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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
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For the fiscal year ended Commission file number
February 1, 1997 000-20969
HIBBETT SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-1074067
(State of other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
451 Industrial Lane
Birmingham, Alabama 35211
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(205)942-4292
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class CUSIP Number Which Registered
Common Stock, $.01 Par Value 428565-10-5 NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None
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) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K (Section 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. .
---
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 $47,511,939 at April 18,1997, based
on the closing sale price of $16.625 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
April 18, 1997 was 6,134,261.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Hibbett Sporting Goods, Inc. Proxy Statement for its 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.
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HIBBETT SPORTING GOODS, INC.
INDEX
PART I
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 8
Item 6. Selected Consolidated Financial and Operating Data 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 31
PART III
Item 10. Directors and Executive Officers of Registrant 31
Item 11. Executive Compensation 32
Item 12. Security Ownership of Certain Beneficial Owners and Management 32
Item 13. Certain Relationships and Related Transactions 32
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 32
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PART I
ITEM 1. BUSINESS
GENERAL
Hibbett Sporting Goods, Inc. ("Hibbett" or the "Company") is a
rapidly-growing operator of full-line sporting goods stores in small to
mid-sized markets in the southeastern United States. Hibbett's stores offer a
broad assortment of quality athletic equipment, footwear and apparel at
competitive prices with superior customer service. The Company's merchandise
assortment features a core selection of brand name merchandise emphasizing team
and individual sports complemented by a selection of localized apparel and
accessories designed to appeal to a wide range of customers within each market.
The Company believes that its stores are among the primary retail distribution
alternatives for brand name vendors that seek to reach Hibbett's target markets.
The Company operates 77 Hibbett Sports stores as well as eight
smaller-format Sports Additions athletic shoe stores and four larger-format
Sports & Co. superstores. Hibbett's primary retail format and growth vehicle is
Hibbett Sports, a 5,000 square foot store located predominantly in enclosed
malls. Although competitors in some markets may carry product lines and national
brands similar to Hibbett, the Company believes that its Hibbett Sports stores
are typically the primary, full-line sporting goods retailers in their markets
due to the extensive selection of traditional team and individual sports
merchandise offered and a high level of customer service.
BUSINESS STRATEGY
The Company targets markets with county populations that range from
30,000 to 250,000. By targeting these smaller markets, the Company believes that
it is able to achieve significant strategic advantages, including numerous
expansion opportunities, comparatively low operating costs and a more limited
competitive environment than generally faced in larger markets. In addition, the
Company establishes greater customer and vendor recognition as the leading
full-line sporting goods retailer in these local communities.
Management believes that its ability to merchandise to local sporting
or community interests differentiates Hibbett from its national competitors.
This strong regional focus also enables the Company to achieve significant cost
benefits including lower corporate expenses, reduced distribution costs and
increased economies of scale from marketing activities. Additionally, Hibbett
also utilizes a number of sophisticated information systems to maintain tight
controls over operating costs.
The Company strives to hire enthusiastic sales personnel with an
interest in sports. The Company's extensive training program focuses on product
knowledge and selling skills and is conducted through the use of in-store
clinics, videos, self study courses, and interactive group discussions.
STORE CONCEPTS
Hibbett Sports
The Company's primary retail format is Hibbett Sports, a 5,000 square
foot store located predominantly in enclosed malls. The Company tailors its
Hibbett Sports concept to the size, demographics and competitive conditions of
each market. Sixty-seven Hibbett Sports stores are located in enclosed malls,
the majority of which are the only enclosed malls in the county, and the
remaining ten are located in strip centers.
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Hibbett Sports stores offer a core selection of quality, brand name
merchandise with an emphasis on team and individual 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. For example, the Company
believes that apparel with logos of sports teams of local interest represents a
larger percentage of the merchandise mix in Hibbett Sports stores than it does
in the stores of national chain competitors. In addition, the Company strives to
quickly respond to major sports events of local interest.
Sports & Co.
The Company opened the first of its four Sports & Co. superstores in
the spring of 1995 in Huntsville, Alabama. Sports & Co. superstores average
25,000 square feet and offer a larger assortment of athletic footwear, apparel
and equipment than 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 exciting and entertaining in-store atmosphere as
Hibbett Sports stores but on a larger scale. For example, Sports & Co.
superstores offer customer participation areas, such as putting greens and
basketball hoop shoots, and feature periodic special events including
appearances by well-known athletes.
Sports Additions
The Company's eight Sports Addition stores are small, mall-based
stores, averaging 1,500 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 Hibbett Sports stores. All Sports
Additions stores are currently located in the malls in which Hibbett Sports
stores are also present.
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 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 the Company's
stores, and its warehousing and distribution are managed separately out of its
own warehouse.
EXPANSION STRATEGY
Hibbett targets markets ranging in population from 30,000 to 250,000.
By targeting smaller markets, the Company believes that it is able to achieve
significant strategic advantages, including numerous expansion opportunities,
comparatively low operating costs and a more limited competitive environment
than generally faced in larger markets. In addition, the Company establishes
greater customer and vendor recognition as the leading full-line sporting goods
retailer in the local community.
The Company has recently accelerated its rate of new store openings to
take advantage of the growth opportunities in its target markets. The Company
has identified over 500 potential markets for future Hibbett Sports stores
within the states in which it operates and in contiguous states. Hibbett's
clustered expansion program, which calls for opening new stores within a
two-hour driving radius of another Company location, allows it to take advantage
of efficiencies in distribution, marketing and regional management. In January
1996 the Company moved its operations to its newly constructed distribution
center which has significant expansion potential to support the Company's growth
for the foreseeable future.
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In evaluating potential markets, the Company considers population,
economic conditions, local competitive dynamics and availability of suitable
real estate. Although approximately 90% of Hibbett Sports stores are located in
enclosed malls, the stores also operate profitably in strip center locations. As
the Company continues to expand, it will open new stores in mall and strip
center locations.
MERCHANDISING
The Company's merchandising strategy is to provide a broad assortment
of quality athletic equipment, footwear and apparel at competitive prices. The
Company's stores offer a core selection of brand name merchandise with an
emphasis on team and individual 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. The Company's leading product category is
athletic footwear, followed by apparel and sporting equipment, ranked according
to sales.
The Company emphasizes quality brand name merchandise. The Company
believes that the breadth and depth of its 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. The Company coordinates with its 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, the Company's stores regularly offer products that reflect
preferences for particular sporting activities in each community and local
interest in college and professional sports teams. The Company's knowledge of
these interests, combined with its access to leading vendors, enables Hibbett
Sports stores to react quickly to emerging trends or special events, such as
college or professional championships.
The Company's merchandise staff analyzes current sporting goods trends
by maintaining close relationships with the Company's vendors, monitoring sales
at competing stores, communicating with customers, store managers and personnel
and reviewing industry trade publications. The merchandise staff works closely
with store personnel to meet the requirements of individual stores for
appropriate merchandise in sufficient quantities.
VENDOR RELATIONSHIPS
The sporting goods retail business is very brand name driven.
Accordingly, the Company maintains relationships with a number of well-known
sporting goods vendors to satisfy customer demand. The Company believes that its
stores are among the primary retail distribution alternatives for brand name
vendors that seek to reach Hibbett's target markets. As a result, the Company is
able to attract considerable vendor interest and establish long-term
partnerships with vendors. As its vendors expand their product lines and grow in
popularity, the Company expands its sales and promotions of these products
within its stores. In addition, as the Company continues to increase its store
base and enter new markets, the vendors have increased their brand presence
within these regions. The Company also places significant emphasis on and works
with its vendors to establish the most favorable pricing and to receive
cooperative marketing funds.
Management believes the Company maintains excellent working
relationships with vendors. During fiscal 1997, the Company's largest vendor,
Nike, represented approximately 40% of its total purchases.
ADVERTISING AND PROMOTION
The Company targets special advertising opportunities in its markets to
increase the effectiveness of its advertising spending. In particular, the
Company prefers advertising in local media as a way to further
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differentiate itself from national chain competitors. Substantially all of the
Company's advertising and promotional spending is centrally directed, with some
funds allocated to district managers on an as-requested basis. Advertising in
the sports pages of local newspapers serves as the foundation of the Company's
promotional program, and in fiscal 1997 it accounted for the majority of the
Company's total advertising spending. Other media such as local radio,
television and outdoor billboards are used by the Company to reinforce Hibbett
name recognition and brand awareness in the community. In addition, direct mail
to customers on an in-house mailing list has been used by the Company to
reinforce already established buying patterns and to increase customer loyalty.
DISTRIBUTION
The Company maintains a single 130,000 square foot distribution center
in Birmingham, Alabama for all 89 of its existing stores and manages the
distribution process centrally from its corporate headquarters which are located
in the same building as the distribution center. In January 1996 the Company
moved its operations to this newly constructed distribution center which has
significant expansion potential to support the Company's growth for the
foreseeable future. The Company believes strong distribution support for its
stores is a critical element of its expansion strategy and is central to its
ability to maintain a low cost operating structure. As the Company continues its
expansion, it intends to open new stores in locations that can be supplied from
the Company's distribution center.
The Company receives substantially all of its merchandise at its
distribution center. For key products, the Company maintains backstock at the
distribution center that is allocated and distributed to stores through an
automatic replenishment program based on items sold during the prior week.
Merchandise is typically delivered to stores weekly via Company-operated
vehicles.
COMPETITION
The business in which the Company is engaged is highly competitive and
many of the items sold by the Company are sold by local sporting goods stores,
department and discount stores, athletic footwear and other specialty athletic
stores, traditional shoe stores and national and regional full-line 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, the growth of large
format retailers has resulted in significant consolidation in large metropolitan
markets. However, the Company believes that the competitive environment for
sporting goods remains different in small to mid-sized markets where retail
demand may not support larger format stores. In smaller markets such as those
targeted by the Company's Hibbett Sports format, national chains compete by
focusing on a specialty category like athletic footwear in the case of Foot
Locker and Foot Action. Accordingly, many of the stores with which the Company
competes are units of national chains that have substantially greater financial
and other resources than the Company. Hibbett Sports format stores compete with
national chains that focus on athletic footwear, local sporting goods stores,
department and discount stores and traditional shoe stores. Although its Hibbett
Sports format may face competition from a variety of competitors, the Company
believes that its Hibbett Sports format is able to compete effectively by
distinguishing itself as a full-line sporting goods store with an emphasis on
team and individual sports merchandise complemented by a selection of localized
apparel and accessories. The larger markets targeted by Sports & Co. superstores
are also highly competitive. The Company's Sports & Co. superstores compete with
sporting goods superstores, athletic footwear superstores and mass
merchandisers. Competitors of Sports & Co. superstores may carry similar product
lines and national brands and a broader assortment. The Company believes the
principal competitive factors in its markets are service, breadth of merchandise
offered, availability of brand names, availability of local merchandise and
price. The Company believes it competes favorably with respect to these factors
in the small to mid-sized markets in the Southeast. However, there can be no
assurance that the Company will continue to be able to compete successfully
against existing or future competitors. Expansion by the Company into markets
served by its competitors, entry of new competitors or expansion of
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existing competitors into the Company's markets, could have a material adverse
effect on the Company's business, financial condition and results of operations.
EMPLOYEES
The Company employed approximately 414 full-time and approximately 686
part-time employees at February 1, 1997, none of whom are represented by a labor
union. The number of part-time employees fluctuates depending on seasonal needs.
There can be no assurance that the Company's employees will not, in the future,
elect to be represented by a union. The Company considers its relationship with
its employees to be good and has not experienced significant interruptions of
operations due to labor disagreements.
ITEM 2. PROPERTIES
The Company currently leases all of its existing 89 store locations and
expects that its policy of leasing rather than owning will continue as it
expands. The Company's leases typically provide for a short initial lease term
with options on the part of the Company to extend. Management believes that this
lease strategy enhances the Company's flexibility to pursue various expansion
opportunities resulting from changing market conditions and to periodically
re-evaluate store locations. The Company's ability to open new stores is
contingent upon locating satisfactory sites, negotiating favorable leases and
recruiting and training additional qualified management personnel.
As current leases expire, the Company believes that it will be able
either to obtain lease renewals if desired for present store locations or to
obtain leases for equivalent or better locations in the same general area. To
date, the Company has not experienced difficulty in either renewing leases for
existing locations or securing leases for suitable locations for new stores. The
Company's leases may contain certain provisions with which the Company may not
be in compliance. Based primarily on the Company's belief that it maintains good
relations with its landlords, that most of its leases are at market rents and
that it has historically been able to secure leases for suitable locations,
management believes that these provisions will not have a material adverse
effect on the business or financial condition of the Company.
The Company moved its operations to the newly-built corporate offices
and distribution center in Birmingham, Alabama in January 1996. The offices and
the distribution center are leased by the Company under a long term operating
lease. Team Sales owns its warehousing and distribution center located in
Birmingham, Alabama.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the business, financial position or
results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the NASDAQ National Market
(NASDAQ) under the symbol HIBB. Trading of the Company's stock commenced on
October 11, 1996. The following table sets forth, for the periods indicated, the
high and low closing sales prices of shares of the Common Stock as reported by
NASDAQ.
Fiscal 1997: High Low
---- ----
First Quarter ................................ -- --
Second Quarter ............................... -- --
Third Quarter (October 11 to November 2) .... $21 1/2 $19 1/2
Fourth Quarter (November 3 to February 1) .... $19 1/2 $12 1/8
On April 18, 1997, the last reported sale price for the Company's
Common Stock as quoted by NASDAQ was $16 5/8 per share. As of April 18, 1997,
the Company had approximately 53 registered shareholders.
The Company has never declared or paid any dividends on its common
stock. The Company currently intends to retain its future earnings to finance
the growth and development of its business and therefore does not anticipate
declaring or paying cash dividends on its common stock for the foreseeable
future. Any future decision to declare or pay dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operations, capital requirements, and such other
factors as the Board of Directors deems relevant.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The statement of operations data and balance sheet data for each of the
five fiscal years ended January 31, 1993, January 29, 1994, January 28, 1995,
February 3, 1996, and February 1, 1997 set forth below have been derived from
audited financial statements of the Company, except for the provision for income
taxes, net income and net income per share in fiscal 1993, which are pro forma
amounts as explained in footnote 3. The following data should be read in
conjunction with the Consolidated Financial Statements of the Company and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Form 10-K.
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HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
February 1, February 3, January 28, January 29, January 31,
1997 1996 1995 1994(1) 1993
---------- ---------- ---------- ---------- ----------
(52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
INCOME STATEMENT DATA:
- ----------------------
Net sales $ 86,401 $ 67,077 $ 52,266 $ 40,119 $ 36,366
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 60,017 46,642 36,225 27,731 24,998
---------- ---------- ---------- ---------- ----------
Gross profit 26,384 20,435 16,041 12,388 11,368
Store operating, selling, and administrative
expenses 17,339 (2) 13,471 10,453 8,579 7,861
Depreciation and amortization 1,821 1,322 1,066 932 814
---------- ---------- ---------- ---------- ----------
Operating income 7,224 5,642 4,522 2,877 2,693
Interest Expense 2,642 1,685 (4) 654 488 325
---------- ---------- ---------- ---------- ----------
Income before provision for income
taxes and extraordinary item 4,582 3,957 3,868 2,389 2,368
Provision for income taxes 1,752 1,514 1,479 920 906 (3)
---------- ---------- ---------- ---------- ----------
Income before extraordinary item 2,830 2,443 2,389 1,469 1,462 (3)
Extraordinary item, net (1,093)(5) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income $ 1,737 $ 2,443 $ 2,389 $ 1,469 $ 1,462
========== ========== ========== ========== ==========
Earnings per common share:
Income before extraordinary item $ 0.61 $ 0.42 $ 0.37 $ 0.23 $ 0.22 (3)
Extraordinary item, net (0.24)(5) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income $ 0.37 $ 0.42 $ 0.37 $ 0.23 $ 0.22 (3)
========== ========== ========== ========== ==========
Weighted average shares outstanding 4,666,173 5,838,267 (4) 6,504,521 6,504,521 6,504,521
========== ========== ========== ========== ==========
SELECTED OPERATING DATA:
- ------------------------
Number of stores open at end of period:
Hibbett Sports 77 56 52 41 33
Sports & Co. 4 3 -- -- --
Sports Additions 8 8 8 8 6
---------- ---------- ---------- ---------- ----------
Total 89 67 60 49 39
========== ========== ========== ========== ==========
BALANCE SHEET DATA:
- -------------------
Working capital $ 16,280 $ 10,907 $ 7,459 $ 4,030 $ 2,097
Total assets 40,358 36,702 22,787 17,507 14,569
Total debt -- (5) 31,912 (4) 5,328 6,179 4,810
Stockholders' investment (deficit) 26,512 (5) (8,093)(4) 8,259 5,871 4,402
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FOOTNOTES (DOLLARS IN THOUSANDS):
(1) During fiscal year 1994, the Company changed its fiscal year from a
twelve-month period ending January 31 to a 52-53 week period ending on
the Saturday nearest to January 31.
(2) Includes a $513 pre-tax gain on the sale of the Company's former
headquarters and distribution facility and a one-time pre-tax
compensation expense of $462 related to stock options issued on August
1, 1996.
(3) Prior to July 1, 1992, the Company was a Subchapter S corporation.
Under these provisions, the taxable income of the Company was included
in the individual income tax returns of the stockholders. Effective
July 1, 1992, the Company and its stockholders terminated the S
corporation election and the Company became a taxable corporation.
Thus, the provision for income taxes for the fiscal year ended January
31, 1993 gives effect to the application of pro forma income taxes that
would have been reported had the Company been a taxable corporation for
federal and state income tax purposes for such fiscal year.
(4) In November 1995, the Company completed the Recapitalization (see
Footnote 2 to the Consolidated Financial Statements). The
Recapitalization included the repurchase and retirement of 5,609,836
shares of common stock for cash and debt and the issuance of 2,886,721
new shares of common stock and debt in exchange for cash. The
Recapitalization resulted in a substantial increase in total debt
outstanding and a deficit in stockholders' investment.
(5) During the third quarter ended November 2, 1996, the Company completed
its initial public offering (see Footnote 2 to the Consolidated
Financial Statements) with net proceeds of $32,868. In connection
therewith, a substantial portion of the Company's long-term debt was
repaid resulting in a loss of $1,093 (net of applicable tax benefit of
$677). The loss is classified as an extraordinary item.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Hibbett is a rapidly-growing operator of full-line sporting goods
stores in small to mid-sized markets in twelve states in the southeastern United
States. Hibbett's stores offer a broad assortment of quality athletic equipment,
footwear and apparel at competitive prices with superior customer service. The
Company's merchandise assortment features a core selection of brand name
merchandise emphasizing team and individual sports complemented by a selection
of localized apparel and accessories designed to appeal to a wide range of
customers within each market. The Company believes that its stores are among the
primary retail distribution alternatives for brand name vendors that seek to
reach Hibbett's target markets.
The Company operates 77 Hibbett Sports stores as well as eight
smaller-format Sports Additions athletic shoe stores and four larger-format
Sports & Co. superstores. Hibbett's primary retail format and growth vehicle is
Hibbett Sports, a 5,000 square foot store located predominantly in enclosed
malls. Although competitors in some markets may carry product lines and national
brands similar to Hibbett, the Company believes that its Hibbett Sports stores
are typically the primary, full-line sporting goods retailers in their markets
due to, among other factors, the extensive selection of traditional team and
individual sports merchandise offered and a high level of customer service.
Beginning in fiscal 1994, Hibbett accelerated its store opening rate to
approximately 10 stores per year. In fiscal 1997, the Company further
accelerated its rate of new store openings to take advantage of the growth
opportunities in its target markets. In fiscal 1997, the Company opened 21 new
Hibbett Sports stores and one Sports & Co. superstore. The Company plans to open
approximately 27 Hibbett Sports stores in fiscal 1998.
To support its expansion plans, the Company has increased its staffing
levels in finance, merchandising, real estate, distribution and field
management. Additionally, in January 1996, the Company moved into its new
headquarters and distribution center which has significant expansion potential
to support the Company's growth for the foreseeable future. The Company expects
to benefit from leveraging these additional costs over a larger store base as it
continues to implement its expansion plans.
In October 1996, the Company completed its initial public offering of
2,300,000 shares of common stock at the initial public offering price of $16 per
share. The net proceeds to the Company of approximately $33 million were used to
repay the subordinated notes and accrued interest thereon, to repay the term
loan and accrued interest thereon, and to reduce borrowings under the revolving
loan agreement.
The Company operates on a 52 or 53 week fiscal year ending on the
Saturday nearest to January 31 of such year. The consolidated statements of
operations for the fiscal years ended February 1, 1997, and January 28, 1995,
include 52 weeks of operations while the fiscal year ended February 3, 1996,
includes 53 weeks of operations. Hibbett is incorporated under the laws of the
state of Delaware.
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RESULTS OF OPERATIONS
The following table sets forth statements of operations expressed as a
percentage of net sales for the periods indicated.
FISCAL YEAR ENDED
------------------------------------------------
February 1, February 3, January 28,
1997 1996 1995
---- ---- ----
Net Sales 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 69.5 69.5 69.3
----- ----- -----
Gross Profit 30.5 30.5 30.7
Store operating, selling, and administrative expenses 20.1 20.1 20.0
Depreciation and amortization 2.1 2.0 2.0
----- ----- -----
Operating Income 8.3 8.4 8.7
Interest expense 3.0 2.5 1.3
----- ----- -----
Income before provision for income taxes
and extraordinary item 5.3 5.9 7.4
Provision for income taxes 2.0 2.3 2.8
----- ----- -----
Income before extraordinary item 3.3 3.6 4.6
Extraordinary item, net (1.3) 0.0 0.0
----- ----- -----
Net income 2.0% 3.6% 4.6%
===== ===== =====
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales. Net sales increased $19.3 million, or 28.8%, to $86.4
million for the fifty-two weeks ended February 1, 1997, from $67.1 million for
the fifty-three weeks ended February 3, 1996. New stores and stores not in the
comparable store net sales calculation accounted for $14.3 million of the
increase in net sales and increases in comparable store net sales contributed
$5.0 million. Excluding the effect of the additional week of sales in the prior
year period, net sales increased 30.4%. The increase in sales in fiscal 1997 is
attributable to the opening of twenty-one Hibbett Sports stores and one Sports &
Co. superstore and a 10.2% increase in comparable store net sales for the 52
week comparable period. The increase in comparable store net sales was due
primarily to increased footwear sales and improved inventory processing at the
new distribution center. Comparable store net sales data for the period reflect
stores open throughout the period and the corresponding period of the prior
fiscal year. Comparable store net sales reflect sales by the Company's
traditional format stores only.
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 $26.4 million, or 30.5% of net sales, in
the fifty-two weeks ended February 1, 1997, as compared to $20.4 million, or
30.5% of net sales, in the prior fiscal year. Improved leveraging of store
occupancy costs over higher sales was offset by higher markdowns in the current
year.
Store operating, selling and administration expenses. Store operating,
selling and administrative expenses for the fifty-two weeks ended February 1,
1997 include a net gain of $533,000 on the disposal of assets which primarily
relates to the $513,000 gain on the sale of the former headquarters and
distribution facility. The net gain was substantially offset by a one-time
compensation expense of approximately $462,000 related to the issuance of stock
options on August 1, 1996. Excluding these items, store
12
13
operating, selling and administrative expenses were $17.4 million, or 20.1% of
net sales, for the fifty-two weeks ended February 1, 1997, as compared to $13.5
million, or 20.1% of net sales, for the fifty-three weeks in the year ago
period.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales increased slightly to 2.1% in the fifty-two weeks ended
February 1, 1997 from 2.0% in the prior year.
Interest expense. The $957,000 increase in interest expense for the
fifty-two weeks ended February 1, 1997 compared to the prior year is due
primarily to the interest expense associated with the subordinated notes which
were issued in connection with the Recapitalization in November 1995 (see Note 2
to the Consolidated Financial Statements) and, to a lesser extent, to an
increase in borrowings under the revolving loan agreement to fund new store
openings. In connection with the initial public offering, the Company repaid a
substantial portion of its long-term debt. As a result, the Company anticipates
lower interest expense in future periods.
Extraordinary item, net. The $1,093,000 extraordinary item is the
result of the early extinguishment of debt with the proceeds of the initial
public offering. This item is shown net of the applicable income tax benefit of
$677,000.
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales. Net sales increased $14.8 million, or 28.3%, to $67.1
million in fiscal 1996 from $52.3 million in fiscal 1995. This increase is
attributable to the opening of five Hibbett Sports stores, three Sports & Co.
superstores and one Sports Additions store, an increase in comparable store net
sales of 6.2% and an additional week of sales as fiscal 1996 included 53 weeks
of operations, offset in part by the closing of one Sports Additions store. The
increase in comparable store net sales was due primarily to increased sales of
footwear and apparel. New stores and stores not in the comparable store net
sales calculation accounted for $11.8 million of the increase in net sales and
increases in comparable store net sales contributed $3.0 million.
Gross profit. Gross profit was $20.4 million, or 30.5% of net sales, in
fiscal 1996 as compared to $16.0 million, or 30.7% of net sales, in fiscal 1995.
The decline in gross profit as a percentage of net sales primarily resulted from
higher distribution costs. In anticipation of its accelerated expansion plan,
the Company increased staff positions at its distribution center, adding two
senior distribution center managers.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $13.5 million, or 20.1% of net sales,
in fiscal 1996 as compared to $10.5 million, or 20.0% of net sales, in fiscal
1995. This increase as a percentage of net sales is primarily attributable to
the costs associated with increasing the Company's corporate staff to support
future growth.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales remained constant at 2.0% in fiscal 1996 and fiscal
1995.
Interest expense. The $1.0 million increase in interest expense for
fiscal 1996 is primarily due to the interest expense associated with the
subordinated notes which were issued in connection with the Recapitalization and
the increase in borrowings under the revolving loan agreement and the previous
loan agreement to fund new store openings.
Net income. Net income increased $54,000, or 2.3%, to $2.4 million in
fiscal 1996 compared to fiscal 1995 due to the factors discussed above.
13
14
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales. Net sales increased $12.1 million, or 30.3%, to $52.3
million in fiscal 1995 from $40.1 million in fiscal 1994. This increase is
attributable to the opening of 11 Hibbett Sports stores and an increase in
comparable store net sales of 15.6%. The increase in comparable store net sales
was due primarily to a significant increase in branded apparel sales as well as
a moderate increase in footwear sales. New stores and stores not in the
comparable store net sales calculation accounted for $7.3 million of the
increase in net sales and increases in comparable store net sales contributed
$4.8 million.
Gross profit. Gross profit was $16.0 million, or 30.7% of net sales, in
fiscal 1995 as compared to $12.4 million, or 30.9% of net sales, in fiscal 1994.
The decline in gross profit as a percentage of net sales primarily resulted from
higher store occupancy costs.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $10.5 million, or 20.0% of net sales,
in fiscal 1995 as compared to $8.6 million, or 21.4% of net sales, in fiscal
1994. This decrease as a percentage of net sales was the result of spreading
fixed costs over the Company's larger sales base.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales decreased to 2.0% in fiscal 1995 from 2.3% in fiscal
1994 as a result of the Company's operating leverage as these costs were
allocated over a larger sales base.
Interest expense. The $166,000 increase in interest expense for fiscal
1995 was due primarily to an increase in borrowings under the previous loan
agreement to fund new store openings.
Net income. Net income increased $920,000, or 62.6%, to $2.4 million in
fiscal 1995 from $1.5 million in fiscal 1994. This increase as a percentage of
net sales was attributable to factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements relate primarily to new store
openings and working capital requirements. The Company's 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 quarter of its fiscal year.
Historically, the Company has funded its cash requirements primarily through
cash flow from operations and borrowings under its revolving loan facilities.
Net cash provided by (used in) operating activities has historically
been driven by net income levels combined with fluctuations in inventory and
accounts payable balances. The Company has increased its inventory levels in
each of the last three fiscal years as the number of stores has increased and
the four larger Sports & Co. superstores have opened. These inventory increases
were primarily financed through increased accounts payable balances in fiscal
1995 but were primarily financed with cash from operations in both fiscal 1996
and fiscal 1997. These activities resulted in cash flows provided by (used in)
operating activities of $1.8 million, $(158,000), and $3.2 million in fiscal
1997, fiscal 1996, and fiscal 1995, respectively.
With respect to cash flows from investing activities, the Company's
proceeds from the sale of property of $5.3 million primarily related to the
sale-leaseback of its new headquarters and distribution center and the sale of
the former headquarters and warehouse facilities. The Company used the proceeds
to (1) repay $4.3 million then outstanding under the senior subordinated notes
issued to temporarily finance the new headquarters and distribution center, and
(2) fund the Company's working capital requirements. Capital expenditures for
fiscal 1997 were $4.3 million compared with $8.2 million in fiscal 1996 and $2.2
million in fiscal 1995. Capital expenditures in fiscal 1997 were primarily used
to open 21 new Hibbett Sports stores
14
15
and one Sports & Co. superstore. The higher capital expenditures in fiscal 1996
resulted primarily from the construction of the new headquarters and
distribution center for approximately $4.7 million.
The Company estimates capital expenditures in fiscal 1998 to be
approximately $3.9 million which will fund the opening of approximately 27
Hibbett Sports stores, remodel selected existing stores, and fund headquarters
and distribution center-related capital expenditures.
Net cash provided by (used in) financing activities was ($539,000),
$7.6 million, and ($851,000) in fiscal 1997, fiscal 1996, and fiscal 1995,
respectively. In fiscal 1997, the Company used the net proceeds of $32.9 million
from the initial public offering to repay long-term debt and revolving loan
borrowings.
In October 1996, the Company entered into a new unsecured $20 million
Revolving Credit Facility (the "Facility") provided by AmSouth Bank of Alabama.
Borrowings under the Facility bear interest at the Company's option either at a
base rate, a quoted cost of funds rate, or a LIBOR based rate. As of February 1,
1997, the Company had no borrowings outstanding under the Facility which expires
October 31, 1999. Based on its current operating and store opening plans, the
Company believes that it can adequately fund its cash needs for the foreseeable
future through borrowings under the Facility and cash generated from operations.
QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its net sales and operating income. The
Company's net sales and operating income are typically higher in the fourth
quarter due to sales increases during the holiday selling season. However, the
seasonal fluctuations are mitigated by the strong product demand in the spring,
summer and back-to-school sales periods. The Company's quarterly results of
operations may also fluctuate significantly as a result of a variety of factors,
including the timing of new store openings, the amount and timing of net sales
contributed by new stores, the level of pre-opening expenses associated with new
stores, the relative proportion of new stores to mature stores, merchandise mix,
the relative proportion of stores represented by each of the Company's three
store concepts and demand for apparel and accessories driven by local interest
in sporting events.
15
16
The following tables set forth certain unaudited financial data for the
quarters indicated:
UNAUDITED QUARTERLY FINANCIAL DATA
(Dollar amounts in thousands, except per share amounts)
Fiscal Year Ended February 1, 1997
-------------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
---------- ---------- ---------- ----------
Net sales $20,251 $18,768 $20,618 $26,764
Gross profit 6,216 5,531 6,417 8,220
Operating income 2,429(1) 725(2) 1,543 2,527
Fiscal Year Ended February 3, 1996
-------------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
---------- ---------- ---------- ----------
Net sales $15,001 $14,354 $15,737 $21,985
Gross profit 4,570 4,247 4,875 6,743
Operating income 1,476 1,055 1,322 1,789
Footnotes (dollars in thousands):
(1) In the first quarter of the fiscal year ended February 1, 1997, the
Company recorded a $513 pre-tax gain on the sale of the Company's
former headquarters and distribution facility. Excluding this gain,
operating income would have been $1,916.
(2) In the second quarter of the fiscal year ended February 1, 1997, the
Company recorded a one-time compensation expense of $462 related to
the issuance of stock options issued on August 1, 1996. Excluding this
expense, operating income would have been $1,187.
16
17
In the opinion of the Company's management, this unaudited information
has been prepared on the same basis as the audited information presented
elsewhere herein and includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the information set forth
therein. The operating results from any quarter are not necessarily indicative
of the results to be expected for any future period.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
The statements contained in this report that are not purely historical
or which might be considered an opinion or projection concerning the Company or
its business, whether express or implied, are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements may include statements regarding the Company's expectations,
intentions, plans or strategies regarding the future. All forward-looking
statements included in this document are based upon information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statements. It is important to note that the Company's
actual results could differ materially from those described or implied in such
forward-looking statements because of, among other factors, the ability of the
Company to execute its expansion plans, a shift in demand for the merchandise
offered by the Company, the Company's ability to obtain brand name merchandise
at competitive prices, the effect of regional or national economic conditions
and the effect of competitive pressures from other retailers. In addition, the
reader should consider the risk factors described from time to time in the
Company's other documents and reports, including the factors described under
"Risk Factors" in the Company's Registration Statement on Form S-1, filed with
the Securities and Exchange Commission on June 27, 1996, as amended.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements Page
- ------------------------------------------ ----
Independent Auditors' Report 18
Consolidated Balance Sheets as of February 1, 1997 and February 3, 1996 19
Consolidated Statements of Operations for the years ended
February 1, 1997, February 3, 1996 and January 28, 1995 20
Consolidated Statements of Stockholders' Investment (Deficit) for the years
ended February 1, 1997, February 3, 1996 and January 28, 1995 21
Consolidated Statements of Cash Flows for the years ended
February 1, 1997, February 3, 1996 and January 28, 1995 22
Notes to Consolidated Financial Statements 23
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hibbett Sporting Goods, Inc.:
We have audited the accompanying consolidated balance sheets of HIBBETT
SPORTING GOODS, INC. (a Delaware corporation, formerly an Alabama corporation)
AND SUBSIDIARIES as of February 1, 1997 and February 3, 1996, and the related
consolidated statements of operations, stockholders' investment (deficit), and
cash flows for each of the three fiscal years in the period ended February 1,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Hibbett Sporting
Goods, Inc. and subsidiaries as of February 1, 1997 and February 3, 1996, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended February 1, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 18, 1997
18
19
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
February 1, February 3,
1997 1996
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,269 $ 31
Accounts receivable, net 2,097 1,341
Inventories 24,521 20,705
Prepaid expenses and other 485 756
Refundable income taxes 128 419
Deferred income taxes 626 538
-------- --------
30,126 23,790
-------- --------
PROPERTY AND EQUIPMENT:
Land 24 748
Buildings 216 4,869
Equipment 5,798 4,581
Furniture and fixtures 4,564 3,470
Leasehold improvements 7,321 5,901
Construction in progress 683 170
-------- --------
18,606 19,739
Less accumulated depreciation & amortization 8,722 7,605
-------- --------
9,884 12,134
-------- --------
NONCURRENT ASSETS:
Deferred income taxes 321 308
Unamortized debt issuance costs, net -- 434
Other, net 27 36
-------- --------
348 778
-------- --------
$ 40,358 $ 36,702
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 10,381 $ 10,371
Accrued income taxes 436 --
Accrued expenses:
Payroll-related 1,875 1,079
Other 1,144 887
Related-party 10 546
-------- --------
13,846 12,883
-------- --------
LONG-TERM DEBT -- 31,912
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT (DEFICIT):
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, no shares outstanding -- --
Common Stock, $.01 par value, 12,000,000 shares
authorized, 6,134,261 shares issued and
outstanding at February 1, 1997; and $.01 par value,
50,000,000 shares authorized, 23,389,000 shares
issued and outstanding at February 3, 61 234
Paid-in capital 47,974 14,933
Retained earnings (deficit) (21,523) (23,260)
-------- --------
26,512 (8,093)
-------- --------
$ 40,358 $ 36,702
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED BALANCE SHEETS.
19
20
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
February 1, February 3, January 28,
1997 1996 1995
----------- ---------- ----------
(52 Weeks) (53 Weeks) (52 Weeks)
Net sales $ 86,401 $ 67,077 $ 52,266
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 60,017 46,642 36,225
----------- ---------- ----------
Gross profit 26,384 20,435 16,041
Store operating, selling, and administrative
expenses 17,339 13,471 10,453
Depreciation and amortization 1,821 1,322 1,066
----------- ---------- ----------
Operating income 7,224 5,642 4,522
Interest expense 2,642 1,685 654
----------- ---------- ----------
Income before provision for income taxes
and extraordinary item 4,582 3,957 3,868
Provision for income taxes 1,752 1,514 1,479
----------- ---------- ----------
Income before extraordinary 2,830 2,443 2,389
Extraordinary item, net of income tax
benefit of $677 (1,093) -- --
----------- ---------- ----------
Net income $ 1,737 $ 2,443 $ 2,389
=========== ========== ==========
Earnings per common share:
Income before extraordinary $ 0.61 $ 0.42 $ 0.37
Extraordinary item, net (0.24) -- --
----------- ---------- ----------
Net income $ 0.37 $ 0.42 $ 0.37
=========== ========== ==========
Weighted average shares outstanding 4,666,173 5,838,267 6,504,521
=========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
20
21
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT (DEFICIT)
(DOLLARS IN THOUSANDS)
Common Stock
------------------------- Retained
Number of Paid-In Earnings
Shares Amount Capital (Deficit)
----------- ------ -------- ---------
BALANCE, January 29, 1994 10,256 $ 1 $ 126 $ 5,743
Net income -- -- -- 2,389
Change in par value -- (1) 1 --
Issuance of shares in connection with a
100-for-1 stock split 1,015,344 10 (10) --
----------- ----- -------- --------
BALANCE, January 28, 1995 1,025,600 10 117 8,132
Net income -- -- -- 2,443
Issuance of shares in connection with a
38.687189-for-1 stock split 38,651,981 387 (387) --
Purchase and retirement of shares (34,220,000) (342) (43) (33,835)
Issuance of shares 17,609,000 176 17,433 --
Expenses related to capital transactions 322,419 3 (2,187) --
----------- ----- -------- --------
BALANCE, February 3, 1996 23,389,000 234 14,933 (23,260)
Net income -- -- -- 1,737
Retroactive effect of 1-for-6.1 reverse stock split (19,554,739) (196) 196 --
Initial public offering of common stock, net
of offering costs of $1,356 2,300,000 23 32,845 --
----------- ----- -------- --------
BALANCE, February 1, 1997 6,134,261 $ 61 $ 47,974 $(21,523)
=========== ===== ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
21
22
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Fiscal Year Ended
-----------------------------------
February 1, February 3, January 28,
1997 1996 1995
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,737 $ 2,443 $ 2,389
-------- -------- -------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Extraordinary item 1,770 -- --
Depreciation and amortization 1,969 1,475 1,124
Deferred income taxes (101) (140) (266)
(Gain) loss on disposal of assets (533) 6 4
Interest expense funded through additional debt 14 128 --
(Increase) decrease in assets:
Accounts receivable, net (756) (247) (9)
Inventories (3,816) (5,969) (3,930)
Prepaid expenses and other 271 (644) 71
Refundable income taxes 291 (419) 61
Other noncurrent assets 9 (474) 11
Increase (decrease) in liabilities:
Accounts payable 10 2,828 2,978
Accrued income taxes 436 (71) 71
Accrued expenses 517 926 694
-------- -------- -------
Total adjustments 81 (2,601) 809
-------- -------- -------
Net cash provided by (used in) operating activities 1,818 (158) 3,198
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,308) (8,172) (2,179)
Proceeds from sale of property 5,267 6 26
-------- -------- -------
Net cash provided by (used in) investing activities 959 (8,166) (2,153)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares in
initial public offering 32,868 -- --
Repayment of subordinated and senior subordinated notes
payable to stockholders (20,267) -- --
Revolving loan borrowings and repayments, net (12,140) 12,140 --
Repayment of term loan (1,000) -- --
Purchase and retirement of shares in the Recapitalization -- (22,250) --
Issuance of shares in the Recapitalization -- 17,609 --
Expenses related to the Recapitalization -- (2,184) --
Principal payments on long-term debt -- (5,328) (3,251)
Proceeds from issuance of long-term debt to stockholders -- 6,641 --
Proceeds from term loan -- 1,000 --
Proceeds from issuance of long-term debt -- -- 4,579
Borrowings (repayments) of short-term debt, net -- -- (2,179)
-------- -------- -------
Net cash provided by (used in) financing activities (539) 7,628 (851)
-------- -------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,238 (696) 194
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 31 727 533
-------- -------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,269 $ 31 $ 727
======== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 3,006 $ 1,038 $ 612
======== ======== =======
Income taxes, net of refunds $ 846 $ 2,144 $ 1,500
======== ======== =======
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
ACTIVITIES:
Issuance of debt (including unamortized debt discount)
to stockholders for the purchase of shares in
the Recapitalization $ -- $ 13,051 $ --
======== ======== =======
Issuance of stock as compensation related to capital
transactions in the Recapitalization $ -- $ 322 $ --
======== ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
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HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Hibbett Sporting Goods, Inc. (the "Company") is an operator of
full-line sporting goods retail stores in small to mid-sized markets in the
Southeastern United States. The Company's fiscal year ends on the Saturday
closest to January 31 of each year.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include its
accounts and the accounts of all wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles 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 financial statements, and (2) the reported amounts of certain
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
INVENTORIES
Inventories are valued 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.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. It is the Company's policy
to depreciate assets acquired prior to January 28, 1995 using accelerated and
straight-line methods over the estimated service lives (3 to 10 years for
equipment, 5 to 10 years for furniture and fixtures, and 10 to 31.5 years for
buildings) and to amortize leasehold improvements using the straight-line method
over the periods of the applicable leases. Depreciation on assets acquired
subsequent to January 28, 1995 is provided using the straight-line method over
the 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, 10 years or over the lives of the respective leases, if shorter.
Maintenance and repairs are charged to expense as incurred. Costs of
renewals and betterments are capitalized by charges to property accounts and are
depreciated using applicable annual rates. The cost and accumulated depreciation
of assets sold, retired, or otherwise disposed of are removed from the accounts,
and the related gain or loss is credited or charged to income.
23
24
STORE OPENING COSTS
Non-capital expenditures incurred in preparation for opening new retail
stores are expensed in the period each store opens.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In preparing disclosures about the fair value of financial instruments,
management has assumed that the carrying amount approximates fair value for cash
and cash equivalents, receivables, short-term borrowings and accounts payable,
because of the short maturities of those instruments. The estimated fair values
of any long-term debt instruments outstanding at year end are based upon the
current interest rate environment and remaining term to maturity.
INCOME TAXES
The Company accounts for income taxes using the asset and liability
method, which generally requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
In addition, the asset and liability method requires the adjustment of
previously deferred income taxes for changes in tax rates.
EARNINGS PER SHARE
Earnings per share for each of the periods presented is calculated by
dividing net income by the number of weighted average common shares outstanding.
Common stock equivalents in the form of stock options are included in the
calculation utilizing the treasury stock method for all periods presented. All
earnings per share, weighted average shares outstanding, stock options, and
stock option per share amounts have been retroactively restated for all periods
presented to reflect the 1-for-6.1 reverse stock split discussed in Note 2.
Supplemental earnings per share is calculated by dividing net income after
adjustment for applicable interest expense of $1,491,000 (net of tax), by the
adjusted number of weighted average shares outstanding (6,134,261 shares after
giving effect to the number of shares to repay $31,012,000 of debt).
Supplemental earnings per share before and after an extraordinary item for the
fiscal year ended February 1, 1997 was $.70 and $.53, respectively.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term, highly liquid investments with original maturities of
three months or less to be cash equivalents.
PRIOR YEAR RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the
current year presentation.
24
25
2. STOCKHOLDERS' INVESTMENT TRANSACTIONS
In December 1994, the Company's Board of Directors approved an increase
in the number of authorized shares of common stock from 20,000 to 3,000,000
shares and a decrease in the par value from $.10 to $.01 per share. In addition,
the Company's Board of Directors declared a 100-for-1 stock split in the form of
a 100% stock dividend.
On November 1, 1995, the Company's Board of Directors approved a series
of equity and debt transactions which resulted in a recapitalization of the
Company and a change in controlling ownership of the common stock outstanding
(the "Recapitalization"). In connection with the Recapitalization, the Company's
Board of Directors (i) increased the number of authorized shares of common stock
from 3,000,000 to 50,000,000 shares, (ii) declared a 38.687189-for-1 stock
split, (iii) approved the repurchase and retirement of 34,220,000 shares
(5,609,836 shares after giving retroactive effect to the 1-for-6.1 reverse stock
split discussed below) of common stock for $1.00 per share ($6.10 per share
after giving retroactive effect to the 1-for-6.1 reverse stock split discussed
below) with $22,250,000 cash and the issuance of $13,051,000 of debt (including
unamortized debt discount), and (iv) approved the issuance of 17,609,000 new
shares (2,886,721 shares after giving effect of the 1-for-6.1 reverse stock
split discussed below) of common stock at $1.00 per share ($6.10 per share after
giving retroactive effect to the 1-for-6.1 reverse stock split discussed below)
and $7,074,000 of debt (including unamortized debt discount) for $24,250,000
cash. Expenses of $2,506,000 were incurred in connection with the
Recapitalization and reduced paid-in capital.
On September 13, 1996, the Company's Board of Directors approved a
1-for-6.1 reverse stock split of the Company's Common Stock. In addition, the
Board of Directors approved a plan of reorganization which included (i)
reincorporating the Company in the state of Delaware, (ii) decreasing the number
of authorized shares of common stock from 50,000,000 to 12,000,000 shares, and
(iii) authorizing 1,000,000 shares of preferred stock, par value $.01 per share.
On October 11, 1996, the Company completed its initial public offering
of 2,300,000 shares of common stock at the initial public offering price of $16
per share. The net proceeds to the Company of $32,868,000 were used to repay the
subordinated notes and accrued interest thereon, to repay the term loan and
accrued interest thereon, and to reduce borrowings under the revolving loan
agreement (see Note 3).
All references in the financial statements to weighted average shares
outstanding, earnings per share, and stock options have been restated to reflect
the above stock splits and the reverse stock split.
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26
3. LONG-TERM DEBT
The Company's long-term debt is as follows:
FEBRUARY 1, FEBRUARY 3,
1997 1996
--------------------------------
Revolving loan agreement $ 0 $ 12,140,000
Term loan agreement, due November 1997, unsecured 0 1,000,000
Subordinated notes payable to stockholders, unsecured,
12%, due November 2002, interest payable quarterly,
beginning November 1, 1996 0 16,000,000
Senior subordinated bridge notes payable to stockholders,
unsecured, 12%, due November 2000, interest payable quarterly 0 4,253,000
Unamortized debt discount 0 (1,481,000)
----------- ------------
0 31,912,000
Less current maturities 0 0
----------- ------------
$ 0 $ 31,912,000
=========== ============
At February 1, 1997, the Company maintained an unsecured revolving
credit facility (the "Facility") totaling $20,000,000 which expires October 31,
1999. There were no amounts outstanding under the Facility at February 1, 1997.
Under the Facility, the Company may borrow amounts against a base rate, a quoted
costs of funds rate, or a LIBOR based rate. The average amount of borrowings
outstanding under the Facility during fiscal 1997 was $5,028,000, the maximum
amount outstanding was $6,261,000, and the weighted average interest rate was
7.44%.
From November 1, 1995 until October 31, 1996, the Company maintained a
revolving loan agreement totaling $25,000,000 which was secured by certain
levels of the Company's accounts receivable and inventories. In connection with
the Company's initial public offering, the amount outstanding under the
agreement was repaid and the revolving loan agreement was terminated. The
average amount of borrowings outstanding under the revolving loan agreement
during fiscal 1997 was $15,996,000, the maximum amount outstanding was
$18,522,000, and the weighted average interest rate was 9.0%.
The Company's term loan was also repaid in connection with the
Company's initial public offering. The interest rate on the amount outstanding
at February 3, 1996, was 9.45%.
As part of the Recapitalization, in November 1995, the Company issued
to stockholders subordinated notes and senior subordinated bridge notes totaling
$20,125,000 with an original issue discount of $1,514,000 related solely to the
stockholders' subordinated notes. A portion of the proceeds of these borrowings
were utilized to retire existing debt. In January 1996, the Company issued
$128,000 of additional notes as satisfaction for interest on the Company's
bridge notes. The Company repaid the senior subordinated bridge notes in
February 1996. In connection with the Company's initial public offering in
October 1996, the subordinated notes were repaid. The repayment resulted in a
loss of $1,093,000 (net of the applicable income tax benefit of $677,000) which
is classified as an extraordinary item in the accompanying statement of
operations.
The Company's debt agreement contains certain restrictive covenants
common to such agreements. The Company was in compliance with respect to all of
its covenants at February 1, 1997.
26
27
During most of fiscal 1996, the Company maintained working capital
lines of credit under which the average borrowings outstanding were $5,200,000,
and the maximum borrowings outstanding were $6,697,000. The weighted average
interest rate was approximately 9.0%.
4. LEASES
The Company leases the premises for its retail sporting goods stores
under operating leases which expire in various years through the year 2008. Many
of these leases contain renewal options and require the Company to pay executory
costs (such as property taxes, maintenance, and insurance). Rental payments
typically include minimum rentals plus contingent rentals based on sales.
In February 1996, the Company entered into a sale-leaseback transaction
to finance its new warehouse and office facilities. The sales price of
$4,700,000 approximated the book value of the facility after considering
transaction expenses. The related lease term is for 15 years at $476,000 per
year and is structured as an operating lease.
Minimum future rental payments under noncancelable operating leases
having remaining terms in excess of one year as of February 1, 1997 are as
follows:
FISCAL YEAR ENDING
------------------
1998 $ 4,807,000
1999 4,683,000
2000 4,527,000
2001 3,760,000
2002 3,378,000
Thereafter 10,805,000
-----------
$31,960,000
===========
Rental expense for all operating leases consisted of the following:
FISCAL YEAR ENDED
--------------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
--------------------------------------------
Minimum rentals $4,365,000 $3,080,000 $2,469,000
Contingent rentals 682,000 487,000 392,000
---------- ---------- ----------
$5,047,000 $3,567,000 $2,861,000
========== ========== ==========
5. PROFIT-SHARING PLAN
The Company maintains a 401(k) profit sharing plan (the "Plan") which
permits participants to make pretax 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 2% to 15%
of their compensation within certain dollar limits 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
27
28
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. Contribution expense for fiscal
years 1997, 1996, and 1995 was $238,000, $165,000, and $108,000, respectively.
6. RELATED-PARTY TRANSACTIONS
Subsequent to November 1, 1995, the Company's new majority shareholder
began providing financial advisory services to the Company for an annual fee of
$200,000. Such services include, but are not necessarily limited to, advice and
assistance concerning any and all aspects of the operation, planning, and
financing of the Company. Management fee expense under this arrangement was
$200,000 and $50,000 in fiscal 1997 and fiscal 1996, respectively.
Prior to November 1, 1995, the Company's previous majority shareholders
(now minority shareholders) provided to the Company similar services as
discussed above. Fees for these services amounted to $0, $95,000, and $256,000
in fiscal years 1997, 1996, and 1995, respectively.
Subordinated notes payable to stockholders, net of the related
unamortized debt discount, were outstanding and included in long-term debt in
the amount of $18,772,000 at February 3, 1996. Related to these notes, the
Company incurred approximately $1,355,000 of interest expense in fiscal 1997. In
fiscal 1996, the Company incurred approximately $620,000 of interest expense, of
which approximately $492,000 was included in accrued expenses and approximately
$128,000 was capitalized into the senior subordinated bridge notes payable at
February 3, 1996.
In connection with services provided to the Company related to the
Recapitalization discussed in Note 2, the Company paid the majority shareholder
and minority shareholders approximately $575,000 and $63,000, respectively, and
issued to a minority shareholder 322,419 shares (52,855 shares after giving
retroactive effect to the 1-for-6.1 reverse stock split discussed in Note 2) of
common stock with an aggregate value of approximately $322,000. These costs were
recorded as a reduction to paid-in capital.
In November 1995, the Company entered into a sublease for one store
with an entity that is controlled by a minority shareholder which expires in
June 2008. Minimum lease payments were $190,800 and $27,000 in fiscal 1997 and
fiscal 1996 respectively. Future minimum lease payments under this noncancelable
sublease aggregate $2,178,000.
The Company leased its previous warehouse and office facilities under a
lease-purchase agreement which was fully paid in a previous year. Subsequent to
February 3, 1996, the Company sold an assignment of its interest in the lease on
this property to a related party for $850,000, which resulted in a gain of
approximately $513,000 in the fiscal year ended February 1, 1997.
On August 1, 1996, the Company entered into an agreement with a
minority shareholder which provided for an annual fee of $50,000 and the grant
of 70,820 stock options discussed in Note 8 in consideration for his advisory
services to the Company.
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7. INCOME TAXES
A summary of the components of the provision for income taxes is as
follows:
FISCAL YEAR ENDED
-----------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
-----------------------------------------
Federal:
Current $ 1,650,000 $ 1,476,000 $ 1,553,000
Deferred (90,000) (126,000) (237,000)
----------- ----------- -----------
1,560,000 1,350,000 1,316,000
----------- ----------- -----------
State:
Current 203,000 178,000 192,000
Deferred (11,000) (14,000) (29,000)
----------- ----------- -----------
192,000 164,000 163,000
----------- ----------- -----------
Provision for income taxes $ 1,752,000 $ 1,514,000 $ 1,479,000
=========== =========== ===========
The provision for income taxes differs from the amounts computed by applying
federal statutory rates due to the following:
FISCAL YEAR ENDED
-------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
-------------------------------------
Tax provision computed at
the federal statutory rate (34%) $1,558,000 $1,345,000 $1,315,000
Effect of state income taxes, net of benefits 151,000 118,000 127,000
Other 43,000 51,000 37,000
---------- ---------- ----------
$1,752,000 $1,514,000 $1,479,000
========== ========== ==========
Temporary differences which create deferred tax assets are detailed below:
FEBRUARY 1, 1997 FEBRUARY 3, 1996
--------------------------------------------
CURRENT NONCURRENT CURRENT NONCURRENT
--------------------------------------------
Depreciation $ 0 $321,000 $ 0 $308,000
Inventory 101,000 0 371,000 0
Accruals 539,000 0 153,000 0
Other (14,000) 0 14,000 0
--------- -------- -------- --------
Deferred tax asset, net $ 626,000 $321,000 $538,000 $308,000
========= ======== ======== ========
The Company has not recorded a valuation allowance for deferred tax assets as
realization is considered more likely than not.
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8. STOCK OPTIONS AND STOCK PURCHASE PLANS
The Hibbett Sporting Goods, Inc. Employee Stock Option Plan, as amended
(the "Original Option Plan") authorizes the granting of stock options for the
purchase of up to 66,352 shares of common stock. As of February 1, 1997, options
for all 66,352 shares were outstanding. Options outstanding become exercisable
33% at the end of each of the following three successive years for 25,369 shares
and 40,983 shares become exercisable 20% at the end of each of the following
five successive years.
In fiscal 1997, the Company adopted the Hibbett Sporting Goods, Inc.
1996 Stock Option Plan, as amended (the "1996 Option Plan"). The 1996 Option
Plan authorizes the granting of stock options for the purchase of up to 238,566
shares of common stock. As of February 1, 1997, a total of 110,370 shares of the
Company's authorized and unissued common stock were reserved for future grants
under the 1996 Option Plan, and options for 127,914 shares were outstanding at
that date. Options outstanding become exercisable 20% at the end of each of the
following five successive years.
On August 1, 1996, the Company granted options pursuant to the
agreement discussed in Note 6 for 70,820 shares which become exercisable six
months after, and will expire no later than nine months after October 17, 1996,
the closing date of the Company's initial public offering.
Compensation expense of $500,000 was accrued in fiscal 1997 related to
the difference in the estimated market value of the stock and the nonqualified
option exercise price, including the related tax benefit. Upon exercise of stock
options, the excess of the proceeds and accruals over the par value will be
credited to paid-in capital.
On September 13, 1996, the Company adopted an Employee Stock Purchase
Plan and Outside Director Stock Purchase Plan reserving 75,000 shares and 50,000
shares of the Company's Common Stock, respectively, for purchase by the
employees and directors at 85% and 100% of the fair value of the Common Stock,
respectively. On January 10, 1997, the Company granted 10,000 options under the
Outside Director Stock Purchase Plan. The Employee Stock Purchase Plan will
become effective on April 1, 1997.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 established
financial accounting and reporting standards for stock-based compensation and
for transactions in which an entity issues its equity instruments to acquire
goods and services for nonemployees. In accordance with SFAS No. 123, the
Company continues to account for and record compensation expense under
Accounting Principles Board Opinion ("APB") No. 25. However, the Company adopted
the disclosure only provisions of SFAS No. 123 as required. If the Company had
recorded compensation expense in accordance with SFAS No. 123 under the fair
value based method, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
FISCAL YEAR ENDED
-------------------------
FEBRUARY 1, FEBRUARY 3,
1997 1996
-------------------------
Net income--as reported $ 1,737 $ 2,443
Net income--pro forma 1,510 2,420
Earnings per share--as reported .37 .42
Earnings per share--pro forma .32 .41
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31
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model. The assumptions used in connection
with the Black-Scholes model as well as information with respect to stock
options is summarized as follows:
ADVISORY OUTSIDE
AGREEMENT DIRECTOR
ORIGINAL OPTION PLAN 1996 OPTION PLAN (NOTE 6) PLAN
-----------------------------------------------------------------
AUGUST NOVEMBER APRIL OCTOBER AUGUST JANUARY
1995 1995 1996 1996 1996 1997
-----------------------------------------------------------------
Weighted average exercise
price per share $1.89 $6.10 $6.10 $16.00 $8.48 $12.13
Weighted average fair value
of options granted $4.56 $2.89 $7.73 $ 7.76 $7.95 $ 2.46
ASSUMPTIONS FOR BLACK-SCHOLES MODEL:
- ------------------------------------
Expected dividend yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Expected stock price
volatility .45 .45 .45 .45 .45 .45
Risk-free interest rate 6.02% 5.73% 6.14% 6.41% 5.72% 5.82%
Expected life of options 3 years 5 years 5 years 5 years 9 months 1 year
9. COMMITMENTS AND CONTINGENCIES
Employment Agreement
On November 1, 1995, the Company entered into an employment agreement
with an employee which provides for a three-year employment period at a base
salary plus various incentives.
Legal
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information required by this item is incorporated by reference from the
sections entitled "Directors and Executive Officers," "The Board of Directors,"
and "Certain Relationships and Related Transactions" in the Proxy Statement for
the Annual Meeting of Stockholders to be held June 24, 1997 (the "Proxy
Statement"), which is to be filed with the Securities and Exchange Commission.
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32
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from the
section entitled "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from the
sections entitled "Security Ownership of Certain Beneficial Owners" and
"Directors and Executive Officers."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from the
section entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements. Reference is made to the Index to the
Consolidated Financial Statements set forth on page 17 of this Form 10-K.
2. Financial Statement Schedules. The following consolidated financial
statement schedule of Hibbett Sporting Goods, Inc. is attached hereto:
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 on the accompanying Index to Exhibits
are filed as part of, or incorporated by reference into, this report.
EXHIBITS INDEX
Exhibit #
3.1 Certificate of Incorporation of the Company
3.2 Bylaws of the Company
10.1.1 Revolving Credit Facility dated as of October 31, 1996 between the
Company, Hibbett Team Sales, Inc. and Amsouth Bank of Alabama
10.2.1* Stockholders Agreement dated as of November 1, 1995 among The SK Equity
Fund, L.P., SK Investment Fund, L.P., the Company and certain
stockholders of the Company named therein (the "Stockholders
Agreement")
10.2.2** Amendment No. 1 to the Stockholders Agreement dated as of June 28, 1996
10.2.3 Amendment No. 2 to the Stockholders Agreement
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33
10.3* Advisory Agreement dated November 1, 1995 between the Company and
Saunders, Karp & Co., L.P.
10.4* Employment and Post-Employment Agreement dated as of November 1, 1995
between the Company and Michael J. Newsome
10.5* Letter from the Company to Michael J. Newsome dated November 1, 1995
re: Incentive Compensation Arrangements
10.6* Non-competition Agreement dated November 1, 1995 among Charles C.
Anderson, Joel R. Anderson, Clyde B. Anderson, the Company, The SK
Equity Fund, L.P. and SK Investment Fund, L.P.
10.7** The Company's Stock Option Plan (as amended effective as of October 10,
1996)
10.8** The Company's Amended and Restated 1996 Stock Option Plan ("1996 Plan")
10.9** The Company's Employee Stock Purchase Plan
10.10** The Company's Stock Plan for Outside Directors
10.11.1* Lease Agreement dated as of February 12, 1996 between QRS 12-14 (AL),
Inc. and Sports Wholesale, Inc. (the "Lease Agreement")
10.11.2 Landlord's Waiver and Consent re: Lease Agreement dated February 12,
1996 by QRS 12-14 (AL), Inc., filed as an exhibit to Amendment No. 1 to
the Company's Registration Statement on Form S-1 (Registration No.
333-07023), filed with the Security and Exchange commission July 16,
1996, and incorporated herein by reference
10.12** Letter from the Company to Clyde B. Anderson dated September 13, 1996
re: Consulting Agreement - S-1
11 Statement of Computation of Net Income Per Share
21* List of Company's Subsidiaries
23.1 Consent of Arthur Andersen LLP
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the three months ended
February 1, 1997.
* Filed as an exhibit to the Company's Registration Statement on Form
S-1, (Registration No. 333- 07023) filed with the Securities and
Exchange Commission June 27, 1996, and incorporated herein by
reference.
** Filed as an exhibit to Amendment No. 2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-07023) filed with the
Securities and Exchange Commission September 16, 1996, and incorporated
herein by reference.
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34
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
HIBBETT SPORTING GOODS, INC.
By: /s/ Michael J. Newsome
-----------------------------------------
Michael J. Newsome
President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons in the capacities
and on the dates indicated.
Signature Title Date
- ------------------------------ ------------------------------- --------------
/s/ Michael J. Newsome Principal Executive Officer and April 28, 1997
- ------------------------------ Director --------------
Michael J. Newsome
/s/ Susan H. Fitzgibbon Principal Financial Officer and April 28, 1997
- ------------------------------ Principal Accounting Officer --------------
Susan H. Fitzgibbon
/s/ Clyde B. Anderson Director April 28, 1997
- ------------------------------ --------------
Clyde B. Anderson
/s/ H. Ray Compton Director April 28, 1997
- ------------------------------ --------------
H. Ray Compton
Director
- ------------------------------ --------------
Barry H. Feinberg
/s/ F. Barron Fletcher, III Director April 28, 1997
- ------------------------------ --------------
F. Barron Fletcher, III
34
35
/s/ Carl Kirkland Director April 28, 1997
- ------------------------------ --------------
Carl Kirkland
/s/ John F. Megrue, Jr. Director April 28, 1997
- ------------------------------ --------------
John F. Megrue, Jr.
/s/ Thomas A. Saunders, III Director April 28, 1997
- ------------------------------ --------------
Thomas A. Saunders, III
35
36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To Hibbett Sporting Goods, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of HIBBETT SPORTING GOODS, INC. (a Delaware corporation,
formerly an Alabama corporation) AND SUBSIDIARIES, included in this Form 10-K
and have issued our report dated March 18, 1997. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. Schedule II included in Part IV of the Form 10-K is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 18, 1997
37
HIBBETT SPORTING GOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 1, 1997, FEBRUARY 3, 1996, AND
JANUARY 28, 1995
FISCAL YEAR ENDED
------------------------------------
February 1, February 3, January 28,
1997 1996 1995
--------- -------- --------
Balance of allowance for doubtful accounts
at beginning of period $ 86,000 $ 61,000 $ 19,000
Charged to costs and expenses 71,000 62,000 43,000
Write-offs, net of recoveries (23,000) (37,000) (1,000)
--------- -------- --------
Balance of allowance for doubtful accounts
at end of period $ 134,000 $ 86,000 $ 61,000
========= ======== ========