economic conditions; and
trade restrictions, including import duties, import quotas or loss of “most favored nation” status with the United
States.
In addition, to the extent that any foreign manufacturer from whom our vendors are associated may directly or
indirectly utilize labor practices that are not commonly accepted in the United States, we could be affected by any resulting
negative publicity. Our sales and profitability could decline if vendors are unable to promptly replace sources providing equally
appealing products at a similar cost.
- 9 -
Problems with our information system software could disrupt our operations and negatively impact our financial results and
materially adversely affect our business operations.
The efficient operation of our business is dependent on the successful integration and operation of our information
systems. In particular, we rely on our information systems to manage effectively our sales, distribution, merchandise planning
and replenishment, to process financial information and sales transactions and to optimize our overall inventory levels. Most of
our information systems are centrally located at our headquarters, with offsite backup at other locations. Our systems, if not
functioning properly, could disrupt our ability to track, record and analyze sales and inventory movement and could cause
disruptions of operations, including, among other things, our ability to process and ship inventory, process financial information
including credit card transactions, process payrolls or vendor payments or engage in other similar normal business activities.
Any material disruption, malfunction or other similar problems in or with our information systems could negatively impact our
financial results and materially adversely affect our business operations.
Pressure from our competitors may force us to reduce our prices or increase our spending, which would lower our revenue
and profitability.
The business in which we are engaged is highly competitive. The marketplace for sporting goods remains highly
fragmented as many different retailers compete for market share by utilizing a variety of store formats and merchandising strategies.
We compete with national chains that focus 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 price discounting policies that, if intensified,
may make it difficult for us to reach our sales goals without reducing our prices. As a result of this competition, we may also need to
spend more on advertising and promotion than we anticipate. We cannot guarantee that we will continue to be able to compete
successfully against existing or future competitors. Expansion into markets served by our competitors, entry of new competitors or
expansion of existing competitors into our markets could be detrimental to our business, financial condition and results of operations.
Our operating results are subject to seasonal and quarterly fluctuations, which could cause the market price of our common
stock to decline.
We have historically experienced and expect to continue to experience seasonal fluctuations in our net sales, operating
income and net income. Our net sales, operating income and net income are typically higher in the spring, back-to-school and
Christmas holiday seasons. An economic downturn during these periods could adversely affect us to a greater extent than if a
downturn occurred at other times of the year.
Our highest sales and operating income historically occur during the fourth fiscal quarter, due mostly to the holiday selling
season. Any decrease in our fourth quarter sales, whether because of a slow holiday selling season, unseasonable weather conditions,
slowing economic conditions, or otherwise, could have a material adverse effect on our business, financial condition and operating
results for the entire fiscal year.
Our quarterly operating results, including comparable store sales, will fluctuate and may not be a meaningful indicator of future
performance and such fluctuations could adversely affect the market price of our common stock.
Our net sales and quarterly results of operations have fluctuated in the past and vary from quarter to quarter. A number of
factors, many outside our control, can cause variations in our quarterly results, including:
•
•
•
•
•
•
changes in product demand that we offer in our stores;
retirement or demise of sports superstars key to certain product promotion;
strikes or lockouts involving professional sports teams;
costs related to the closures of existing stores;
changes in our merchandise assortment;
population trends and changes in the business environment.
Changes in our comparable store sales results could affect the price of our common stock. Factors which have historically
affected, and will continue to affect our comparable store sales results, include:
•
•
•
•
•
•
•
•
•
shifts in consumer tastes and fashion trends;
calendar shifts of holiday or seasonal periods;
the timing of new store openings and the relative proportion of new stores to mature stores;
the level of pre-operating expenses associated with new stores;
the amount and timing of net sales contributed by new stores;
changes in the other tenants in the shopping centers in which we are located;
pricing, promotion or other actions taken by our competitors or the addition of new competitors within our markets;
the timing and type of promotional events; and
unseasonable weather conditions or natural disasters.
- 10 -
We cannot assure you that comparable store sales will trend at the rates achieved in prior periods or that rates will not
decline. Comparable store sales vary from quarter to quarter, and an unanticipated decline in revenues or comparable store sales may
cause the price of our common stock to fluctuate significantly.
The market price of our common stock is likely to be highly volatile as the stock market in general is and has been highly
volatile. Factors that could cause fluctuation in our common stock price may include, among other things:
actual or anticipated variations in quarterly operating results;
changes in financial estimates by security analysts;
our inability to meet or exceed securities analysts’ estimates or expectations;
•
•
•
• market reaction to conditions or trends within our industry or to changes in the market valuations of other retail companies;
•
• market rumors or announcements by us or by our competitors of significant acquisitions, divestitures or joint ventures,
additions or departures of key personnel;
strategic partnerships or other strategic initiatives;
announcements by us of large capital commitments; and
sales of our common stock by key personnel or large institutional holders.
•
•
Many of these factors are beyond our control and may cause the market price of our common stock to decline, regardless
of our operating performance.
We would be materially and adversely affected if our single distribution center were shut down.
We currently operate a single centralized distribution center in Birmingham, Alabama. We receive and ship substantially
all of our merchandise at our distribution center. Any natural disaster or other serious disruption to this facility due to fire, tornado or
any other cause would damage a portion of our inventory and could impair our ability to adequately stock our stores and process
returns of products to vendors and could adversely affect our sales and profitability. In addition, we could incur significantly higher
costs and longer lead times associated with distributing our products to our stores during the time it takes for us to reopen or replace
the center.
We depend on key personnel.
We have benefited from the leadership and performance of our senior management, especially Michael J. Newsome,
our Chairman and Chief Executive Officer. If we lose the services of any of our principal executive officers, including Mr.
Newsome we may not be able to run our business effectively and operating results could suffer. In particular, Mr. Newsome has
been instrumental in directing our business strategy within our target markets in the Sunbelt, Mid-Atlantic and the lower Midwest
and maintaining long-term relationships with our key vendors. Our overall success and the success of our expansion strategy will
depend on our ability to retain our current management, including Mr. Newsome, and our ability to attract and retain qualified
personnel in the future. As we continue to grow, we will continue to hire, appoint or otherwise change senior managers and other
key executives. We do not maintain key man life insurance on any of our executive officers. The loss of services of
Mr. Newsome for any reason could have a material adverse effect on our business, financial condition and results of operations.
In addition, the loss of certain other principal executive officers could affect our ability to run our business effectively and our
ability to successfully expand our operations.
On March 9, 2005, we entered into a Retention Agreement (the Agreement) with Mr. Newsome. The purpose of the
Agreement is to secure the continued employment of Mr. Newsome as an advisor to us following his future retirement from the
duties of Chief Executive Officer of our Company. Such retirement is not currently planned.
Provisions in our charter documents and Delaware law might deter acquisition bids for us.
Certain provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects and may
discourage, delay or prevent a takeover attempt that a stockholder might consider in its best interest. These provisions, among other
things:
•
•
•
•
•
classify our Board of Directors into three classes, each of which serves for different three year periods;
provide that a director may be removed by stockholders only for cause by a vote of the holders of not less than two-thirds
of our shares entitled to vote;
provide that all vacancies on our Board of Directors, including any vacancies resulting from an increase in the number of
directors, may be filled by a majority of the remaining directors, even if the number is less than a quorum;
provide that special meetings of the stockholders may only be called by the Chairman of the Board of Directors, a majority
of the Board of Directors or upon the demand of the holders of a majority of the shares entitled to vote at any such special
meeting; and
call for a vote of the holders of not less than two-thirds of the shares entitled to vote in order to amend the foregoing
provisions and certain other provisions of our certificate of incorporation and bylaws.
- 11 -
In addition, our Board of Directors, without further action of the stockholders, is permitted to issue and fix the terms of
preferred stock which may have rights senior to those of common stock. We are also subject to the Delaware business combination
statute, which may render a change in control of us more difficult. Section 203 of the Delaware General Corporation Laws would be
expected to have an anti-takeover effect with respect to transactions not approved in advance by the Board of Directors, including
discouraging takeover attempts that might result in a premium over the market price for the shares of Common Stock held by
stockholders.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We currently lease all of our existing 688 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 ten years with options on our part to extend.
Most leases also contain a kick-out clause if projected sales levels are not met and an early termination/remedy option if co-tenancy
and exclusivity provisions are violated. We believe this leasing 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, recruiting and training qualified management
personnel and the availability of market relevant inventory.
As current leases expire, we believe we will either be able 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 primarily on our belief
that we maintain good relations with our landlords, that most of our leases are at approximate market rents and that generally we
have 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.
Our corporate offices and our retail distribution center are leased under an operating lease. We own the Team Sales’
facility located in Birmingham, Alabama that warehouses inventory for educational institutions and youth associations. We
believe our current distribution center is suitable and adequate to support our immediate needs in the next few years.
Store Locations
As of February 2, 2008, we currently operate 688 stores in 23 contiguous states. Of these stores, 224 are located in malls
and 464 are located in strip-shopping centers which are typically anchored by a Wal-Mart store. The following shows the number of
locations by state as of March 28, 2008:
Alabama
Arizona
Arkansas
Florida
Georgia
Iowa
Illinois
Indiana
79
5
34
32
84
5
16
18
Kansas
Kentucky
Louisiana
Missouri
Mississippi
Nebraska
New Mexico
North Carolina
15
33
33
21
52
4
7
44
Ohio
Oklahoma
South Carolina
Tennessee
Texas
Virginia
West Virginia
TOTAL
14
27
31
50
67
16
4
691
Item 3.
Legal Proceedings.
In October 2005, three former employees filed a lawsuit in Mississippi federal court alleging they are owed back wages for
overtime because they were improperly classified as exempt salaried employees. They also alleged other wage and hour violations.
The suit asked the court to certify the case as a collective action under the Fair Labor Standards Act on behalf of all similarly situated
employees. We dispute the allegations of wrongdoing in this complaint and have vigorously defended ourselves in this matter.
However, the parties have negotiated a settlement and the court has now ruled to certify the collective action in accordance with the
negotiated settlement. At February 2, 2008, we began making initial distributions and estimated that the remaining liability related to
this matter is $755,000. Accordingly, we accrued $755,000 as a current liability on our condensed consolidated balance sheet. At
February 3, 2007, we had accrued $750,000 as a current liability on our condensed consolidated balance sheet relating to this matter.
Subsequent to the end of Fiscal 2008, we completed our obligation under the negotiated settlement related to this case.
We are also party to other legal proceedings incidental to our business. We do not believe that any of these matters will,
individually or in the aggregate, have a material adverse effect on our business or financial condition. We cannot give assurance,
however, that one or more of these lawsuits will not have a material adverse affect on our results of operations for the period in
which they are resolved.
- 12 -
The estimate of our liability for pending and unasserted potential claims does not include litigation costs. It is our policy to
accrue legal fees when it is probable that we will have to defend against known claims or allegations and we can reasonably estimate
the amount of the anticipated expense. Although we have accrued legal fees associated with litigation currently pending against us,
we have not made any accruals for potential liability for settlements or judgments because the potential liability is neither probable
nor estimable.
From time to time, we enter into certain types of agreements that require us to indemnify parties against third party claims
under certain circumstances. Generally, these agreements relate to: (a) agreements with vendors and suppliers under which we may
provide customary indemnification to our vendors and suppliers in respect to actions they take at our request or otherwise on our
behalf; (b) agreements to indemnify vendors against trademark and copyright infringement claims concerning merchandise
manufactured specifically for or on behalf of the Company; (c) real estate leases, under which we may agree to indemnify the lessors
from claims arising from our use of the property; and (d) agreements with our directors, officers and employees, under which we
may agree to indemnify such persons for liabilities arising out of their relationship with us. We have director and officer liability
insurance, which, subject to the policy’s conditions, provides coverage for indemnification amounts payable by us with respect to our
directors and officers up to specified limits and subject to certain deductibles.
If the Company believes that a loss is both probable and estimable for a particular matter, the loss is accrued in accordance
with the requirements of SFAS No. 5, “Accounting for Contingencies.” With respect to any matter, the Company could change its
belief as to whether a loss is probable or estimable, or its estimate of loss, at any time. Even though the Company may not believe a
loss is probable or estimable, it is reasonably possible that the Company could suffer a loss with respect to that matter in the future.
Item 4.
Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of our stockholders during the fourth quarter of Fiscal 2008.
- 13 -
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock is traded on the NASDAQ Global Select Market (NASDAQ) 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.
Fiscal 2008:
First Quarter ended May 5, 2007
Second Quarter ended August 4, 2007
Third Quarter ended November 3, 2007
Fourth Quarter ended February 2, 2008
Fiscal 2007:
First Quarter ended April 29, 2006
Second Quarter ended July 29, 2006
Third Quarter ended October 28, 2006
Fourth Quarter ended February 3, 2007
High
Low
$
$
$
$
32.97
30.62
28.74
23.65
$
$
$
$
34.54
31.19
28.16
33.95
$
$
$
$
27.26
23.70
21.09
12.30
$
$
$
$
28.20
18.95
18.90
27.00
On March 28, 2008, the last reported sale price for our common stock as quoted by NASDAQ was $15.06 per share. As of
March 28, 2008, we had 23 stockholders of record.
- 14 -
The Stock Price Performance Graph below compares the percentage change in our cumulative total stockholder return on
its common stock against a cumulative total return of the NASDAQ Composite Index and the NASDAQ Retail Trade Index. The
graph below outlines returns for the period beginning on January 31, 2003 to January 31, 2008. We have not paid any dividends.
Total stockholder return for prior periods is not necessarily an indication of future performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Hibbett Sports, Inc., The NASDAQ Composite Index
And The NASDAQ Retail Trade Index
$600
$500
$400
$300
$200
$100
$0
1/03
1/04
1/05
1/06
1/07
1/08
Hibbett Sports, Inc.
NASDAQ Composite
NASDAQ Retail Trade
* $100 invested on 1/31/03 in stock or index-including reinvestment of dividends.
Fiscal year ending January 31.
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 not anticipate declaring
or paying cash dividends on our common stock for the foreseeable future. Any future decision to declare or pay dividends will be at
the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital
requirements and such other factors as our Board of Directors deems relevant.
- 15 -
The following table presents our share repurchase activity for the thirteen weeks and quarter ending February 2, 2008:
ISSUER PURCHASES OF EQUITY SECURITIES (1)
Total Number
of Shares
Purchased
Average
Price per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs
Approximate
Dollar Value of
Shares that may
yet be Purchased
Under the
Programs
Period
As of November 3, 2007
5,276,713
$
23.45
5,276,713
$
126,239,000
November 4, 2007 to December 1, 2007
December 2, 2007 to January 5, 2008
January 6, 2008 to February 2, 2008
Quarter ended February 2, 2008
302,600
432,400
711,400
1,446,400
21.44
20.45
15.34
18.14
302,600
432,400
711,400
1,446,400
119,752,000
110,908,000
99,996,000
99,996,000
TOTAL since inception
6,723,113
$
22.31
6,723,113
$
99,996,000
(1) In August 2004, the Board of Directors authorized a plan to repurchase our common stock. The Board of Directors has
subsequently authorized increases to this plan with a current authorization effective November 2007 of $250.0 million.
The current authorization expires on January 30, 2010. Considering stock repurchases through February 2, 2008, we
have approximately $100.0 million of the total authorization remaining for future stock repurchases.
- 16 -
Item 6. Selected Consolidated Financial Data.
The following selected consolidated financial data has been derived from the consolidated financial statements of the
Company. The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our Consolidated Financial Statements and Notes to Financial Statements thereto.
(Dollars in thousands, except share and per share amounts and Selected Operating
Data)
Fiscal Year Ended
January 28,
2006
(52 weeks)
February 3,
2007
(53 weeks)
January 31,
2004
(52 weeks)
January 29,
2005
(52 weeks)
February 2,
2008
(52 weeks)
Income Statement Data:
Net sales
Cost of goods sold, including distribution center
and store occupancy costs
Gross profit
Store operating, selling and administrative
expenses
Depreciation and amortization
Operating income
Interest income
Interest expense
Interest income, net
Income before provision for income taxes
Provision for income taxes
Net income
Earnings per common shares:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Balance Sheet Data:
Working capital
Total assets
Long-term debt
Stockholders' investment
Selected Operating Data:
Number of stores open at end of period:
Hibbett Sports
Sports & Co.
Sports Additions
Total
$
520,720
$
512,094
$
440,269
$
377,534
$
320,964
351,876
168,844
338,963
173,131
293,368
146,901
255,250
122,284
216,938
104,026
108,463
12,154
48,227
582
151
431
48,658
100,461
10,932
61,738
906
30
876
62,614
85,060
10,119
51,722
1,170
24
1,146
52,868
72,923
9,939
39,422
517
42
475
39,897
63,514
9,686
30,826
165
59
106
30,932
18,329
30,329
$
24,541
38,073
$
19,244
33,624
$
14,750
25,147
$
11,290
19,642
$
$
$
0.98
0.96
$
$
1.19
1.17
$
$
1.00
0.98
$
$
0.72
0.70
$
$
0.57
0.55
31,049,058
31,525,050
32,094,127
32,619,839
33,605,568
34,393,026
34,855,682
35,690,363
34,521,674
35,397,089
$
89,383
216,734
-
119,055
$
106,428
212,853
-
136,641
$
98,623
195,829
-
124,773
$
106,012
202,105
-
130,039
$
96,042
173,759
-
120,440
666
4
18
688
593
4
16
613
527
4
18
549
461
4
17
482
408
4
16
428
Note: No dividends have been declared or paid.
- 17 -
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Hibbett Sports, Inc. operates sporting goods stores in small to mid-sized markets, predominantly in the Sunbelt, Mid-
Atlantic and the lower Midwest. Our stores offer a broad assortment of quality athletic equipment, footwear and apparel with a
high level of customer service. As of February 2, 2008 we operated a total of 688 retail stores composed of 666 Hibbett Sports
stores, 18 Sports Additions athletic shoe stores and 4 Sports & Co. superstores in 23 states.
Our primary retail format and growth vehicle is Hibbett Sports, a 5,000-square-foot store located primarily in strip centers
which are usually anchored by a Wal-Mart store and in enclosed malls. Over the last several years, we have concentrated and expect
to continue our store base growth in strip 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 branded merchandise and a high level of customer
service. We do not expect that the average size of our stores opening in Fiscal 2009 will vary significantly from the average size of
stores opened in Fiscal 2008.
We historically have comparable store sales in the low to mid-single digit range. We plan to increase total company-wide
square footage by approximately 11% in Fiscal 2009, which is slightly below our increases over the last several years of between
12% and 15%. We believe total sales percentage growth will be mid to high single digits in Fiscal 2009. Over the past several years,
we have increased our product margin due to improved vendor discounts, fewer retail reductions, increased efficiencies in logistics
and favorable leveraging of store occupancy costs. We expect a slight improvement in product margin rate in Fiscal 2009 attributable
primarily to improved vendor discounts.
Due to our increased sales, we have historically leveraged our store operating, selling and administrative expenses. Based
on projected sales, we expect operating, selling and administrative rates to increase somewhat in Fiscal 2009 primarily due to lower
than normal historical sales growth and increases in statutory minimum wage. We also expect to continue to generate sufficient cash
to enable us to expand and remodel our store base and to provide capital expenditures for both distribution center and technology
upgrade projects.
Hibbett maintains a merchandise management system that allows us to identify and monitor trends. However, this system
does not produce U.S. generally accepted accounting principle (GAAP) financial information by product category. Therefore, it is
impracticable to provide GAAP net sales by product category.
Our audited consolidated financial statements presented in this Form 10-K differ from our earnings release reported on
March 13, 2008 due to a refinement of our estimate of the lower of cost or market reserve. The revised estimate resulted in a
decrease of $0.8 million in ending inventory and pre-tax income from previously reported numbers.
Hibbett operates on a 52- or 53-week fiscal year ending on the Saturday nearest to January 31 of each year. The
consolidated statement of operations for fiscal year ended February 2, 2008 includes 52 weeks of operations. The consolidated
statements of operations for fiscal year ended February 3, 2007 includes 53 weeks of operations and the consolidated statements
of operations for fiscal year ended January 28, 2006 includes 52 weeks of operations. We have operated as a public company and
have been incorporated under the laws of the State of Delaware since October 6, 1996.
- 18 -
Results of Operations
The following table sets forth the percentage relationship to net sales of certain items included in our Consolidated
Statements of Operations expressed for the periods indicated.
February 2,
2008
Fiscal Year Ended
February 3,
2007
January 28,
2006
100.0%
100.0%
100.0%
67.6
32.4
20.8
2.3
9.3
0.1
-
0.1
9.3
3.5
5.8%
66.2
33.8
19.6
2.1
12.1
0.2
-
0.2
12.2
4.8
7.4%
66.6
33.4
19.3
2.3
11.8
0.3
-
0.3
12.0
4.4
7.6%
Net sales
Costs of goods sold, including distribution and
store occupancy costs
Gross profit
Store operating, selling and administrative
expenses
Depreciation and amortization
Operating income
Interest income
Interest expense
Interest income, net
Income before provision for income taxes
Provision for income taxes
Net income
Note: Columns may not foot due to rounding.
Fiscal 2008 Compared to Fiscal 2007
Net sales. Net sales increased $8.6 million, or 1.7%, to $520.7 million for the 52 weeks ended February 2, 2008, from
$512.1 million for the 53 weeks ended February 3, 2007. We attribute this slight increase to the following factors:
• We opened 82 Hibbett Sports and 2 Sports Additions stores while closing 9 Hibbett Sports stores for net stores opened
of 75 stores in the 52 weeks ended February 2, 2008. New stores and stores not in the comparable store net sales
calculation accounted for $22.6 million of the increase in net sales.
• We experienced a 3.1% decrease in comparable store net sales for the 52 weeks ended February 2, 2008 compared to
the 52 weeks ended January 27, 2007 primarily as the result of a decrease in store traffic resulting from a difficult
economic environment in our industry.
• Net sales increased 4.1% for the 52 weeks ended February 2, 2008 compared to the 52 weeks ended January 27, 2007.
• Net sales from the 53rd week of Fiscal 2007 accounted for approximately $11.8 million or approximately 2.4%.
We believe the decrease in comparable store sales is attributable to overall economic pressures on our consumers
resulting from the housing slump, rising fuel prices and anxiety over the economy in general. Additionally, our results were
impacted by a weakening in our urban markets as we believe those fashion dollars historically used for high-priced athletic shoes
and fashion items shifted to high-priced electronics. We experienced the following trends in Fiscal 2008:
• We experienced an overall decline in footwear and equipment sales.
•
• We saw a negative shift in our urban fashion apparel and footwear.
Pro-licensed apparel continued its slow down, especially in NBA licensed product.
Comparable store net sales data for the period reflects sales for our traditional format Hibbett Sports and Sports
Additions stores open throughout the period and the corresponding period of the prior fiscal year. If a store remodel or relocation
results in the store being closed for a significant period of time, its sales are removed from the comparable store base until it has
been open a full 12 months. During the 52 weeks ended February 2, 2008, 524 stores were included in the comparable store sales
comparison. Our four Sports & Co. stores are not and have never been included in the comparable store net sales comparison
because we have not opened a superstore since September 1996 nor do we plan to open additional superstores in the future.
- 19 -
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 $168.8 million, or 32.4% of net sales, in the 52 weeks ended February 2, 2008,
compared with $173.1 million, or 33.8% of net sales, in the 53 week period of the prior fiscal year. We attribute this decrease in
gross profit to a slight decrease in product margins and the deleveraging of store occupancy costs and distribution expenses.
Store occupancy experienced its largest increases in rent expense and utilities expenses as a percent to sales. Distribution
expenses were impacted primarily in data processing costs resulting from contract labor costs to support information technology
upgrades and projects.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $108.5
million, or 20.8% of net sales, for the 52 weeks ended February 2, 2008, compared with $100.5 million, or 19.6% of net sales, for
the 53 weeks ended February 3, 2007. Expenses contributing to this increase included:
•
Salary and benefit costs in our stores increased by 81 basis points while decreasing 29 basis points at the administrative
level. Store costs were impacted by the lower than expected sales growth and larger than normal fourth quarter store
openings, while administrative salaries decreased as a result of lost bonuses.
• Net advertising expenses increased 18 basis points due to the increased advertising efforts for new and low performing
•
stores.
Stock-based compensation accounted for 15 basis points. The expense associated with the movement of certain grant
dates into the first quarter as compared to a year ago was somewhat offset by a higher than normal forfeiture of awards
resulting from employee turnover and loss of performance-based awards.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.3% in the 52 weeks
ended February 2, 2008, and 2.1% in the 53 weeks ended February 3, 2007. The weighted-average lease term of new store leases
added in Fiscal 2008 compared to those added in Fiscal 2007 decreased in lease terms at 6.71 years compared to 7.62 years,
respectively. We attribute the increase in depreciation expense as a percent to sales to the shorter lease terms as well as the
information systems placed in service as of February 4, 2007.
Provision for income taxes. Provision for income taxes as a percentage of net sales was 3.5% in the 52 weeks ended
February 2, 2008, compared to 4.8% for the 53 weeks ended February 3, 2007. The combined federal, state and local effective
income tax rate as a percentage of pre-tax income was 37.7% for Fiscal 2008 and 39.2% for Fiscal 2007. The decrease in rate
over last year is primarily the result of the favorable resolution of certain state tax issues, lower than historical stock option
exercise behavior, and higher than historical equity forfeitures offset somewhat by the permanent differences related to incentive
stock options.
Fiscal 2007 Compared to Fiscal 2006
Net sales. Net sales increased $71.8 million, or 16.3%, to $512.1 million for the 53 weeks ended February 3, 2007,
from $440.3 million for the 52 weeks ended January 28, 2006. We attribute this increase to the following factors:
• We opened 74 Hibbett Sports and closed 8 Hibbett Sports stores and 2 Sports Additions stores for net stores opened of
64 stores in the 53 weeks ended February 3, 2007. New stores and stores not in the comparable store net sales
calculation accounted for $56.7 million of the increase in net sales.
• We experienced a 3.8% increase in comparable store net sales for the 52 weeks ended January 27, 2007 primarily as the
result of an increase in price. Higher comparable store net sales contributed $15.1 million to the increase in net sales.
• We believe sales pick-up related to the 53rd week contributed approximately 2.7% to the increase in sales over last year.
We believe the increase in comparable store sales is attributable to an overall positive merchandise performance during
the year and increased focus on customer service. Additionally, our results were positively impacted in the third quarter by the
introduction of tax-free holidays in three of our states and an increased promotional effort in an attempt to leverage the strong
post-hurricane sales from the prior year. We also experienced strong seasonal sales in the last quarter of Fiscal 2007 related to
the Christmas holidays.
• Nike and Under Armour brands experienced solid performance in youth and cleats, performance apparel and team
•
equipment.
Pro and college licensed apparel performed well, particularly in youth products and NFL jerseys. Key professional
teams in our market included the Indianapolis Colts, New Orleans Saints and Chicago Bears. Top selling NFL jerseys
included Peyton Manning, Reggie Bush, Tony Romo and Brian Urlacher. College licensed apparel was led by
women’s Nike product.
• We continue to experience weakness in caps and in classics footwear.
- 20 -
Comparable store net sales data for the period reflects sales for our traditional format Hibbett Sports and Sports
Additions stores open throughout the period and the corresponding period of the prior fiscal year. If a store remodel or relocation
results in the store being closed for a significant period of time, its sales are removed from the comparable store base until it has
been open a full 12 months. During the 52 weeks ended January 27, 2007, 459 stores were included in the comparable store sales
comparison. Our four Sports & Co. stores are not and have never been included in the comparable store net sales comparison
because we have not opened a superstore since September 1996 nor do we plan to open additional superstores in the future.
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 $173.1 million, or 33.8% of net sales, in the 53 weeks ended February 3, 2007,
compared with $146.9 million, or 33.4% of net sales, in the 52 week period of the prior fiscal year. We attribute this increase in
gross profit primarily to a reduction in markdown rate. Occupancy, as a percent of net sales, improved by 31 basis points year
over year due to decreases in common area maintenance and rental expenses as a percentage of sales. Offsetting these decreases
were distribution center costs by 10 basis points, primarily due to the increased repair and maintenance expenses and a decrease
in vendor violations.
Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $100.5
million, or 19.6% of net sales, for the 53 weeks ended February 3, 2007, compared with $85.1 million, or 19.3% of net sales, for
the 52 weeks ended January 28, 2006. These expenses increased as a percentage of net sales between periods primarily due to the
implementation of 123R which added 53 basis points in stock based compensation. Other trends experienced included:
•
•
•
an increase in legal fees as a percent of net sales of 8 basis points related to pending litigation;
an increase in credit/debit card fees as a percent of net sales of 7 basis points related to the increased use of these
tenders by our customers over cash; and
decreases as a percent of net sales in insurance costs of 11 basis points and freight and shipping costs of 5 basis points.
Depreciation and amortization. Depreciation and amortization as a percentage of net sales was 2.1% in the 53 weeks
ended February 3, 2007, and 2.3% in the 52 weeks ended January 28, 2006. We experienced a slight trend upwards in the terms
of our new store leases which contributed to the leveraging of depreciation expense as leasehold improvements were expensed
over the longer lease term which, in most cases, is less than the estimated useful life of the asset. Our average lease term of
leases added in Fiscal 2007 was 7.44 years compared to 7.15 years for leases added in Fiscal 2006.
Provision for income taxes. Provision for income taxes as a percentage of net sales was 4.8% in the 53 weeks ended
February 3, 2007, compared to 4.4% for the 52 weeks ended January 28, 2006. The combined federal, state and local effective
income tax rate as a percentage of pre-tax income was 39.2% for Fiscal 2007 and 36.4% for Fiscal 2006. The increase in rate
over last year is primarily the result of the permanent difference related to incentive stock options arising as a result of applying
the provisions of SFAS No. 123R.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings, stock repurchases and working capital requirements. Our
working capital requirements are somewhat seasonal in nature and typically reach their peak near the end of the third and the
beginning of the fourth quarters of our fiscal year. Historically, we have funded our cash requirements primarily through our cash
flow from operations and occasionally from borrowings under our revolving credit facilities.
Our Consolidated Statements of Cash Flows are summarized as follows (in thousands):
February 2,
2008
Fiscal Year Ended
February 3,
2007
January 28,
2006
Net cash provided by operating activities:
Net cash used in investing activities:
Net cash used in financing activities:
Net (decrease) increase in cash and cash equivalents
Operating Activities.
$
$
$
48,022
(16,549)
(51,098)
(19,625)
36,462
(2,997)
(29,042)
4,423
$
$
$
38,061
(28,532)
(41,927)
(32,398)
Cash flow from operations is seasonal in our business. Typically, we use cash flow from operations to increase inventory
in advance of peak selling seasons, such as pre-Christmas and back-to-school. Inventory levels are reduced in connection with
higher sales during the peak selling seasons and this inventory reduction, combined with proportionately higher net income, typically
produces a positive cash flow.
- 21 -
Net cash provided by operating activities was $48.0 million for the 52 weeks ended February 2, 2008 compared with net
cash provided by operating activities of $36.5 million and $38.1 million in the 53 weeks ended February 3, 2007 and the 52 weeks
ended January 28, 2006, respectively.
Inventory levels have continued to increase year over year as the number of stores have increased. The increase in
inventory used cash of $16.0 million, $16.4 million and $5.9 million during Fiscal 2008, 2007, and 2006, respectively, while the
accounts payable increase provided cash of $22.1 million during Fiscal 2008 as we managed cash while protecting vendor discounts.
During Fiscal 2007 and Fiscal 2006, the accounts payable decrease used cash of $3.9 million and $4.3 million, respectively. Net
income provided cash of $30.3 million, $38.1 million and $33.6 million during Fiscal 2008, 2007 and 2006, respectively. Also
offsetting uses of cash were non-cash charges, including depreciation and amortization expense of $12.2 million, $10.9 million and
$10.1 million during Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively, and stock-based compensation expense of $3.7 million
and $2.8 million during Fiscal 2008 and Fiscal 2007, respectively. A shift in the timing of certain equity awards contributed to the
increase in stock-based compensation in Fiscal 2008 over Fiscal 2007.
Investing Activities.
Cash used in investing activities in the fiscal periods ended February 2, 2008, February 3, 2007 and January 28, 2006
totaled $16.5 million, $3.0 million and $28.5 million, respectively. Net purchases of short-term investments were $0.2 million
during Fiscal 2008 compared to net redemptions of short-term investments of $13.2 million during Fiscal 2007 and net purchases of
short-term investments of $13.2 million during Fiscal 2006. Gross capital expenditures used $16.4 million, $16.3 million and $15.3
million during Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively. In Fiscal 2008, short-term investments were redeemed for
cash used in our stock repurchase program.
We use cash in investing activities to build new stores and remodel or relocate existing stores. Furthermore, net cash used
in investing activities includes purchases of information technology assets and expenditures for our distribution facility and corporate
headquarters.
We opened 84 new stores and relocated and/or remodeled 13 existing stores during the 52 weeks ended February 2, 2008.
We opened 74 new stores and relocated and/or remodeled 7 existing stores during the 53 weeks ended February 3, 2007. We opened
74 new stores and relocated and/or remodeled 9 existing stores during the 52 weeks ended January 28, 2006.
We estimate the cash outlay for capital expenditures in the fiscal year ended January 31, 2009 will be approximately $24.0
million, which relates to the opening of approximately 85 new stores, remodeling of selected existing stores, information system
upgrades and various improvements at our headquarters and distribution center. Of the total budgeted dollars for capital
expenditures for Fiscal 2009, we anticipate that approximately 70% will be related to the opening of new stores and remodeling and
or relocating existing stores. Approximately 21% will be related to information systems with the remaining 9% related primarily to
office expansion and security equipment for our stores.
As of February 2, 2008, we had an approximate $0.1 million outlay remaining on enhancements to our JDA system
relating to inventory planning and replenishment. We anticipate that these upgrades will be implemented in the first half of Fiscal
2009 and believe these enhancements will help us develop better efficiencies in the allocation and planning of inventory and better
enable us to analyze and generally improve sales across all markets and merchandise by allowing us to better analyze inventory at the
store level.
Financing Activities.
Net cash used in financing activities was $51.1 million in the 52 weeks ended February 2, 2008 compared to $29.0 million
in the 53 weeks ended February 3, 2007 and $41.9 million in the 52 weeks ended January 28, 2006, respectively. The cash
fluctuation as compared to prior fiscal years was primarily the result of the repurchase of our common stock. We expended $52.7
million, $33.0 million and $45.3 million on repurchases of our common stock during Fiscal 2008, Fiscal 2007 and Fiscal 2006,
respectively.
Financing activities also consisted of proceeds from transactions in our common stock and the excess tax benefit from the
exercise of incentive stock options. As stock options are exercised, we will continue to receive proceeds and expect a tax deduction;
however, the amounts and timing cannot be predicted.
At February 2, 2008, we had a revolving credit facility that allows borrowings up to $30.0 million and which renews in
August 2008. Under the provisions of this facility, we can draw down funds when our main operating account falls below $100,000.
The facility does not require a commitment or agency fee and there are no covenant restrictions associated with the facility. We plan
to renew this facility as it expires and do not anticipate any problems in doing so; however, no assurance can be given that we will be
granted a renewal or terms which are acceptable to us.
Subsequent to fiscal year ended February 2, 2008, we entered into an additional revolving credit facility that allows
borrowings up to $50.0 million to facilitate our stock repurchase program. The facility is unsecured and expires on December 31,
2008. There are no covenant restrictions on this facility.
- 22 -
At February 3, 2007, we had a revolving credit facility that allowed borrowings up to $15.0 million and renewed annually
in November. Under the provisions of this facility, we could draw down funds when our main operating account fell below
$100,000. The facility did not require a commitment or agency fee and there were no covenant restrictions associated with the
facility.
At January 28, 2006, we had two unsecured credit facilities that allowed borrowings up to $15.0 million and $10.0 million
and which renewed annually in November. Under the provisions of these facilities, we could draw down funds when our main
operating account fell below $100,000. Neither facility required a commitment or agency fee nor were there any covenant
requirements.
As of February 2, 2008, February 3, 2007 and January 28, 2006, we had no debt outstanding under any of these facilities.
Based on our current operating and store opening plans and plans for the repurchase of our common stock, we believe we can fund
our cash needs for the foreseeable future through cash generated from operations and, if necessary, through periodic future
borrowings against our credit facilities.
The following table lists the aggregate maturities of various classes of obligations and expiration amounts of various
classes of commitments related to Hibbett Sports, Inc. at February 2, 2008:
Payments due under contractual obligations (in thousands)
Long-term Debt
Obligations (1)
Capital Lease
Obligations (2)
Operating Lease
Obligations (3)
Total
Fiscal 2009
Fiscal 2010
Fiscal 2011
Fiscal 2012
Fiscal 2013
Thereafter
-
$
-
-
-
-
-
$
-
-
$
-
-
-
-
-
$
-
$
$
40,332
35,676
28,735
22,635
17,519
32,280
177,177
40,332
35,676
28,735
22,635
17,519
32,280
177,177
$
$
(1) See “Debt” – Consolidated Financial Statement Note 5 in Item 8.
(2) As of Fiscal 2008, we do not have any capital lease obligations.
(3) See “Lease Commitments” – Consolidated Financial Statements Note 9 in Item 8.
Approximately $2.3 million of unrecognized tax benefits have been recorded as liabilities in accordance with FIN No.
48 and we are uncertain as to if or when such amounts may be settled.
Off-Balance Sheet Arrangements
We have not provided any financial guarantees as of February 2, 2008. All purchase obligations are cancelable and
therefore are not included in the table above.
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising
capital, incurring debt or operating our business. We do not have any arrangements or relationships with entities that are not
consolidated into the financial statements.
Inflation and Other Economic Factors
Our ability to provide quality merchandise on a profitable basis may be subject to economic factors and influences that
we cannot control. National or international events, including the war on terrorism and unrest in the Middle East, could lead to
disruptions in economies in the United States or in foreign countries where a significant portion of our merchandise is
manufactured. These and other factors could increase our merchandise costs and other costs that are critical to our operations.
Consumer spending could also decline because of economic pressures.
Merchandise Costs. Based on current economic conditions, we expect that any increase in merchandise costs per unit
will be offset by improved vendor discounts and increased retail prices in Fiscal 2009.
Freight Costs. We continued to experience rising fuel costs during Fiscal 2008 that increased our freight costs and we
expect that fuel costs may continue to rise in Fiscal 2009. We do not expect increases in freight costs to have a material effect on
our results of operations as we continue to leverage the costs associated with inbound freight against the cost of outbound freight.
- 23 -
Minimum Wage. Recent increases in the mandated minimum wage have impacted our payroll costs. Congress has
approved federal minimum wage increases by approximately 41% over a three year period with the first increase of
approximately 14% taking place during Fiscal 2008. By July 2009, the federal minimum wage will increase an additional 24.0%.
All of the states we operate in have either passed legislation to raise the minimum wage or their minimum wage is increasing in
conjunction with the federal minimum wage. Some of the states have automatic provision for future increase based on the
Consumer Price Index or on inflation.
Insurance Costs. In Fiscal 2008, we continued to experience a decrease in general business insurance that began in
Fiscal 2007, when we changed to a partially self-insured program for our workers’ compensation and general liability. During
both fiscal periods, we have experienced an increase in our average monthly health insurance claims. 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 same period, health insurance declined due to a reduction in claims. In Fiscal
2009, we expect that general business insurance costs will stabilize while health insurance costs will increase slightly.
Recent Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities – Including an Amendment of FASB Statement 115.” This statement permits companies to elect to measure certain
assets and liabilities at fair value. At each reporting date subsequent to adoption, unrealized gains and losses on items for which
the fair value option has been elected must be reported in earnings. SFAS No. 159 was effective as of the beginning of the first
fiscal year that began after November 15, 2007, or February 3, 2008 for our Company. The adoption of SFAS No. 159 did not
have a material effect on our consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value measurements; however, SFAS No.
157 does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. We implemented SFAS No. 157 on February 3, 2008 and the adoption of
SFAS No. 157 did not have a material effect on our consolidated financial statements.
Our Critical Accounting Policies
Our critical 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 the SEC Staff
Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements,” as amended by SAB No. 104, “Revenue
Recognition.”
Retail merchandise sales occur on-site in our 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 may make
further payments in installments, but the entire purchase price for merchandise placed on layaway must be received by us within
30 days. The down payment and any installments are recorded by us as short-term deferred revenue until the customer pays the
entire purchase price for the merchandise. We 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.
The cost of coupon sales incentives is 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. Revenue is subsequently recognized at the time the
customer redeems the gift cards and takes possession of the merchandise. Unredeemed gift cards are recorded as a current
liability.
It is not our policy to take unclaimed layaway deposits and unredeemed gift cards into income. As of February 2, 2008,
February 3, 2007 and January 28, 2006, there was no breakage revenue recorded in income. The deferred revenue liability for
layaway deposits and unredeemed gift cards was $2.1 million and $1.8 million at February 2, 2008 and February 3, 2007,
respectively. Any unrecognized breakage revenue is immaterial. We escheat unredeemed gift cards.
Inventory Valuation.
Lower of Cost or Market: Beginning in Fiscal 2008, inventory is valued using the lower of weighted-average cost or
market method. Market is determined based on estimated net realizable value. We regularly review inventories to determine if
the carrying value exceeds realizable value, and we record a reserve to reduce the carrying value to net realizable value as
necessary. We account for obsolescence as part of our lower of cost or market reserve based on historical trends and specific
identification. As of February 2, 2008, the reserve was $1.5 million. There was no amount reserved as of February 3, 2007. Our
inventory valuation reserves contain uncertainties as the calculations require management to make assumptions and to apply
judgment regarding such factors as market conditions, the selling environment, historical results and current inventory trends.
- 24 -
Prior to Fiscal 2008, cost was assigned to store inventories using the retail inventory method. In using this method, the
valuation of inventories at cost and the resulting gross margins were computed by applying a calculated cost-to-retail ratio to the
retail value of inventories. The retail method is an averaging method that has been widely used in the retail industry and results in
valuing inventories at lower of cost or market when markdowns are taken as a reduction of the retail value of inventories on a
timely basis.
Our management believes that the application of the cost method is preferable as compared to the retail method because
it increases the organizational focus on the actual margin realized on each sale.
Shrink Reserves: We accrue for inventory shrinkage based on the actual historical shrink results of our most recent
physical inventories. These estimates are compared to actual results as physical inventory counts are performed and reconciled to
the general ledger. Store counts are typically performed on a cyclical basis and the distribution center’s counts are performed
mid-year and in late December or early January every year. As of February 2, 2008 and February 3, 2007, the reserve was $0.9
million and $2.0 million, respectively.
Accrued Expenses. On a monthly basis, we estimate certain material expenses in an effort to record those expenses in
the period incurred. Our most material estimates relate to payroll and payroll tax expenses, property taxes, insurance-related
expenses and utility expenses. Estimates are primarily based on current activity and historical results and are adjusted as our
estimates change. Differences in our estimates and assumptions could result in an accrual materially different from the accrual
calculated. Historically, the differences in these accruals have not had a material effect on our financial condition or results of
operations.
Income Taxes. We estimate the annual tax rate based on projected taxable income for the full year and record a
quarterly income tax provision in accordance with the anticipated annual rate. As the year progresses, we refine the estimates of
the year’s taxable income as new information becomes available, including year-to-date financial results. This continual
estimation process often results in a change to our expected effective tax rate for the year. When this occurs, we adjust the
income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the
expected annual tax rate. Significant judgment is required in determining our effective tax rate and in evaluating our tax position
and changes in estimates could materially impact our results of operations and financial position.
Uncertain Tax Positions: We account for uncertain tax positions in accordance with FIN No. 48. The application of
income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we
are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and
guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and
judgments can materially affect amounts recognized in the consolidated balance sheets and statements of income. See Note 8 to
the Consolidated Financial Statements, “Income Taxes”, for additional detail on our uncertain tax positions.
Litigation Accruals. Estimated amounts for claims that are probable and can be reasonably estimated are recorded as
liabilities in the consolidated balance sheets. The likelihood of a material change in these estimated accruals would be dependent
on new claims as they may arise and the favorable or unfavorable outcome of a particular litigation. As additional information
becomes available, we assess the potential liability related to pending litigation and revise estimates as appropriate. Such
revisions in estimates of the potential liability could materially impact our results of operations and financial position.
Impairment of Assets. We continually evaluate whether events and circumstances have occurred that indicate the
remaining balance of long-lived assets and intangibles may be impaired and not recoverable. Our policy is to recognize any
impairment loss on long-lived assets as a charge to current income when certain events or changes in circumstances indicate that
the carrying value of the assets may not be recoverable. Impairment is assessed considering the estimated undiscounted cash
flows over the asset’s remaining life. If estimated cash flows are insufficient to recover the investment, an impairment loss is
recognized based on a comparison of the cost of the asset to fair value less any costs of disposition.
Stock-Based Compensation. We use the Black-Scholes option-pricing model to estimate the fair value at the date of
grant of stock options granted under our 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 period
that captures the relative volatility of our stock. We use the risk free interest rate on the date of grant or purchase date based on
the U.S. Treasury rate with maturities approximating the expected lives of our options. The effects on net income and earnings
per shares (EPS) of stock-based compensation expense, net of tax, calculated using the fair value of stock options and stock
purchase rights in accordance with the Black-Scholes options-pricing model are not necessarily representative of the effects of
our results of operations in the future. In addition, the compensation expense utilizes an option-pricing model developed for
traded options with relatively short lives. Our stock option grants have a life of up to ten years and are not transferable.
Therefore, the actual fair value of a stock option grant may be different from our estimates. We believe that our estimates
incorporate all relevant information and represent a reasonable approximation in light of the difficulties involved in valuing non-
traded stock options. All estimates and assumptions are regularly evaluated and updated when applicable.
- 25 -
Insurance Accruals. We use a combination of insurance and self-insurance for a number of risks including employee-
related health benefits, a portion of which is paid by our employees, workers’ compensation and general liability. The estimates
and accruals for these liabilities associated with these risks are regularly evaluated for adequacy based on the most current
available information, including historical claims experience and expected future claims costs.
Operating Leases. We lease our retail stores and distribution center under operating leases. Many lease agreements
contain rent holidays, rent escalation clauses and/or contingent rent provisions. We recognize rent expense on a straight-line basis
over the expected lease term, including cancelable option periods where failure to exercise such options would result in an
economic penalty. We use a time period for our straight-line rent expense calculation that equals or exceeds the time period used
for depreciation. In addition, the commencement date of the lease term is the earlier of the date when we become legally
obligated for the rent payments or the date when we take possession of the building for initial setup of fixtures and merchandise.
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 not anticipate declaring
or paying cash dividends on our common stock for the foreseeable future. Any future decision to declare or pay dividends will be at
the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital
requirements and such other factors as our Board of Directors deems relevant.
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 SEC, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer (See Item 9A).
Quarterly and Seasonal 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 mitigated by the strong product demand in the spring 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.
Although our operations are influenced by general economic conditions, we do not believe that, historically, inflation has
had a material impact on our results of operations as we are generally able to pass along inflationary increases in costs to our
customers. However, in recent periods, we have experienced an impact on overall sales due to a consumer spending slowdown
spawned by higher gas prices and a slump in the housing market.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Our financial condition, results of operations and cash flows are subject to market risk from interest rate fluctuations on
our credit facilities, which bear interest at rates that vary with LIBOR, prime or quoted cost of funds rates. During the majority
of Fiscal 2008, we had only one facility that allowed borrowings up to $15.0 million. In August 2007, we renewed this facility
and increased the allowed borrowings to $30.0 million. During the majority of Fiscal 2007 and all of Fiscal 2006, we had two
operating facilities allowing combined borrowings up to $25.0 million. Effective November 2006, we elected to renew only one
facility that allowed borrowings up to $15.0 million and renewed annually.
In February 2008, subsequent to our fiscal year end, we added another facility which allows borrowings up to $50.0
million which we intend to use for our stock repurchase program. The new facility expires in December 2008 and is renewable at
that time. Interest rates on this facility vary with the British Bankers Association (BBA) LIBOR rate.
At the end of Fiscal 2008, Fiscal 2007 and Fiscal 2006, we had no borrowings outstanding under any credit facility.
There were 106 days during the fifty-two weeks ended February 2, 2008, where we incurred borrowings against our credit
facility for an average borrowing of $7.8 million. During Fiscal 2008, the maximum amount outstanding against these
agreements was $18.4 million and the weighted average interest rate was 5.64%. There were twenty-four days during the fifty-
three weeks ended February 3, 2007, where we incurred borrowings against our credit facilities for an average and maximum
borrowing of $2.5 million and $5.1 million and an average interest rate of 6.12%. At no time during the fifty-two weeks ended
January 28, 2006, did we incur borrowings against our credit facility. 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.
- 26 -
Item 8. Consolidated Financial Statements and Supplementary Data.
The following 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 February 2, 2008 and February 3, 2007
• Consolidated Statements of Operations for the fiscal years ended February 2, 2008, February 3, 2007
and January 28, 2006
• Consolidated Statements of Cash Flows for the fiscal years ended February 2, 2008, February 3, 2007
and January 28, 2006
• Consolidated Statements of Stockholders’ Investment for fiscal years ended February 2, 2008, February
3, 2007 and January 28, 2006
• 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 consolidated
financial statements or notes thereto.
- 27 -
Report of Independent 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
February 2, 2008 and February 3, 2007, and the related consolidated statements of operations, stockholders’ investment, and cash
flows for each of the years in the three-year period ended February 2, 2008. We also have audited the Company’s internal control
over financial reporting as of February 2, 2008, based on the criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting (Item 9A(b)). Our responsibility is to express an opinion on these
consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial 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 of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As discussed in note 1 to the consolidated financial statements, effective February 4, 2007, the Company changed its method of
accounting for inventory and adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109. As discussed in note 3 to the consolidated financial statements, effective January 29,
2006, the Company changed its method of accounting for share-based payments.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Hibbett Sports, Inc. and subsidiaries as of February 2, 2008 and February 3, 2007, and the results of their operations
and their cash flows for each of the years in the three-year period ended February 2, 2008, in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, Hibbett Sports, Inc. and subsidiaries
maintained, in all material respects, effective internal control over financial reporting as of February 2, 2008, based on the criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
/s/ KPMG LLP
Birmingham, Alabama
April 1, 2008
- 28 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share information)
ASSETS
February 2, 2008
February 3, 2007
Current Assets:
Cash and cash equivalents
Short-term investments
Trade receivables, net
Accounts receivable, other
Inventories
Prepaid expenses and other
Deferred income taxes, net
Total current assets
Property and Equipment:
Land and building
Equipment
Furniture and fixtures
Leasehold improvements
Construction in progress
Less accumulated depreciation and amortization
Total property and equipment
Non-current Assets:
Deferred income taxes
Other, net
Total non-current assets
Total Assets
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable
Accrued income taxes
Accrued payroll expense
Deferred rent
Other accrued expense
Total current liabilities
Non-current Liabilities:
Deferred rent
Accrued income taxes
Other
Total non-current liabilities
Stockholders' Investment:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
no shares issued
Common stock, $.01 par value, 80,000,000 shares authorized,
36,162,201 and 36,047,732 shares issued at February 2, 2008
and February 3, 2007, respectively
Paid-in capital
Retained earnings
Treasury stock at cost; 6,723,113 and 4,306,413 shares repurchased
at February 2, 2008 and February 3, 2007, respectively
Total stockholders' investment
Total Liabilities and Stockholders' Investment
$
10,742
191
1,899
3,676
141,406
5,348
2,725
165,987
$
30,367
-
1,585
3,066
125,240
5,024
1,607
166,889
245
40,338
20,991
57,599
2,564
121,737
75,232
46,505
245
32,946
18,846
50,767
4,417
107,221
64,648
42,573
3,780
462
4,242
216,734
$
3,217
174
3,391
212,853
$
$
64,125
688
4,432
4,379
2,980
76,604
$
42,016
5,338
6,592
4,228
2,287
60,461
18,012
2,968
95
21,075
15,715
-
36
15,751
-
-
362
87,142
181,555
360
81,916
151,697
(150,004)
119,055
216,734
$
(97,332)
136,641
212,853
$
See accompanying notes to consolidated financial statements.
- 29 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share information)
Net sales
Cost of goods sold, including distribution
center and store occupancy costs
Gross profit
Store operating, selling and administrative
expenses
Depreciation and amortization
Operating income
Interest income
Interest expense
Interest income, net
Income before provision for income taxes
Provision for income taxes
Net income
Basic earnings per share
Diluted earnings per share
Weighted average shares outstanding:
Basic
Diluted
February 2, 2008
(52 weeks)
Fiscal Year Ended
February 3, 2007
(53 weeks)
January 28, 2006
(52 weeks)
$
520,720
$
512,094
$
440,269
351,876
168,844
108,463
12,154
48,227
582
151
431
48,658
338,963
173,131
100,461
10,932
61,738
906
30
876
62,614
293,368
146,901
85,060
10,119
51,722
1,170
24
1,146
52,868
$
18,329
30,329
$
24,541
38,073
$
19,244
33,624
$
$
0.98
0.96
$
$
1.19
1.17
$
$
1.00
0.98
31,049,058
31,525,050
32,094,127
32,619,839
33,605,568
34,393,026
See accompanying notes to consolidated financial statements.
- 30 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share information)
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Deferred income tax expense (benefit), net
Excess tax benefit from stock option exercises
Loss on disposal of assets, net
Stock-based compensation
Changes in operating assets and liabilities:
Trade receivables, net
Accounts receivable, other
Inventories
Prepaid expenses and other current assets
Accrued and refundable income taxes
Other non-current assets
Accounts payable
Deferred rent, non-current
Accrued expenses
Net cash provided by operating activities
Cash Flows From Investing Activities:
(Purchase) sale of short-term investments, net
Capital expenditures
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash Flows From Financing Activities:
Cash used for stock repurchases
Excess tax benefit from stock option exercises
Proceeds from options exercised and purchase of
shares under the employee stock purchase plan
Net cash used in financing activities
February 2,
2008
Fiscal Year Ended
February 3,
2007
January 28,
2006
$
30,329
$
38,073
$
33,624
12,154
673
(520)
230
3,677
(314)
(610)
(16,022)
(326)
(4,154)
(288)
22,109
2,296
(1,212)
48,022
(191)
(16,376)
18
(16,549)
(52,672)
520
1,054
(51,098)
10,932
(1,073)
(1,232)
370
2,837
(55)
149
(16,378)
(3,530)
6,005
(19)
(3,913)
1,513
2,783
36,462
13,227
(16,278)
54
(2,997)
(32,958)
1,232
2,684
(29,042)
10,119
(1,918)
-
465
15
(263)
375
(5,853)
(501)
823
(15)
(4,259)
3,478
1,971
38,061
(13,227)
(15,348)
43
(28,532)
(45,263)
-
3,336
(41,927)
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
(19,625)
30,367
10,742
$
4,423
25,944
30,367
$
(32,398)
58,342
25,944
$
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest
Income taxes, net of refunds
$
$
151
22,031
$
$
30
19,608
$
$
24
20,338
Supplemental Schedule of Non-Cash Financing Activities:
Deferred board compensation
Shares awarded to satisfy deferred board compensation
$
33
1,306
$
31
1,142
$
15
581
See accompanying notes to consolidated financial statements.
- 31 -
(45,263)
(64,374)
6,373
(45,263)
124,773
38,073
5,223
(1,307)
HIBBETT SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT
(in thousands, except share information)
Common Stock
Treasury Stock
Number of
Shares
Amount
Paid-In
Capital
Retained
Earnings
Number of
Shares
Amount
Total
Stockholders'
Investment
Balance-January 29, 2005
35,232,998
$
352
$
68,798
$
80,000
1,268,100
$
(19,111)
$
130,039
33,624
33,624
Net income
Issuance 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
501,754
5
6,368
1,859,600
Balance-January 28, 2006
35,734,752
357
75,166
113,624
3,127,700
38,073
Net income
Issuance of shares from the
employee stock purchase plan and
the exercise of stock options, net of
tax benefit $2,539
Adjustment to income tax benefit
from exercises of employee stock
options
Purchase of shares under the stock
repurchase program
Stock-based compensation
312,980
3
5,220
(1,307)
2,837
1,178,713
(32,958)
(32,958)
2,837
Balance-February 3, 2007
36,047,732
360
81,916
151,697
4,306,413
(97,332)
136,641
Net income
Cumulative effect of adopting FIN
No. 48
Cumulative effect of change in
accounting principle, net
Issuance of shares from the
employee stock purchase plan and
the exercise of stock options, net of
tax benefit $275
Purchase of shares under the stock
repurchase program
Stock-based compensation
Balance-February 2, 2008
30,329
(554)
83
114,469
2
1,549
30,329
(554)
83
1,551
2,416,700
(52,672)
(52,672)
3,677
3,677
36,162,201
$
362
$
87,142
$
181,555
6,723,113
$
(150,004)
$
119,055
See accompanying notes to consolidated financial statements.
- 32 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Hibbett Sports, Inc. is an operator of sporting goods retail stores in small to mid-sized markets predominately in the
Sunbelt, Mid-Atlantic and the lower Midwest. Our fiscal year ends on the Saturday closest to January 31 of each year. The
consolidated statement of operations for fiscal year ended February 2, 2008, includes 52 weeks of operations. The consolidated
statement of operations for fiscal year ended February 3, 2007, includes 53 weeks of operations while the consolidated statements
of operations for fiscal year ended January 28, 2006 includes 52 weeks of operations. Our merchandise assortment features a core
selection of brand name merchandise emphasizing individual team sports equipment, athletic and fashion apparel and footwear
related accessories. We complement this core assortment with a selection of localized apparel and accessories designed to appeal
to a wide range of customers within each market.
Accounting Changes
Change in Accounting Principle – Inventories
On February 4, 2007, the first day of Fiscal 2008, we changed our inventory valuation method. Previously, inventories
were principally valued at the lower of cost or market using the retail method. Commencing in Fiscal 2008, inventories are
principally valued at the lower of cost or market, using the weighted-average cost method.
SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and FASB
Statement No. 3,” requires a retrospective application of changes in accounting principles. However the effect of this change in
accounting principle for periods prior to Fiscal 2008 is not determinable, as the period-specific information required to value
inventory using the weighted-average cost method is not available for periods prior to February 4, 2007. This change was
recognized as a net increase of $143,000 to inventory, an increase of $60,000 to deferred tax liabilities and a cumulative effect to
retained earnings of $83,000. This change in valuation method did not have a material impact on net income or diluted earnings
per share.
We believe the new accounting method of weighted-average cost is preferable to the retail method of inventory
valuation because it will produce more accurate inventory amounts reported in the balance sheet and, in turn, more accurate cost
of sales in the income statement. The new JDA Merchandising System, implemented in Fiscal 2008, has facilitated our ability to
value our inventory on the weighted-average cost method.
Adoption of FIN No. 48
On February 4, 2007,we adopted the provisions of FASB Interpretation No. 48 (FIN No. 48), “Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109.” FIN No. 48 clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for
Income Taxes,” by prescribing the financial statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. Under FIN No. 48, the financial statement effects of a tax position should initially be recognized when it is
more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. A tax position that
meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest amount of tax
benefit that has a greater then 50% likelihood of being realized upon ultimate settlement with a taxing authority.
As a result of implementing FIN No. 48, we increased the liability for unrecognized tax benefits by $3.8 million,
increased deferred tax assets by $3.2 million and reduced retained earnings as of February 4, 2007, by $0.6 million. Our total
liability for unrecognized tax benefits as of February 4, 2007 amounted to $5.7 million. As of February 2, 2008, our total liability
for unrecognized tax benefits amounted to $3.0 million of which $1.0 million would affect the effective tax rate if recognized.
We filed for an accounting method change with the Internal Revenue Service before the end of Fiscal 2008 which
resulted in a reduction of approximately $2.9 million of our liability for prior year unrecognized tax benefits. We expect to
recognize this liability ratably over the next four years.
We classify interest and penalties recognized on the liability for unrecognized tax benefits as income tax expense. The
associated amounts included in our total liability for unrecognized tax benefits were $345,000 as of February 2, 2008 and
$567,000 as of February 3, 2007.
- 33 -
Principles of Consolidation
The consolidated financial statements of our Company include its accounts and the accounts of all wholly-owned
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Occasionally, certain
reclassifications are made to conform previously reported data to the current presentation. Such reclassifications had no impact
on total assets, net income or stockholders’ investment.
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect (1) the reported amounts of certain
assets and liabilities and disclosure of certain contingent assets and liabilities at the date of the consolidated financial statements
and (2) the reported amounts of certain revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Reportable Segments
Given the economic characteristics of the store formats, the similar nature of products offered for sale, the type of
customers, the methods of distribution and how our Company is managed, our operations constitute only one reportable segment.
Customers
No customer accounted for more than 5.0% of our sales during the years ended February 2, 2008, February 3, 2007 and
January 28, 2006.
Vendor Arrangements
We enter into arrangements with some of our vendors that entitle us to a partial refund of the cost of merchandise
purchased during the year or reimbursement of certain costs we incur to advertise or otherwise promote their product. The
volume based rebates, supported by a vendor agreement, are estimated throughout the year and reduce the cost of inventory and
cost of goods sold during the year. This estimate is regularly monitored and adjusted for current or anticipated changes in
purchase levels and for sales activity.
We also receive vendor support through a variety of other programs, including markdown reimbursements, vendor
compliance and defective merchandise. If the payment is a reimbursement for costs incurred, it is offset against those related
costs; otherwise, it is treated as a reduction to the cost of merchandise. Markdown reimbursements related to merchandise that
has been sold are negotiated by our merchandising teams and are credited directly to Cost of Goods Sold in the period received.
If vendor funds are received prior to merchandise being sold, they are recorded as a reduction of merchandise cost.
Cost of Goods Sold
We include inbound freight charges, merchandise purchases, store occupancy costs and a portion of our distribution
costs related to our retail business in cost of goods sold. Outbound freight charges associated with moving merchandise to and
between stores are included in store operating, selling and administrative expenses.
Advertising
We expense advertising costs when incurred. 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 advertisements are run.
The following table presents the components of our advertising expense (in thousands):
Gross advertising costs
Advertising reimbursements
Net advertising costs
February 2,
2008
$
6,519
(3,609)
2,910
Fiscal Year Ended
February 3,
2007
$
5,194
(3,225)
1,969
January 28,
2006
$
4,727
(2,935)
1,792
$
$
$
- 34 -
Stock Repurchase Program
In August 2004, our Board of Directors (the Board) authorized a plan to repurchase our common stock. The Board has
subsequently authorized increases to this plan with a current authorization effective November 2007 of $250.0 million. Stock
repurchases may be made in the open market or in negotiated transactions until January 30, 2010, with the amount and timing of
repurchases dependent on market conditions and at the discretion of our management.
We repurchased 2,416,700, 1,178,713 and 1,859,600 shares of our common stock during years ended February 2, 2008,
February 3, 2007 and January 28, 2006, respectively, at a cost of approximately $52.7 million, $33.0 million and $45.3 million,
respectively. As of February 2, 2008, we had repurchased a total of 6,723,113 shares of our common stock at an approximate cost
of $150.0 million. We have approximately $100.0 million available for stock repurchase as of February 2, 2008.
Cash and Cash Equivalents
We consider all short-term, highly liquid investments with original maturities of 90 days or less, including commercial
paper and money market funds, to be cash equivalents. Amounts due from third party credit card processors for the settlement of
debit and credit card transactions are included as cash equivalents as they are generally collected within three business days.
Cash equivalents related to credit and debit card transactions at February 2, 2008 and February 3, 2007 were $2.4 million and
$2.2 million, respectively.
Short-Term Investments
All investments with original maturities of greater than 90 days are accounted for in accordance with SFAS No. 115,
“Accounting for Certain Investments in Debt and Equity Securities.” We determine the appropriate classification at the time of
purchase. We held approximately $191,000 of investments in securities at February 2, 2008. We did not hold any investments in
securities at February 3, 2007. Our investments in securities primarily consisted of municipal bonds classified as available-for-
sale. Investments in these securities are recorded at cost, which approximates fair value. Despite the long-term nature of their
stated contractual maturities, we believe there is a ready liquid market for these securities. As a result, there are no cumulative
gross unrealized holding gains (losses) or gross realized gains (losses) from our securities. All income generated from these
securities is recorded as interest income. We continually evaluate our short-term investments for other than temporary
impairment.
Trade and Other Accounts Receivable
Trade accounts receivable consists primarily of amounts due to us from sales to educational institutions and youth
associations. We do not require collateral and we maintain an allowance for potential uncollectible accounts based on an analysis
of the aging of accounts receivable at the date of the financial statements, historical losses and existing economic conditions,
when relevant. The allowance for doubtful accounts at February 2, 2008 and February 3, 2007 was $46,000 and $34,000,
respectively.
Other accounts receivable consisted primarily of tenant allowances due from landlords and cooperative advertising due
from vendors, all of which are deemed to be collectible.
Inventories and Valuation
Lower of Cost or Market: Beginning in Fiscal 2008, inventories are valued using the lower of weighted-average cost or
market method. Market is determined based on estimated net realizable value. We regularly review inventories to determine if
the carrying value exceeds realizable value, and we record a reserve to reduce the carrying value to net realizable value as
necessary. We account for obsolescence as part of our lower of cost or market reserve based on historical trends and specific
identification. As of February 2, 2008, the reserve was $1.5 million. There was no amount reserved as of February 3, 2007. A
determination of net realizable value requires significant judgment and estimates.
Previously, we valued inventories at the lower of cost or market using the retail inventory method of accounting, with
cost determined on a first-in, first-out basis and market based on the lower of replacement cost or estimated realizable value. We
believe the cost method is preferable as compared to the retail method because it will increase the organizational focus on the
actual margin realized on each sale.
Shrinkage: We accrue for inventory shrinkage based on the actual historical shrink results of our most recent physical
inventories. These estimates are compared to actual results as physical inventory counts are performed and reconciled to the
general ledger. Store counts are typically performed on a cyclical basis and the distribution center’s counts are performed mid-
year and in late December or early January every year. As of February 2, 2008 and February 3, 2007, the reserve was $0.9
million and $2.0 million, respectively.
- 35 -
Inventory Purchase Concentration: Our business is dependent to a significant degree upon close relationships with our
vendors. Our largest vendor, Nike, represented approximately 48.5%, 47.3% and 44.9% of our purchases in Fiscal 2008, Fiscal
2007 and Fiscal 2006, respectively. Our next largest vendor in Fiscal 2008 represented approximately 9.3%, 9.4% and 11.3% of
our purchases in Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively. Our third largest vendor in Fiscal 2008 represented
approximately 6.6%, 4.8% and 3.2% of our purchases in Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively.
Property and Equipment
Property and equipment are recorded at cost. Depreciation on assets is principally provided using the straight-line
method over their estimated service lives (3 to 5 years for equipment, 7 years for furniture and fixtures and 39 years for
buildings) or, in the case of leasehold improvements, the shorter of the initial term of the underlying leases or the estimated
economic lives of the improvements (typically 3 to 10 years).
Construction in progress is comprised primarily of property and equipment related to unopened stores and costs
associated with technology upgrades at period end. At fiscal year ended February 3, 2007, construction in progress was comprised
mostly of system costs associated with the JDA Merchandising System which was implemented on February 4, 2007.
Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold,
retired or otherwise disposed of are removed from property and equipment and the related gain or loss is credited or charged to
income.
Statement of Position (SOP) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use,” provides guidance on accounting for such costs. SOP 98-1 requires computer software costs that are incurred in
the preliminary project stage to be expensed as incurred. Once the capitalization criteria of SOP 98-1 have been met, directly
attributable development costs should be capitalized. It also provides that upgrade and maintenance costs should be expensed.
Our treatment of such costs is consistent with SOP 98-1, with the costs capitalized being amortized over the expected useful life
of the software. For the fiscal year ended February 2, 2008, there were no costs capitalized under SOP 98-1. For the fiscal year
ended February 3, 2007, we capitalized approximately $120,000 under SOP 98-1 associated with the implementation of our new
merchandising software.
Deferred Rent
Deferred rent primarily consists of step rent and allowances from landlords related to our leased properties. Step rent
represents the difference between actual operating lease payments due and straight-line rent expense, which is recorded by the
Company over the term of the lease, including the build-out period. This amount is recorded as deferred rent in the early years of
the lease, when cash payments are generally lower than straight-line rent expense, and reduced in the later years of the lease
when payments begin to exceed the straight-line expense. Landlord allowances are generally comprised of amounts received
and/or promised to us by landlords and may be received in the form of cash or free rent. We record a receivable from the landlord
and a deferred rent liability when the allowances are earned. This deferred rent is amortized into income (through lower rent
expense) over the term (including the pre-opening build-out period) of the applicable lease, and the receivable is reduced as
amounts are received from the landlord.
On our statements of cash flows, the current and long-term portions of landlord allowances are included as changes in
cash flows from operations. The current portion is included as a change in accrued expenses and the long-term portion is
included as a change in deferred rent, non-current. The liability for the current portion of unamortized landlord allowances was
$3.9 million and $3.1 million at February 2, 2008 and February 3, 2007, respectively. The liability for the long-term portion of
unamortized landlord allowances was $14.6 million and $12.6 million at February 2, 2008 and February 3, 2007, respectively.
The non-cash portion of landlord allowances received is immaterial.
Revenue Recognition
We recognize revenue, including gift card and layaway sales, in accordance with the SEC SAB No. 101, “Revenue
Recognition in Financial Statements,” as amended by SAB No. 104, “Revenue Recognition.”
Retail merchandise sales occur on-site in our 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 may make
further payments in installments, but the entire purchase price for merchandise placed on layaway must be received by the
Company within 30 days. The down payment and any installments are recorded by us as short-term deferred revenue until the
customer pays the entire purchase price for the merchandise. We 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.
The cost of coupon sales incentives is recognized at the time the related revenue is recognized by the Company.
Proceeds received from the issuance of gift cards are initially recorded as deferred revenue. Revenue is subsequently recognized
at the time the customer redeems the gift cards and takes possession of the merchandise. Unredeemed gift cards are recorded as a
current liability.
- 36 -
It is not our policy to take unclaimed layaway deposits and unredeemed gift cards into income. For the years ended
February 2, 2008, February 3, 2007 and January 28, 2006, there was no breakage revenue recorded in income. The deferred
revenue liability for layaway deposits and unredeemed gift cards was $2.1 million and $1.8 million at February 2, 2008 and
February 3, 2007, respectively. Any unrecognized breakage revenue is immaterial. We escheat 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 expenses. All pre-opening costs are included in store
operating, selling and administrative expenses as a part of operating expenses.
We consider individual store closings to be a normal part of operations and regularly review store performance against
expectations. Costs associated with store closings are recognized at the time of closing or when a liability has been incurred.
Accounting for the Impairment of Long-Lived Assets
We continually evaluate whether events and circumstances have occurred that indicate the remaining balance of long-
lived assets and intangibles may be impaired and not recoverable. Our policy is to recognize any impairment loss on long-lived
assets as a charge to current income when certain events or changes in circumstances indicate that the carrying value of the assets
may not be recoverable. Impairment is assessed considering the estimated undiscounted cash flows over the asset’s remaining
life. If estimated cash flows are insufficient to recover the investment, an impairment loss is recognized based on a comparison of
the cost of the asset to fair value less any costs of disposition.
Self-Insurance Accrual
We are self-insured for a significant portion of our health insurance. Liabilities associated with the risks that are
retained by us are estimated, in part, by considering our historical claims. The estimated accruals for these liabilities could be
affected if future occurrences and claims differ from our assumptions. To minimize our potential exposure, we carry stop-loss
insurance which reimburses us for losses over $100,000 per covered person per year or $2.0 million per year in the aggregate. As
of February 2, 2008 and February 3, 2007, the accrual for these liabilities was $450,000 and $350,000, respectively, and was
included in accrued expenses in the consolidated balance sheets.
We are also self-insured for our workers’ compensation and general liability insurance up to an established deductible
with a cumulative stop loss. As of February 2, 2008 and February 3, 2007, the accrual for these liabilities (which is not
discounted) was $200,000 and was included in accrued expenses in the consolidated balance sheets.
Sales Returns, net
Net sales returns were $18.3 million for Fiscal 2008, $14.2 million for Fiscal 2007 and $12.1 million for Fiscal 2006.
The accrual for the effect of estimated returns on pre-tax income was $181,000 and $124,000 as of February 2, 2008 and
February 3, 2007, respectively, and was included in accrued expenses in the consolidated balance sheets.
Fair Value of Financial Instruments
We believe that the carrying amount approximates fair value for cash and cash equivalents, short-term investments,
receivables and accounts payable, because of the short maturities of those instruments.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities – Including an Amendment of FASB Statement 115.” This statement permits companies to elect to measure certain
assets and liabilities at fair value. At each reporting date subsequent to adoption, unrealized gains and losses on items for which
the fair value option has been elected must be reported in earnings. SFAS No. 159 was effective as of the beginning of the first
fiscal year that began after November 15, 2007, or February 3, 2008 for our Company. The adoption of SFAS No. 159 did not
have a material effect on our consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value measurements; however, SFAS No.
157 does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. We implemented SFAS No. 157 on February 3, 2008 and the adoption of
SFAS No. 157 did not have a material effect on our consolidated financial statements.
- 37 -
NOTE 3. STOCK-BASED COMPENSATION
At February 2, 2008, we had four stock-based compensation plans:
(a) The Amended 2005 Equity Incentive Plan (Incentive Plan) provides that the Board of Directors may grant equity
awards to certain employees of the Company at its discretion. The Incentive Plan authorizes grants of equity
awards of up to 1,233,159 authorized, but unissued shares of common stock which includes 483,159 shares carried
forward from the original 1996 Stock Option Plan (1996 Plan), as amended, plus an additional 750,000 shares
approved for issuance effective July 1, 2005. At February 2, 2008, there were 1,011,202 shares available for grant
under the Incentive Plan.
(b) The Amended 2005 Employee Stock Purchase Plan (ESPP) allows for qualified employees to participate in the
purchase of up to 204,794 shares of our common stock at a price equal to 85% of the lower of the closing price at
the beginning or end of each quarterly stock purchase period. At February 2, 2008, there were 159,166 shares
available for purchase under the ESPP.
(c) The Amended 2005 Director Deferred Compensation Plan (Deferred Plan) allows non-employee directors an
election to defer all or a portion of their fees into stock units, stock options or cash. The Deferred Plan authorizes
grants of stock up to 112,500 authorized, but unissued shares of common stock. At February 2, 2008, there were
110,052 shares available for grant under the Deferred Plan.
(d) The Amended 2006 Non-Employee Director Equity Plan (DEP) provides for grants of equity awards to non-
employee directors. The DEP authorizes grants of equity awards of up to 672,975 authorized, but unissued shares
of common stock which includes 172,975 shares carried forward from the original Stock Plan for Outside
Directors (Director Plan), plus an additional 500,000 shares approved for issuance effective June 1, 2006. At
February 2, 2008, there were 635,730 shares available for grant under the DEP.
Effective January 29, 2006, we adopted the fair value recognition provisions of SFAS No. 123R, “Share-Based
Payments,” using the modified prospective transition method. Under this method, compensation cost recognized in the periods
ended February 2, 2008 and February 3, 2007 included: (a) compensation expense for all share-based payments granted prior to,
but not yet vested as of January 28, 2006, based on the grant date fair value estimated in accordance with the original provisions
of SFAS No. 123, “Accounting for Stock-Based Compensation,” and (b) compensation expense for all share-based payments
granted on or after January 29, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No.
123R. The fair value of each stock option was estimated on the grant date using the Black-Scholes option-pricing model with
various assumptions used for new grants as described below. Compensation expense for new stock options and nonvested equity
awards is recognized on a straight-line basis over the vesting period. In accordance with the modified prospective method,
results for prior periods have not been restated.
Prior to January 29, 2006, we accounted for our stock-based compensation plans under the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and
related interpretations. Under APB No. 25, no compensation cost for stock options was reflected in net earnings, as all options
granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.
In addition, no compensation expense was recognized for common stock purchases under the ESPP.
- 38 -
The following table illustrates the pro-forma effect on net income and earnings per share for the fiscal year ended
January 28, 2006 as if we had applied the fair value recognition provisions of SFAS No. 123, as amended, to stock-based
compensation (in thousands, except per share data):
Net income, as reported
$
33,624
Add: Stock-based employee compensation expense, included in
the determination of net income, net of tax
61
Deduct: Stock-based employee compensation expense,
determined under the fair value based method for all awards, net
of tax
Net income, pro-forma
Earnings per share:
Basic - as reported
Basic - pro-forma
Diluted - as reported
Diluted - pro-forma
(3,778)
$
29,907
$
$
1.00
0.89
$
$
0.98
0.87
Our plans allow for a variety of equity awards including stock options, restricted stock awards, stock appreciation
rights and performance awards. As of February 2, 2008 the Company had only granted awards in the form of stock options and
restricted stock units (RSUs). RSUs and options to purchase our common stock have been granted to officers, directors and key
employees. Beginning with the adoption of the Incentive Plan, a greater proportion of the awards granted to employees,
including executive employees, have been RSUs as opposed to stock options when compared to grants made in prior years. The
annual grant made for Fiscal 2008 to employees consisted solely of RSUs. We have also awarded RSUs that are performance-
based to our named executive officers and expect the Compensation Committee of the Board will continue to grant more
performance-based awards to key employees in the future. The terms and vesting schedules for stock-based awards vary by type
of grant and generally vest upon time-based conditions. Upon exercise, stock-based compensation awards are settled with
authorized but unissued company stock.
The compensation cost that has been charged against income for these plans was as follows for the fiscal years ended
February 2, 2008 and February 3, 2007 (in thousands):
Fiscal Year Ended
February 2,
2008
February 3,
2007
Stock-based compensation expense by type:
Stock options
Restricted stock awards
Employee stock purchase
Director deferred compensation
Total stock-based compensation expense
Tax benefit recognized
Stock-based compensation expense, net of tax
$
$
2,068
1,479
97
33
3,677
894
2,783
2,104
603
99
31
2,837
549
2,288
$
$
In accordance with SAB No. 107, “Share-Based Payment,” issued in March 2005, share-based plan expense has been
included in store operating, selling and administrative expense since it is incentive compensation. Certain other deferred stock
compensation plans are also reflected in store operating, selling and administrative expense. There is no capitalized stock-based
compensation cost.
The tax benefit recognized in our consolidated financial statements, as disclosed above, is based on the amount of
compensation expense recorded for book purposes. The actual tax benefit realized in our tax return is based on the intrinsic
value, or the 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 tax benefit realized for the deductions considered on our tax returns for the fiscal
years ended February 2, 2008 and February 3, 2007 was from option exercises and totaled $0.6 million and $2.7 million,
respectively.
- 39 -
Stock Options
Stock options are granted with an exercise price equal to the closing market price of our common stock on the date of
grant. During the period between July 2005 and December 2006, stock options were granted with an exercise price equal to the
closing market price of our common stock on the last trading day preceding the date of grant. Vesting and expiration provisions
vary between equity plans. Grants awarded to employees under the 1996 Plan, as amended, vest over a five year period in equal
installments beginning on the first anniversary of the grant date and expire on the tenth anniversary of the date of grant. Grants
awarded to employees under the Incentive Plan vest over a four year period in equal installments beginning on the first
anniversary of the grant date and expire on the eighth anniversary of the date of grant with the exception of a grant made on
August 18, 2005, whose provisions provided for the five year vesting schedule and ten year term described in the 1996 Plan.
Grants awarded to outside directors under both the DEP and Deferred Plan, vest immediately upon grant and expire on the tenth
anniversary of the date of grant.
Following is the weighted average fair value of each option granted during the fiscal year ended February 2, 2008. The
fair value was estimated on the date of grant using the Black Scholes pricing model with the following weighted average
assumptions for each period:
Grant date
Weighted average fair value at date of grant
Expected option life (years)
Expected volatility
Risk-free interest rate
Dividend yield
Quarter 4
2/2/2008
12/31/2007
$8.43
4.20
48.01%
3.39%
None
Quarter 3
11/3/2007
9/30/2007
$9.56
4.20
41.07%
4.11%
None
Quarter 2
8/4/2007
6/30/2007
$9.89
4.07
36.33%
5.00%
None
Quarter 1
5/5/2007
3/31/2007
$10.68
4.07
39.22%
4.55%
None
3/19/2007
$10.56
4.07
39.22%
4.53%
None
We calculate the expected term for our stock options based on historical employee exercise behavior. Historically, an
increase in our stock price has led to a pattern of earlier exercise by employees. We also expected the reduction of the
contractual term from 10 years to 8 years to facilitate a pattern of earlier exercise by employees and to contribute to a gradual
decline in the average expected term in future periods. For the last two years, the Compensation Committee has awarded RSUs
rather than options to our employees. With the absence of new grants, the expected term may increase slightly because it will be
affected to a greater extent by director options which have a longer contractual life.
The volatility used to value stock options is based on historical volatility. We calculate historical volatility using an
average calculation methodology based on daily price intervals as measured over the expected term of the option. We have
consistently applied this methodology since our adoption of the original disclosure provisions of SFAS No. 123.
Beginning with awards granted in the second quarter of Fiscal 2008, we based the risk-free interest rate on the annual
continuously compounded risk-free rate with a term equal to the option’s expected term. Previously, we used the market yield on
U.S. Treasury securities. While the difference between the two rates is minimal and has only a slight effect on the fair value
calculation, we believe using the annual continuously compounded risk-free rate is more compliant with SFAS No. 123R. The
dividend yield is assumed to be zero since we have no current plan to declare dividends.
Activity for our option plans during the fifty-two weeks ended February 2, 2008 was as follows:
Options outstanding at February 3, 2007
Granted
Exercised
Forfeited, cancelled or expired
Number of
Shares
1,387,388
29,795
(96,007)
(37,418)
Weighted
Average
Exercise Price
15.46
$
27.71
19.80
26.58
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
($000's)
Options outstanding at February 2, 2008
1,283,758
$
15.89
5.77
$
7,559
Exercisable at February 2, 2008
825,921
$
13.56
5.46
$
6,153
- 40 -
The weighted average grant fair value of options granted during the fiscal years ended February 2, 2008 and February
3, 2007 was $10.39 and $12.83, respectively. The compensation expense included in store operating, selling and administrative
expenses and recognized during the fiscal years was $2.1 million in each year before the recognized income tax benefit of $0.3
million in each year.
The total intrinsic value of stock options exercised during the fiscal years ended February 2, 2008, February 3, 2007
and January 28, 2006 was $1.9 million, $7.1 million and $8.4 million, respectively. The intrinsic value of stock options is
defined as the difference between the current market value and the grant price. The total cash received from these stock option
exercises during Fiscal 2008, 2007 and 2006 was $0.9 million, $2.3 million and $2.9 million, respectively. Excess tax receipts
from stock option exercises are included in cash flows from financing activities as required by SFAS No. 123R. As of February
2, 2008, there was $2.8 million of unrecognized compensation cost related to nonvested stock options. This cost is expected to
be recognized over a weighted-average period of 2.0 years.
Restricted Stock Awards
Restricted stock awards are granted with a fair value equal to the closing market price of our common stock on the date
of grant with the exception of those granted between August 2005 and December 2006 which were granted with a fair value
equal to the closing market price of our common stock on the last trading day preceding the date of grant. Compensation expense
is recorded straight-line over the vesting period. Restricted stock awards generally cliff vest in four to five years from the date of
grant.
The following table summarizes the restricted stock awards activity under all of our plans during the fifty-two weeks
ended February 2, 2008:
Restricted stock awards outstanding at February 3, 2007
Granted
Vested
Forfeited, cancelled or expired
Weighted-
Average
Grant Date
Fair Value
29.66
$
28.30
-
28.01
Number of
Awards
87,923
124,425
-
(69,302)
Restricted stock awards outstanding at February 2, 2008
143,046
$
29.28
The weighted average grant date fair value of our RSUs granted was $28.30 and $31.55 for the fiscal years ended
February 2, 2008 and February 3, 2007. There were 124,325 and 60,510 RSUs granted during Fiscal 2008 and Fiscal 2007,
respectively. The compensation expense included in store operating, selling and administrative expenses and recognized during
Fiscal 2008 and Fiscal 2007 was $1.5 million and $0.6 million, respectively, before the recognized income tax benefit of $0.6
million and $0.2 million, respectively.
As of February 2, 2008, no RSUs granted had vested. The total intrinsic value of our restricted stock awards
outstanding and unvested at February 2, 2008 and February 3, 2007 was $2.7 million and $2.8 million, respectively. As of
February 2, 2008, there was approximately $2.5 million of total unamortized unrecognized compensation cost related to restricted
stock awards. This cost is expected to be recognized over a weighted average period of 3.0 years.
Employee Stock Purchase Plan
The Company’s ESPP allows eligible employees the right to purchase shares of our common stock, subject to certain
limitations, at 85% of the lesser of the fair market value at the end of each calendar quarter (purchase date) or the beginning of
each calendar quarter. Our employees purchased 18,462 shares of common stock at an average price of $21.25 per share during
the fiscal year ended February 2, 2008. The assumptions used in the option pricing model for the fifty-two weeks ended
February 2, 2008 were: (a) expected life of 3 months (.25 years); (b) volatility between 36.3% and 41.8%; (c) risk-free interest
rate between 3.99% and 5.08%; and (d) dividend yield of 0.0%. The weighted average grant date fair value of ESPP options
granted during the fifty-two weeks ended February 2, 2008 was $5.90.
During the fiscal year ended February 3, 2007, our employees purchased 17,992 shares of common stock at an average
price of $22.02 per share through the ESPP. The assumptions used in the option pricing model for the fifty-three weeks ended
February 3, 2007 were: (a) expected life of 3 months (.25 years); (b) volatility between 40.7% and 41.0%; (c) risk-free interest
rate between 3.98% and 4.93%; and (d) dividend yield of 0.0%. The weighted average grant date fair value of ESPP options
granted during the fifty-three weeks ended February 3, 2007 was $5.93.
- 41 -
The expense related to the ESPP was determined using the Black-Scholes option pricing model and the provisions of
FASB Technical Bulletin (“FTB”) No. 97-1, “Accounting under Statement 123 for Certain Employee Stock Purchase Plans with
a Look-Back Option,” as amended by SFAS No. 123R. The compensation expense included in store operating, selling and
administrative expenses and recognized during the fiscal years ended February 2, 2008 and February 3, 2007 was approximately
$97,000 and $99,000, respectively. Prior to the adoption of SFAS No. 123R, the ESPP was considered noncompensatory and no
expense was recorded in the consolidated statement of operations.
Director Deferred Compensation
Under the Deferred Plan, non-employee directors can elect to defer all or a portion of their board and board committee
fees into cash, stock options or deferred stock units. Those fees deferred into stock options are subject to the same provisions as
provided for in the DEP and are expensed and accounted for accordingly. Director fees deferred into our common stock are
calculated and expensed each calendar quarter by taking total fees earned during the calendar quarter and dividing by the closing
price on the last day of the calendar quarter, rounded to the nearest whole share. The total annual retainer, board and board
committee fees for non-employee directors that are not deferred into stock options, but which includes amounts deferred into
stock units under the Deferred Plan, are expensed as incurred in all periods presented. A total of 1,306, 1,142 and 581 stock units
were deferred under this plan in Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively.
The compensation expense included in store operating, selling and administrative expenses and recognized during
Fiscal 2008 and Fiscal 2007 was approximately $33,000 and $31,000, respectively before the recognized income tax benefit of
approximately $12,000 in both fiscal years.
NOTE 4. EARNINGS PER SHARE
The computation of basic earnings per share (EPS) is based on the number of weighted-average common shares
outstanding during the period. The computation of diluted EPS is based on the weighted average number of shares outstanding
plus the incremental shares that would be outstanding assuming exercise of dilutive stock options and issuance of restricted stock.
The number of incremental shares is calculated by applying the treasury stock method.
The following table sets forth the computation of basic and diluted earnings per share:
Fiscal Year Ended
February 2,
February 3,
January 28,
2008
2007
2006
Net income, in thousands
$
30,329
$
38,073
$
33,624
Weighted average number of common
shares outstanding
Stock options
Restricted stock
Weighted average number of common
shares outstanding and dilutive shares
31,049,058
427,822
48,170
32,094,127
500,478
25,234
33,605,568
787,458
-
31,525,050
32,619,839
34,393,026
Basic earnings per common share
$
0.98
$
1.19
$
1.00
Diluted earnings per common share
$
0.96
$
1.17
$
0.98
In calculating diluted earnings per share for the fifty-two weeks ended February 2, 2008, options to purchase 455,598
shares of common stock were outstanding as of the end of the period, but were not included in the computations of diluted
earnings per share due to their anti-dilutive effect. In calculating diluted earnings per share for the fifty-three weeks ended
February 3, 2007, options to purchase 135,706 shares of common stock were outstanding as of the end of the period, but were not
included in the computation of diluted earnings per share due to their anti-dilutive effect. In calculating diluted earnings per
share for the fifty-two weeks ended January 28, 2006, options to purchase 49,000 shares of common stock were outstanding as of
the end of the period, but were not included in the computations of diluted earnings per share due to their anti-dilutive effect.
- 42 -
NOTE 5. DEBT
As of February 2, 2008, we had one unsecured credit facility, which is renewable annually in August. The facility
allows for borrowings up to $30.0 million at a rate based on prime at our election or another mutually agreed upon fixed rate at
the time of draw. As of February 2, 2008, we had no borrowings outstanding under this facility. Under the provisions of this
facility, we do not pay commitment fees and are not subject to covenant requirements. We can draw down on the line of credit
when our main operating account balance falls below $100,000. At the beginning of Fiscal 2008, we had one operating facility
allowing borrowings up to $15.0 million which we elected to increase to $30.0 million in August 2007. There were 106 days
during the fifty-two weeks ended February 2, 2008, where we incurred borrowings against our credit facility for an average and
maximum borrowing of $7.8 million and $18.4 million, respectively, and an average interest rate of 5.64%. At February 2, 2008,
$30.0 million was available to us from this facility.
Subsequent to February 2, 2008, we added a new credit facility that allows borrowings up to $50.0 million. The new
facility was effective February 4, 2008 and will expire on December 31, 2008. The facility is unsecured and does not require a
commitment or agency fee, nor are there any covenant restrictions.
At February 3, 2007, we had one facility that allowed borrowings up to $15.0 million. There were twenty-four days
during the fifty-three weeks ended February 3, 2007, where we incurred borrowings against this credit facility for an average and
maximum borrowing of $2.5 million and $5.1 million, respectively, and an average interest rate of 6.12%. At February 3, 2007,
$15.0 million was available to us from this facility.
NOTE 6. PROFIT-SHARING PLAN
We maintain a 401(k) profit-sharing plan (the Plan) which permits participants to make pre-tax contributions to the
Plan. The Plan covers all employees who have completed one year of service and who are at least 21 years of age. Participants of
the Plan may voluntarily contribute from 1% to 100% of their compensation subject to certain yearly dollar limitations as allowed
by law. These elective contributions are made under the provisions of Section 401(k) of the Internal Revenue Code which allows
deferral of income taxes on the amount contributed to the Plan. The Company’s contribution to the Plan equals (1) an amount
determined at the discretion of the Board of Directors plus (2) a matching contribution equal to a discretionary percentage of up
to 6% of a participant’s compensation. For each of Fiscal 2008, Fiscal 2007 and Fiscal 2006, we matched 75% of contributions
made to the Plan by the employees up to 6% of the employee’s compensation.
On November 29, 2007, our Board of Directors adopted the Hibbett Sports, Inc. Supplemental 401(k) Plan (the
Supplemental Plan) effective February 1, 2008. The primary purpose of the Supplemental Plan is to supplement the employer
matching contribution and salary deferral opportunity available to highly compensated employees whose ability to receive
Company matching contributions and defer salary under our existing Plan has been limited because of certain restrictions
applicable to qualified plans. The non-qualified deferred compensation Supplemental Plan will supplement the existing Plan and
allow participants to defer up to 40% of their compensation and receive an employer matching contribution, subject to a
maximum of 4.5% of compensation. The matching contribution for Fiscal 2008 was $0.75 for each dollar of compensation
deferred.
Contribution expense amounts under the Plans for Fiscal 2008, 2007 and 2006 were $496,000, $520,000 and $491,000,
respectively.
NOTE 7. RELATED-PARTY TRANSACTIONS
The Company leases one store under a sublease arrangement from Books-A-Million, Inc., (BAM) 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 2008, Fiscal 2007 and Fiscal 2006. Future minimum lease payments
under this non-cancelable sublease aggregate approximately $80,000. In March 2008, the Board appointed two new directors
who are associated with BAM. Albert C. Johnson is a Director and stockholder of BAM and Terrance G. Finley is an executive
officer and stockholder of BAM.
NOTE 8. INCOME TAXES
Our effective tax rate is based on our income, statutory tax rates and tax planning opportunities available in the various
jurisdictions in which we operate. For interim financial reporting, we estimate the annual tax rate based on projected taxable
income for the full year and record a quarterly income tax provision in accordance with the anticipated annual rate. Significant
judgment is required in determining our effective tax rate and in evaluating our tax positions.
- 43 -
A summary of the components of the provision (benefit) for income taxes is as follows (in thousands):
Federal:
Current
Deferred
State:
Current
Deferred
February 2,
2008
Fiscal Year Ended
February 3,
2007
January 28,
2006
$
18,077
(1,298)
16,779
$
22,761
(769)
21,992
$
18,800
(1,518)
17,282
1,577
(27)
1,550
2,853
(304)
2,549
2,362
(400)
1,962
$
18,329
$
24,541
$
19,244
A reconciliation of the statutory federal income tax rate as a percentage of income tax rate as a percentage of income
before income taxes follows:
Tax provision computed at the federal statutory rate
Effect of state income taxes, net of federal benefits
Other, net
February 2,
2008
Fiscal Year Ended
February 3,
2007
January 28,
2006
35.00%
2.36%
0.31%
37.67%
35.00%
2.65%
1.54%
39.19%
35.00%
2.41%
-1.01%
36.40%
Deferred income taxes on the balance sheet result from temporary differences between the amount of assets and
liabilities recognized for financial reporting and tax purposes. The components of the deferred taxes assets (liabilities) are as
follows (in thousands):
February 2, 2008
February 3, 2007
Deferred rent
Accumulated depreciation
Inventory
Prepaids
Accruals
Stock-based compensation
Other
Deferred taxes
Current
$
1,765
-
1,149
(717)
238
506
(216)
2,725
Non-current
7,257
$
(4,994)
-
-
650
867
-
3,780
$
Current
$
1,536
-
285
-
582
40
(836)
1,607
Non-current
6,553
$
(3,901)
-
-
59
506
-
3,217
$
$
$
In accordance with SFAS No. 109, we recognize deferred tax assets and liabilities based on the difference between the
financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets represent items to be used as a
tax deduction or credit in future tax returns for which we have already properly recorded the tax benefit in the income statement.
At least quarterly, we assess the likelihood that the deferred tax assets balance will be recovered. We take into account such
factors as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies that could
potentially enhance the likelihood of a realization of a deferred tax asset. To the extent recovery is not more likely than not, a
valuation allowance is established against the deferred tax asset, increasing our income tax expense in the year such
determination is made. We have determined that no such allowance is required.
Additionally, due to the adoption of FIN No. 48 (as described in Note 1), we have revised our policy on income taxes
with respect to accounting for uncertain tax positions. We consider our policy on income taxes to be a critical accounting policy
due to the significant level of estimates, assumptions and judgments and its potential impact on our consolidated financial
statements.
- 44 -
We adopted FIN No. 48 effective February 4, 2007. In accordance with FIN No. 48, we recognize a tax benefit
associated with an uncertain tax position when, in our judgment, it is more likely than not that the position will be sustained upon
examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, we initially and
subsequently measure the tax benefit as the largest amount that we judge to have a greater than 50% likelihood of being realized
upon ultimate settlement with a taxing authority. Our liability associated with unrecognized tax benefits is adjusted periodically
due to changing circumstances, such as the progress of tax audits, case law developments and new or emerging legislation. Such
adjustments are recognized entirely in the period in which they are identified. Our effective tax rate includes the net impact of
changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by management.
A number of years may elapse before a particular matter for which we have recorded a liability related to an
unrecognized tax benefit is audited and finally resolved. The number of years with open tax audits varies by jurisdiction. While
it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe our liability for
unrecognized tax benefits is adequate. Favorable settlement of an unrecognized tax benefit could be recognized as a reduction in
our effective tax rate in the period of resolution. Unfavorable settlement of an unrecognized tax benefit could increase the
effective tax rate and may require the use of cash in the period of resolution. Our liability for unrecognized tax benefits is
generally presented as non-current. However, if we anticipate paying cash within one year to settle an uncertain tax position, the
liability is presented as current.
A reconciliation of the unrecognized tax benefit under FIN No. 48 during Fiscal 2008 follows (in thousands):
Unrecognized tax benefit - February 4, 2007
Gross increases - tax positions in prior period
Gross decreases - tax positions in prior period
Gross increases - tax positions in current period
Settlements
Lapse of statute of limitations
Unrecognized tax benefit - February 2, 2008
Fiscal Year Ended
February 2, 2008
5,117
$
836
(3,259)
-
(29)
(42)
2,623
$
We expect a decrease in our FIN No. 48 liability of approximately $320,000 in the next 12 months due to the expiration
of certain statutes of limitations. We classify interest and penalties recognized on the liability for unrecognized tax benefits as
income tax expense. As of February 2, 2008, we have accrued interest and penalties in the amount of $345,000.
In the course of an internal review of prior federal income tax returns, we determined that certain deductions may not
meet all of the requirements for deductibility with respect to performance-based plans set forth in Section 162(m) of the Internal
Revenue Code of 1986, as amended. We recorded a balance sheet adjustment in the fourth quarter of Fiscal 2007, increasing
income taxes payable and reducing additional paid-in-capital by $1.3 million for deductions taken by the Company in Fiscal 2006
and prior years. The related income tax benefit was previously recorded as an increase in additional paid-in-capital and did not
impact prior years’ results of operations. No adjustments were required to be made to our consolidated statements of operations.
The Fiscal 2007 adjustment is reflected in the accompanying consolidated financial statements and was not material to the
Company’s financial position, results of operations or cash flows for any previously reported annual or interim periods.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Lease Commitments
We lease the premises for our retail sporting goods stores under non-cancelable operating leases having initial or
remaining terms of more than one year. The leases typically provide for terms of five to ten years with options on our part to extend.
Many of our leases contain scheduled increases in annual rent payments and the majority of our leases also require us to pay
maintenance, insurance and real estate taxes. Additionally, many of the lease agreements contain tenant improvement allowances,
rent holidays and/or rent escalation clauses (contingent rentals). For purposes of recognizing incentives and minimum rental
expenses on a straight-line basis over the terms of the leases, we use the date of initial possession to begin amortization, which is
generally when we enter the space and begin to make improvements in preparation of our intended use.
We also lease certain computer hardware, office equipment and transportation equipment under non-cancelable operating
leases having initial or remaining terms of more than one year.
In February 1996, we entered into a sale-leaseback transaction to finance our distribution center and office facilities. In
December 1999, the related operating lease was amended to include the Fiscal 2000 expansion of these facilities. The amended lease
rate is $877,000 per year and can increase annually with the Consumer Price Index. This lease will expire in December 2014.
- 45 -
During the fifty-two weeks ended February 2, 2008, we increased our lease commitments by a net of 75 retail stores,
each having initial lease termination dates between January 2012 and May 2018 as well as various office and transportation
equipment. At February 2, 2008, the future minimum lease payments, excluding maintenance, insurance and real estate taxes, for
our current operating leases and including the net 75 operating leases added during the fifty-two weeks ended February 2, 2008,
were as follows (in thousands):
Fiscal 2009
Fiscal 2010
Fiscal 2011
Fiscal 2012
Fiscal 2013
Thereafter
TOTAL
$
40,332
35,676
28,735
22,635
17,519
32,280
177,177
$
Rental expense for all operating leases consisted of the following (in thousands):
February 2,
2008
Fiscal Year Ended
February 3,
2007
January 28,
2006
Minimum rentals
Contingent rentals
$
$
32,693
2,342
35,035
$
$
30,291
2,339
32,630
$
$
27,774
1,658
29,432
Most of our retail store leases contain provisions that allow for early termination of the lease by either party if certain pre-
determined annual sales levels are not met. Generally, these provisions allow the lease to be terminated between the third and fifth
year of the lease. Should the lease be terminated under these provisions, in some cases, the unamortized portion of any landlord
allowances related to that property would be payable to the landlord.
Legal Proceedings and other Contingencies
In October 2005, three former employees filed a lawsuit in Mississippi federal court alleging they are owed back wages
for overtime because they were improperly classified as exempt salaried employees. They also allege other wage and hour
violations. The suit asked the court to certify the case as a collective action under the Fair Labor Standards Act on behalf of all
similarly situated employees. We dispute the allegations of wrongdoing in this complaint and have vigorously defended ourselves
in this matter. However, the parties have negotiated a settlement and the court has now ruled to certify the collective action in
accordance with the negotiated settlement. At February 2, 2008, we began making initial distributions and estimated that the
remaining liability related to this matter is $755,000. Accordingly, we accrued $755,000 as a current liability on our consolidated
balance sheet. At February 3, 2007, we estimated that the liability related to this matter was within the range of $750,000 and
$960,000 and accordingly, accrued $750,000 as a current liability on our consolidated balance sheet. Subsequent to the end of Fiscal
2008, we completed our obligation under the negotiated settlement related to this case.
We are also party to other legal proceedings incidental to our business. We do not believe that any of these matters will,
individually or in the aggregate, have a material adverse effect on our business or financial condition. We cannot give assurance,
however, that one or more of these lawsuits will not have a material adverse effect on our results of operations for the period in
which they are resolved. At February 2, 2008, we have estimated that the liability related to these other matters is approximately
$20,000 and accordingly, have accrued $20,000 as a current liability on our consolidated balance sheet. As of February 3, 2007,
no loss amount was accrued because a loss was not considered probable or estimable.
The estimates of our liability for pending and unasserted potential claims does not include litigation costs. It is our policy
to accrue legal fees when it is probable that we will have to defend against known claims or allegations and we can reasonably
estimate the amount of the anticipated expense. Although we have accrued legal fees associated with litigation currently pending
against us, we have not made any accruals for potential liability for settlements or judgments because the potential liability is neither
probable nor estimable.
- 46 -
From time to time, we enter into certain types of agreements that require us to indemnify parties against third party
claims under certain circumstances. Generally these agreements relate to: (a) agreements with vendors and suppliers under which
we may provide customary indemnification to our vendors and suppliers in respect of actions they take at our request or
otherwise on our behalf; (b) agreements to indemnify vendors against trademark and copyright infringement claims concerning
merchandise manufactured specifically for or on behalf of the Company; (c) real estate leases, under which we may agree to
indemnify the lessors from claims arising from our use of the property; and (d) agreements with our directors, officers and
employees, under which we may agree to indemnify such persons for liabilities arising out of their relationship with us. The
Company has director and officer liability insurance, which, subject to the policy’s conditions, provides coverage for
indemnification amounts payable by us with respect to our directors and officers up to specified limits and subject to certain
deductibles.
NOTE 10. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables set forth certain unaudited financial data for the quarters indicated (dollar amounts in thousands,
except per share amounts):
Net sales
Gross profit
Operating income
Net income
Fiscal Year Ended February 2, 2008
First
(13 weeks)
Second
(13 weeks)
Third
(13 weeks)
Fourth
(13 weeks)
$
133,842
45,053
16,102
10,227
$
114,404
37,476
7,797
4,681
$
129,628
42,474
12,553
7,815
$
142,847
43,841
11,775
7,606
Basic earnings per common share
Diluted earnings per common share
$
$
0.32
0.32
$
$
0.15
0.15
$
$
0.25
0.25
$
$
0.26
0.25
Net sales
Gross profit
Operating income
Net income
Fiscal Year Ended February 3, 2007
First
(13 weeks)
Second
(13 weeks)
Third
(13 weeks)
Fourth
(14 weeks)
$
126,914
44,140
18,125
11,523
$
104,363
32,692
6,425
4,020
$
129,658
43,066
15,612
9,926
$
151,159
53,233
21,576
12,604
Basic earnings per common share
Diluted earnings per common share
$
$
0.35
0.35
$
$
0.12
0.12
$
$
0.31
0.31
$
$
0.40
0.39
In the opinion of our management, this unaudited information has been prepared on the same basis as the audited
information presented elsewhere herein and includes all adjustments necessary to present fairly the information set forth herein.
The operating results from any quarter are not necessarily indicative of the results to be expected for any future period.
The Fiscal 2008 unaudited consolidated statements of operations for the second quarter presented above includes a $1.2
million pretax benefit related to our accounting for inventory in-transit and shrinkage results. The total pretax benefit of $1.2
million was corrected in the fourth quarter of Fiscal 2008. We have reviewed this accounting error utilizing SAB No. 99,
“Materiality” and SAB No. 108, “Effects of Prior Year Misstatements on Current Year Financial Statements,” and believe the
impact of this error is not material to current or prior interim period consolidated financial statements.
- 47 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON SUPPLEMENTAL SCHEDULE
The Board of Directors and Stockholders
Hibbett Sports, Inc.:
We have audited and reported separately herein on the financial statements of Hibbett Sports, Inc. and subsidiaries as of and for the
years ended February 2, 2008 and February 3, 2007, and for each of the years in the three-year period ended February 2, 2008.
Our audits were made for the purpose of forming an opinion on the basic financial statements of Hibbett Sports, Inc. and subsidiaries
taken as a whole. The supplementary information included in Schedule II – Valuation and Qualifying Accounts is presented for
purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects
in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
Birmingham, Alabama
April 1, 2008
- 48 -
HIBBETT SPORTS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Fiscal 2006
Allowance for doubtful accounts
Fiscal 2007
Allowance for doubtful accounts
Fiscal 2008
Allowance for doubtful accounts
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Write-offs,
net of
recoveries
Balance at
End of
Period
$ 59,000
$
20,000
$
(34,000)
$
45,000
$ 45,000
$
20,000
$
(31,000)
$
34,000
$ 34,000
$
27,000
$
(15,000)
$
46,000
- 49 -
Item 9. Changes in and Disagreements with Independent Registered Public Accounting Firm on Accounting and
Consolidated Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
(a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this
evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures
were effective as of February 2, 2008.
(b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f). Under 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 February 2, 2008, based on the Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under the framework in Internal
Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of
February 2, 2008.
(c) Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the fourth quarter of Fiscal 2008 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
- 50 -
Item 10.
Directors, Executive Officers and Corporate Governance.
PART III
The information required is incorporated by reference from the sections entitled “Directors and Executive Officers”, “The
Board of Directors”, “Code of Ethics”, “Annual Compensation of Executive Officers” and “Related Person Transactions” in the
Proxy Statement for the Annual Meeting of Stockholders to be held June 2, 2008 (the “Proxy Statement”), which is to be filed with
the Securities and Exchange Commission.
Item 11.
Executive Compensation.
The information required is incorporated by reference from the section entitled “Annual Compensation of Executive
Officers”, “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” in the Proxy
Statement.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required is incorporated by reference from the sections entitled “Security Ownership
of Certain Beneficial Owners”, “Compensation of Non-Employee Directors”, “Annual Compensation of Executive Officers” and
“Directors and Executive Officers” in the Proxy Statement.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
The information required is incorporated by reference from the section entitled “Related Person Transactions” and
“Governance Information” in the Proxy Statement.
Item 14.
Principal Accounting Fees and Services.
The information required is incorporated by reference from the section entitled “Independent Registered Public
Accounting Firm” in the Proxy Statement.
- 51 -
Page
28
29
30
31
32
33
48
49
Item 15.
Exhibits and Consolidated Financial Statement Schedules.
PART IV
(a) Documents filed as part of this report:
1.
Financial Statements.
The following Financial Statements and Supplementary Data of the Registrant and Independent Registered
Public Accounting Firm’s Report on such Financial Statements are incorporated by reference from the
Company’s 2008 Annual Report to Stockholders, in Part II, Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of February 2, 2008 and February 3, 2007
Consolidated Statements of Operations for the fiscal years ended February 2, 2008, February 3, 2007 and
January 28, 2006
Consolidated Statements of Cash Flows for the fiscal years ended February 2, 2008, February 3, 2007 and
January 28, 2006
Consolidated Statements of Stockholders’ Investment for the fiscal years ended February 2, 2008,
February 3, 2007 and January 28, 2006
Notes to Consolidated Financial Statements
2.
Financial Statement Schedules.
The index to the Consolidated Financial Statement Schedule follows:
Report of Independent Registered Public Accounting Firm on Supplemental Schedule
Schedule II – Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of the Securities
and Exchange Commission are not required under the related instructions or are not applicable, and
therefore have been omitted.
3.
Exhibits.
The Exhibits listed below are the exhibits of Hibbett Sports, Inc. and its wholly owned subsidiaries and are
filed as part of, or incorporated by reference into, this report.
Number Description
Certificates of Incorporation and By-Laws
3.1 Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 of the
Company’s Form 8-K filed with the Securities and Exchange Commission on February 15, 2007.)
3.2 By-laws of the Company (incorporated herein by reference to Exhibit 3.2 of the Company’s Form 8-K
filed with the Securities and Exchange Commission on February 15, 2007.)
Material Contracts
10.1 Adoption by Board of Directors of Hibbett Sporting Goods, Inc. of an amendment to the 2006 Non-
Employee Director Equity Plan to change the date of the director’s annual equity award to coincide with
the employee annual equity award grant date, dated as of February 2, 2007; incorporated by reference as
Exhibit 10.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February
7, 2007.
10.2 Agreement of Merger and Plan of Reorganization that created the successor holding company Hibbett
Sports, Inc. to Hibbett Sporting Goods, Inc. and its subsidiaries, dated as of February 9, 2007; incorporated
by reference as Exhibit 10.1 to the Registrant’s Form 8-K filed with the Securities and Exchange
Commission on February 15, 2007.
10.3 Credit Agreement between the Company and Regions Bank, dated as of August 29, 2007; incorporated by
reference as Exhibit 10.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission
on August 29, 2007.
10.4 Adoption by Board of Directors of Hibbett Sports, Inc. of the Supplemental 401(k) Plan to allow highly
compensated employees participation in salary deferral; incorporated by reference as Exhibit 10.1 to the
Registrant’s Form 8-K filed with the Securities and Exchange Commission on November 30, 2007.
- 52 -
10.5 Hiring and compensation arrangements for Nissan Joseph as President and Chief Operating Officer of
Hibbett Sports, Inc.; incorporated by reference to the Registrant’s Form 8-K filed with the Securities and
Exchange Commission on January 2, 2008.
10.6 Adoption by the Compensation Committee of the Board of Directors of Hibbett Sports, Inc. of a Change in
Control Severance Agreement for specified executives of the Company; incorporated by reference as
Exhibit 10.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on January
24, 2008.
Annual Report to Security Holders
13.1 Fiscal 2008 Annual Report to Stockholders.
Subsidiaries of the Registrant
21 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 Holding, Inc.
6) Gift Card Services, LLC
Consents of Experts and Counsel
23.1 Consent of Independent Registered Public Accounting Firm (filed herewith)
Certifications
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer (filed herewith)
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer (filed herewith)
32.1 Section 1350 Certification of Chief Executive Officer (filed herewith)
32.2 Section 1350 Certification of Chief Financial Officer (filed herewith)
55
56
57
58
59
- 53 -
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES.
Date: April 2, 2008
HIBBETT SPORTS, INC.
By:
/s/ Gary A. Smith
Gary A. Smith
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Michael J. Newsome
Michael J. Newsome
Chief Executive Officer and Chairman of the
Board (Principal Executive Officer)
April 2, 2008
/s/ Gary A. Smith
Gary A. Smith
/s/ Clyde B. Anderson
Clyde B. Anderson
/s/ Terrance G. Finley
Terrance G. Finley
/s/ Albert C. Johnson
Albert C. Johnson
/s/ Carl Kirkland
Carl Kirkland
/s/ Ralph T. Parks
Ralph T. Parks
/s/ Thomas A. Saunders, III
Thomas A. Saunders, III
/s/ Alton E. Yother
Alton E. Yother
Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
April 2, 2008
Director
April 2, 2008
Director
April 2, 2008
Director
April 2, 2008
Director
April 2, 2008
Director
April 2, 2008
Director
April 2, 2008
Director
April 2, 2008
- 54 -
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Hibbett Sports, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-21299, 333-21303, 333-21305, 333-63094,
333-96755, 333-126316, 333-126313, 333-126311, and 333-135217) of Hibbett Sports, Inc. and subsidiaries (the Company) of
our report dated April 1, 2008, with respect to (i) the consolidated balance sheets of Hibbett Sports, Inc. and subsidiaries as of
February 2, 2008 and February 3, 2007, and the related consolidated statements of operations, stockholders’ investment, and cash
flows for each of the years in the three-year period ended February 2, 2008 and the related consolidated financial statement
schedule and (ii) the effectiveness of internal control over financial reporting as of February 2, 2008, which report appears in the
February 2, 2008, Annual Report on Form 10-K of Hibbett Sports, Inc. and subsidiaries.
Our report refers to the Company’s changes in its method of accounting for inventory and its method of accounting for share-
based payments, as well as the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109.
/s/ KPMG LLP
Birmingham, Alabama
April 1, 2008
- 55 -
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 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 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 and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. 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
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s fourth fiscal quarter 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 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:
April 2, 2008
/s/ Michael J. Newsome
Michael J. Newsome
Chief Executive Officer and Chairman
of the Board (Principal Executive Officer)
- 56 -
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 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 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 and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. 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
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s fourth fiscal quarter 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 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:
April 2, 2008
/s/ Gary A. Smith
Gary A. Smith
Vice President and Chief Financial Officer
(Principal Financial Officer)
- 57 -
Exhibit 32.1
Section 1350 Certification of Chief Executive Officer
In connection with the Annual Report on Form 10-K of Hibbett Sports, Inc. (the “Company”) for the fiscal year ended
February 2, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned
officer certifies, to the best knowledge and belief of such officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(i)
The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of
condition and results of operations of the Company.
(ii)
The information contained in the Report fairly presents, in all material respects, the financial
Date: April 2, 2008
/s/ Michael J. Newsome
Michael J. Newsome
Chief Executive Officer and Chairman of the
Board (Principal Executive Officer)
- 58 -
Exhibit 32.2
Section 1350 Certification of Chief Financial Officer
In connection with the Annual Report on Form 10-K of Hibbett Sports, Inc. (the “Company”) for the fiscal year ended
February 2, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned
officer certifies, to the best knowledge and belief of such officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(i)
The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of
condition and results of operations of the Company.
(ii)
The information contained in the Report fairly presents, in all material respects, the financial
Date: April 2, 2008
/s/ Gary A. Smith
Gary A. Smith
Vice President and Chief Financial Officer
(Principal Financial Officer)
- 59 -
C O R P O R A T E I N F O R M A T I O N
Corporate Offices
451 Industrial Lane
Birmingham, Alabama 35211
(205) 942-4292
(205) 912-7293 Fax
www.hibbett.com
Stock Transfer Agent and Registrar
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
(800) 568-3476
Shareholders seeking information concerning stock transfers, change of
address, and lost certificates should contact Computershare directly.
Annual Report on Form 10-K
A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended February
2, 2008, as filed with the Securities and Exchange Commission, may be obtained without
charge upon written request to the Company’s Investor Relations department.
Annual Meeting
The 2008 Annual Meeting of Stockholders will be held at the principal executive offices of Hibbett
Sports, Inc., 451 Industrial Lane, Birmingham, Alabama, on Monday, June 2, 2008, at 10:00 A.M.,
local time.
Stock Market Information
The Company’s common stock is traded on the NASDAQ Global Select Market under the
symbol HIBB. The following table sets forth, for the periods indicated, the high and low sales
prices of shares of the common stock as reported by NASDAQ:
Fiscal 2008:
Quarter ended May 5, 2007
Quarter ended August 4, 2007
Quarter ended November 3, 2007
Quarter ended February 2, 2008
Fiscal 2007:
Quarter ended April 29, 2006
Quarter ended July 29, 2006
Quarter ended October 28, 2006
Quarter ended February 3, 2007
High
$32.97
$30.62
$28.74
$23.65
High
$34.54
$31.19
$28.16
$33.95
Low
$27.26
$23.70
$21.09
$12.30
Low
$28.20
$18.95
$18.90
$27.00
Independent Registered Public
Accounting Firm
KPMG LLP
Birmingham, Alabama
General Counsel
Williams Mullen
Norfolk, Virginia
B O A R D O F D I R E C T O R S
Michael J. Newsome - Chairman of the Board and Chief Executive Officer, Hibbett Sports, Inc.
Clyde B. Anderson - Executive Chairman of the Board, Books-A-Million, Inc.
Terrance G. Finley - President of Merchandising, Books-A-Million, Inc.
Albert C. Johnson - Independent Financial Consultant
Carl Kirkland - Chairman Emeritus, Kirkland’s, Inc.
Ralph T. Parks - RT Parks, Inc.
Thomas A. Saunders, III - Private Investor
Alton E. Yother - Senior Executive Vice President and Chief Financial Officer (Retired),
Regions Financial Corporation
O F F I C E R S
Michael J. Newsome - Chairman of the Board and Chief Executive Officer
Nissan Joseph - President and Chief Operating Officer
Gary A. Smith - Vice President, Principal Accounting and Chief Financial Officer
Cathy E. Pryor - Vice President of Store Operations
Jeffry O. Rosenthal - Vice President of Merchandising
H I B B E T T S p o r t s , I n c .
4 5 1 I n d u s t r i a l L a n e B i r m i n g h a m , A l a b a m a 3 5 2 1 1
2 0 5 . 9 4 2 . 4 2 9 2
w w w. h i b b e t t . c o m