AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1996
REGISTRATION NO. 333-07023
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
HIBBETT SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
-------------------
<TABLE>
<S> <C> <C>
ALABAMA 5941 63-1074067
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Code Number) Identification No.)
</TABLE>
451 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
(205) 942-4292
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------
SUSAN H. FITZGIBBON
CHIEF FINANCIAL OFFICER
HIBBETT SPORTING GOODS, INC.
451 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
(205) 942-4292
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
COPIES TO:
<TABLE>
<S> <C> <C>
ALAN DEAN GREGORY S. CURRAN STEVEN DELLA ROCCA
DAVIS POLK & WARDWELL BALCH & BINGHAM LATHAM & WATKINS
450 LEXINGTON AVENUE 1901 SIXTH AVENUE NORTH 885 THIRD AVENUE, SUITE 1000
NEW YORK, NEW YORK 10017 SUITE 2600 NEW YORK, NEW YORK 10022
(212) 450-4000 BIRMINGHAM, ALABAMA 35203 (212) 906-1200
(205) 251-8100
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
-------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 1, 1996
PROSPECTUS
2,000,000 SHARES
[HIBBETT SPORTS "FOR THE REAL SPORT" LOGO]
HIBBETT SPORTING GOODS, INC.
COMMON STOCK
--------------
All of the shares of Common Stock, par value $.01 per share (the "Common
Stock"), being offered hereby (the "Offering") are being sold by Hibbett
Sporting Goods, Inc. ("Hibbett" or the "Company"). Prior to this Offering, there
has not been a public market for the Common Stock. It is currently estimated
that the initial public offering price will be between $14.00 and $16.00 per
share. See "Underwriting" for information relating to the factors considered in
determining the initial public offering price. The shares of Common Stock have
been approved for trading on the Nasdaq National Market under the symbol "HIBB",
subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY(2)
<S> <C> <C> <C>
Per Share....................... $ $ $
Total(3)........................ $ $ $
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of the Offering estimated at $1,000,000 payable by
the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock, solely to cover over-allotments,
if any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively.
--------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1996 at the offices of Smith Barney Inc., 333 West 34th Street, New
York, NY 10001.
--------------
SMITH BARNEY INC.
MONTGOMERY SECURITIES
THE ROBINSON-HUMPHREY COMPANY, INC.
, 1996
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
---------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. All
references to fiscal years of the Company in this Prospectus refer to the fiscal
years ended on the Saturday nearest to January 31 of such year, except that
references to the Company's fiscal years 1992 and 1993 refer to the fiscal years
ended on January 31 of such year. All references in this Prospectus to the
number of stores currently operated by the Company are made as of September 30,
1996, except that the number of stores on the inside back cover page of the
Prospectus does not reflect the three additional stores opened since September
10, 1996. Unless otherwise indicated, the information in this Prospectus (i)
assumes that the Underwriters' overallotment option is not exercised, (ii)
assumes the Company's reincorporation in the state of Delaware, which will be
completed prior to the closing of the Offering and (iii) gives effect to a 1
for 6.1 reverse stock split effected on September 13, 1996.
THE COMPANY
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 footwear, apparel and equipment 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.
Hibbett has received the Nike Retailer Excellence Award for the Southeast region
for eight consecutive years based on its performance in the full-line sporting
goods category.
The Company operates 70 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 Hibbett Sports
stores are typically the primary, full-line sporting goods retailers in their
markets because of, among other factors, their extensive selection of
traditional team and individual sports merchandise and their superior customer
service.
KEY BUSINESS STRATEGIES
Unique Emphasis on Small Markets. The Company targets markets ranging in
population from 30,000 to 250,000. Hibbett will continue to aggressively target
markets of this size. 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.
Strong Regional Focus. With over 30 years of experience as a full-line
sporting goods retailer in the Southeast, the Company believes that Hibbett
benefits from strong name recognition, a loyal customer base and operating and
cost efficiencies. Although the core merchandise assortment tends to be similar
for each Hibbett Sports store, important local and regional differences
frequently exist. Management believes that its ability to merchandise to local
sporting or community interests differentiates Hibbett from its national
competitors. The Company's regional focus also enables it to achieve
3
<PAGE>
significant cost benefits including lower corporate expenses, reduced
distribution costs and increased economies of scale from its marketing
activities.
Low Cost Operating Strategy. In addition to the cost benefits of the
Company's small market emphasis and regional focus, Hibbett maintains tight
control over its operating costs through the use of its management information
systems. The Company's systems assist management in making timely and informed
merchandise decisions, maintaining tight inventory control and monitoring
store-level and corporate expenses.
Emphasis on Training and Customer Satisfaction. Management seeks to exceed
customer expectations in order to build loyalty and generate repeat business.
The Company strives to hire enthusiastic sales personnel with an interest in
sports and provides them with extensive training to create a sales staff with
strong product knowledge dedicated to outstanding customer service. Hibbett's
training programs focus on both selling skills and continuing product/technical
training and are conducted through in-store clinics, video presentations and
interactive group discussions.
Investment in Management and Infrastructure. The Company's experienced
management team and its recently upgraded information and distribution systems
are expected to facilitate the Company's future growth. The Company's new
headquarters and distribution center is currently capable of servicing in excess
of 150 Hibbett Sports stores and has significant expansion potential to support
the Company's growth for the foreseeable future. Through its comprehensive
information systems, the Company monitors all aspects of store operations on a
daily basis and is able to control inventory levels and operating costs.
EXPANSION STRATEGY
The Company is accelerating its rate of new store openings to take advantage
of the growth opportunities in its target markets. As the Company continues to
expand, it is anticipated that Hibbett Sports will remain its primary growth
vehicle. The Company plans to open approximately 18 Hibbett Sports stores in
fiscal 1997 (14 have been opened to date) and approximately 27 Hibbett Sports
stores in fiscal 1998. The Company has also opened an additional Sports & Co.
superstore in September 1996. The Company anticipates that it will selectively
open additional Sports Additions stores and Sports & Co. superstores as
opportunities arise in the future. 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.
The Company believes its business and expansion strategies have contributed
to its increasing net sales and operating profits. Over the past five fiscal
years, net sales have increased at a 20.3% compound annual growth rate to $67.1
million in fiscal 1996, and operating income has increased at a 29.3% compound
annual growth rate to $5.6 million in fiscal 1996.
The Company's principal executive offices are located at 451 Industrial
Lane, Birmingham, Alabama 35211, and its telephone number is 205-942-4292.
4
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered.................. 2,000,000 shares of Common Stock
Common Stock to be outstanding after
the Offering.......................... 5,834,262 shares of Common Stock(1)
Use of Proceeds....................... To redeem $16.0 million in aggregate principal
amount of Subordinated Notes and accrued interest
of approximately $1.5 million and to repay a $1.0
million Term Loan and accrued interest thereon,
with the balance to be used to reduce outstanding
balances under its Revolving Loan Agreement. See
"Use of Proceeds."
Nasdaq National Market symbol......... "HIBB"
</TABLE>
- ------------
(1) Excludes 96,555 shares of Common Stock that are issuable under outstanding
options that are currently exercisable or will become exercisable within 180
days after the closing of the Offering.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SELECTED OPERATING DATA)
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
------------------------------------------------------------------- --------------------
JANUARY 31, JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1992 1993 1994(1) 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------- -------- ---------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................... $32,033 $36,366 $40,119 $52,266 $67,077 $ 29,355 $ 39,019
Gross profit................ 9,901 11,368 12,388 16,041 20,435 8,817 11,747
Operating income............ 2,020 2,693 2,877 4,522 5,642 2,531 3,154(2)
Interest expense............ 453 325 488 654 1,685(3) 410 1,814(3)
Income before provision for
income taxes............... 1,567 2,368 2,389 3,868 3,957 2,121 1,340
Net income.................. 979(4) 1,462(4) 1,469 2,389 2,443 1,310 826
Net income per share........ .15(4) .22(4) .23 .37 .42(5) .20 .21(5)
Weighted average shares
outstanding................ 6,342 6,505 6,505 6,505 5,838(3) 6,505 3,938(3)
SELECTED OPERATING DATA:
Number of stores open at end
of period:
Hibbett Sports............. 34 33 41 52 56 54 62
Sports & Co................ 0 0 0 0 3 1 3
Sports Additions........... 4 6 8 8 8 7 8
----------- ----------- ----------- ----------- ----------- -------- ---------
Total.................... 38 39 49 60 67 62 73
----------- ----------- ----------- ----------- ----------- -------- ---------
----------- ----------- ----------- ----------- ----------- -------- ---------
Net sales growth............ 13.7% 13.5% 10.3% 30.3% 28.3% 28.0% 32.9%
Comparable store net sales
increase (decrease)(6)..... 2.4% 10.6% (0.3%) 15.6% 6.2% 6.3% 13.9%
</TABLE>
<TABLE>
<CAPTION>
AT AUGUST 3, 1996
-------------------------
ACTUAL AS ADJUSTED(7)
------- --------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................................... $16,478 $ 18,650
Total assets............................................................ 40,408 40,707
Total debt.............................................................. 33,148(3) 9,135
Stockholders' investment (deficit)...................................... (7,267)(3) 18,519
</TABLE>
- ------------
(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 $513,000 pre-tax gain on the sale of the Company's former
headquarters and distribution facility and a one-time pre-tax compensation
expense of $462,000 related to stock options issued on August 1, 1996. See
"Certain Transactions--Advisory Agreements."
(3) In November 1995, the Company completed 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"). 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. See "Certain
Transactions--Transactions Related to the Recapitalization."
(4) 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 provisions for income
taxes for the fiscal
6
<PAGE>
years ended January 31, 1992 and 1993 give 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 years.
(5) The net proceeds from the Offering will be used to retire a substantial
portion of the Company's debt. Accordingly, a presentation of supplemental
net income per share before extraordinary item is calculated by dividing net
income after adjustment for applicable interest expense ($741,000 and
$1,457,000 for the fiscal year ended February 3, 1996 and the twenty-six
week period ended August 3, 1996, respectively) by the adjusted number of
weighted average shares outstanding (7,838,267 shares and 5,938,224 shares
at February 3, 1996 and August 3, 1996, respectively) after giving effect to
the estimated number of shares that would be required to be sold at an
assumed initial public offering price of $15 per share to repay $26,900,000
of debt. Supplemental net income per share before an extraordinary item of
approximately $1.1 million (to reflect the expense related to the write-off
of unamortized debt discount and debt issuance costs, net of taxes) for the
fiscal year ended February 3, 1996 and the twenty-six week period ended
August 3, 1996 was $.41 and $.38, respectively. Supplemental net income per
share after an extraordinary item of approximately $1.1 million (to reflect
the expense related to the write-off of unamortized debt discount and debt
issuance costs, net of taxes) for the fiscal year ended February 3, 1996 and
the twenty-six week period ended August 3, 1996 was $.26 and $.20,
respectively.
(6) Comparable store net sales data for a period reflect stores open throughout
that period and the corresponding period of the prior fiscal year. For the
periods indicated, comparable store net sales do not include sales by Sports
& Co. superstores or Team Sales (as defined herein).
(7) Adjusted to give effect to the Offering and the application of the estimated
net proceeds thereof as described in "Use of Proceeds," and the effect on
retained earnings (deficit) of an extraordinary item representing the
write-off of unamortized debt discount and debt issuance costs, net of
taxes.
7
<PAGE>
RISK FACTORS
Before purchasing the shares of Common Stock offered hereby, a prospective
investor should consider the specific factors set forth below as well as the
other information set forth elsewhere in this Prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" for a description of other factors affecting the business of the
Company generally.
EXPANSION PLANS
During the last three fiscal years, Hibbett opened approximately 10 new
stores a year, growing from 39 stores at the beginning of fiscal 1994 to 67
stores at the end of fiscal 1996. The Company plans to open approximately 18
Hibbett Sports stores in fiscal 1997 (14 have been opened to date) and
approximately 27 Hibbett Sports stores in fiscal 1998. The Company has also
opened an additional Sports & Co. superstore in September 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." The proposed expansion is
substantially more rapid than the Company's historical growth, and the continued
growth of the Company will depend, in large part, upon the Company's ability to
open new stores in a timely manner and to operate them profitably. However,
successful expansion is subject to various contingencies, many of which are
beyond the Company's control. These contingencies include, among others, (i) the
Company's ability to identify and secure suitable store sites on a timely basis
and on satisfactory terms and to complete any necessary construction or
refurbishment of these sites, (ii) the Company's ability to hire, train and
retain qualified managers and other personnel and (iii) the successful
integration of new stores into existing operations. In addition, the Company's
relatively short experience with opening and operating superstores and the
increased competition typically faced by superstores may result in the Company's
obtaining a lower rate of return on its Sports & Co. superstores as compared to
Hibbett Sports stores. In addition, new Sports & Co. superstores may take a
longer time to achieve profitability than Hibbett Sports stores. No assurance
can be given that the Company will be able to complete its expansion plans
successfully; that the Company will be able to achieve results similar to those
achieved with prior locations; or that the Company will be able to continue to
manage its growth effectively. The Company's failure to achieve its expansion
plans could materially adversely affect its business, financial condition and
results of operations. In addition, operating margins may be impacted in periods
in which incremental expenses have been incurred in advance of new store
openings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview; --Quarterly Fluctuations."
MERCHANDISE TRENDS
The Company's success depends in part on its ability to anticipate and
respond to changing merchandise trends and consumer demand in a timely manner.
Accordingly, any failure by the Company to identify and respond to emerging
trends could adversely affect consumer acceptance of the merchandise in the
Company's stores, which in turn could materially adversely affect the Company's
business, financial condition and results of operations. In addition, if the
Company miscalculates either the market for the merchandise in its stores or its
customers' purchasing habits, it may be faced with a significant amount of
unsold inventory, which could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, a major
shift in consumer demand away from athletic footwear and apparel could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Merchandising."
VENDOR RELATIONSHIPS
The Company's business is dependent to a significant degree upon close
relationships with vendors and the Company's ability to purchase brand name
merchandise at competitive prices. During fiscal
8
<PAGE>
1996, the Company's largest vendor, Nike, represented approximately 35% of its
purchases. The loss of key vendor support could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company believes that it has long-standing and strong relationships with its
vendors and that it has adequate sources of brand name merchandise on
competitive terms; however, there can be no assurance that the Company 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
criteria which are beyond the Company's control. See "Business--Vendor
Relationships."
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, national and regional full-line sporting goods
stores, footwear and other specialty sports supply stores and traditional shoe
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
cities. 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 speciality 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 emphasizing a
selection of individual and team sports merchandise complemented by a localized
mix of 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,
small-format sporting goods stores and mass merchandisers. Competitors of Sports
& Co.'s 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 local
merchandise and price. The Company believes it competes favorably with respect
to these factors in 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 competition. Expansion by the Company
into the markets served by its competitors, entry of new competitors or
expansion of existing competitors into the Company's markets, could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business-- Competition."
RETAIL INDUSTRY; SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's sales are subject to general economic conditions and could be
adversely affected by a weak retail environment. No assurances can be given that
purchases of sporting goods will not decline during recessionary periods or that
a prolonged recession will not have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company has historically experienced and expects to continue to experience
seasonal fluctuations in its net sales, operating income and net income. The
Company's net sales, operating income and net income are typically higher in the
fourth quarter due to sales increases during the Christmas season. An economic
downturn during this period could adversely affect the Company to a greater
extent than if such downturn occurred at other times of the year.
9
<PAGE>
The Company's quarterly results of operations may also fluctuate
significantly as a result of a variety of factors, including, among other
factors, 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 such as the NCAA basketball championship. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Fluctuations." Upon the repayment of the Subordinated
Notes (as defined herein) and the Term Loan (as defined herein) and the
reduction of the outstanding level of its borrowings under the Revolving Loan
Agreement, concurrent with the Offering, the Company will record an
extraordinary item of approximately $1.1 million, net of taxes. This expense
reflects a write-off of unamortized debt issuance costs and debt discount. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
REGIONAL MARKET CONCENTRATION
Most of the Company's stores are located in the southeastern United States.
In addition, the Company's current expansion plans anticipate that all new
stores will be located in the states where the Company currently has operations
or in contiguous new states. Consequently, the Company's results of operations
are more subject to regional economic conditions, regional weather conditions,
regional demographic and population changes and other regional factors than the
operations of more geographically diversified competitors. See "Business--Store
Locations."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a significant extent upon the
leadership and performance of Michael J. Newsome, President, Susan H.
Fitzgibbon, Chief Financial Officer, Joy A. McCord, Vice President of
Merchandising and Cathy E. Pryor, Vice President of Store Operations. The
Company does not maintain key man insurance on any of its personnel. The loss of
the services of any of these individuals could have a material adverse effect on
the Company's business, financial condition and results of operations. As the
Company continues to grow, it will continue to hire, appoint or otherwise change
senior managers and other key executives. There can be no assurance that the
Company will be able to retain its executive officers and key personnel or
attract additional qualified members to its management team in the future. The
Company does not have employment or non-competition agreements with its
executive officers other than Mr. Newsome. None of the Company's senior
management has any experience in managing a public company. See "Management."
CONTROL OF THE COMPANY BY CERTAIN STOCKHOLDERS
Upon completion of the Offering, The SK Equity Fund, L.P. and SK Investment
Fund, L.P. (collectively, the "Funds") will own approximately 49% of the
outstanding Common Stock, and the Anderson Shareholders (as defined herein) will
own approximately 14% of the outstanding Common Stock. Pursuant to the
Stockholders Agreement (as defined herein), the Funds and the Anderson
Shareholders agreed to vote for a Board of Directors composed of the nominees of
the Funds and the Anderson Shareholders. Directors are elected by a plurality of
the votes cast by the holders of shares entitled to vote and cumulative voting
is not permitted. Subject to the Stockholders Agreement, the Funds will
effectively have power to elect the directors of the Company and to determine
the outcome of any matter submitted to a vote of the Company's stockholders for
approval which requires a majority stockholder vote. See "Certain
Transactions--Stockholders Agreement" and "Principal Stockholders." A reduction
in the ownership interest of the Funds may in certain circumstances lead to the
acceleration of the Company's credit facilities, requiring refinancing or
waiver. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
10
<PAGE>
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
which will be adopted in connection with the Company's reincorporation in
Delaware prior to the completion of the Offering 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, (i) classify the Company's Board of Directors into three classes,
each of which will serve for different three year periods, (ii) provide that a
director may be removed by stockholders only for cause by a vote of the holders
of more than two-thirds of the shares entitled to vote, (iii) provide that all
vacancies on the Company's 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 quorum, (iv) 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 (v) require a vote of the holders of more than two-thirds of the
shares entitled to vote in order to amend the foregoing and certain other
provisions of the Certificate of Incorporation and Bylaws. See "Description of
Capital Stock--Charter and Bylaw Provisions." In addition, the 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 the
Common Stock. See "Description of Capital Stock--Preferred Stock." The Company
will also be subject to the Delaware business combination statute, which may
render more difficult a change in control of the Company. See "Description of
Capital Stock--Delaware Law."
POTENTIAL ADVERSE MARKET PRICE EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
Common Stock, or the availability of shares for future sales, will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect prevailing market prices for the Common Stock.
Upon completion of the Offering, the Company will have 5,834,262 shares of
Common Stock outstanding (assuming no exercise of the Underwriters'
overallotment option and no exercise of outstanding options). Of these shares,
the 2,000,000 shares sold in the Offering (assuming no exercise of the
Underwriters' overallotment option) will be freely transferable by persons other
than affiliates of the Company, without restriction or further registration
under the Securities Act of 1933, as amended (the "Act"). On the date of this
Prospectus, 3,834,262 "restricted shares" within the meaning of Rule 144 under
the Act are outstanding and may not be sold in the absence of registration under
the Act unless an exemption from registration is available, including exemptions
contained in Rule 144. The Company and all of its shareholders, officers and
directors have agreed that, for a period of 180 days following the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, grant any option to purchase or otherwise dispose of Common
Stock or any securities convertible into or exchangeable for Common Stock. After
giving effect to these contractual restrictions, 947,541 shares of Common Stock
will be eligible for sale 180 days after the date of this Prospectus under Rule
144 and 2,886,721 additional shares of Common Stock will be eligible for sale
under Rule 144 beginning November 1, 1997. In addition, holders of 3,834,262
shares are entitled to piggyback registration rights, of which 3,711,311 shares
are also entitled to demand registration rights. See "Shares Eligible for Future
Sale" and "Underwriting."
LACK OF PRIOR PUBLIC MARKET AND VOLATILITY OF STOCK PRICE
Prior to the Offering, there has not been a public market for the Common
Stock and there can be no assurance that an active trading market in the Common
Stock will develop subsequent to the Offering or, if developed, that it will be
sustained. The initial public offering price will be determined by negotiations
between the Company and the Representatives of the Underwriters. See
"Underwriting."
11
<PAGE>
Upon commencement of the Offering, the Common Stock will be quoted on the Nasdaq
National Market, which has experienced and is likely to experience in the future
significant price and volume fluctuations which could adversely affect the
market price of the Common Stock without regard to the operating performance of
the Company. Furthermore, the Company's failure to have two independent
directors within 90 days after the date of this Prospectus may result in a
delisting of the Common Stock from the Nasdaq National Market. In addition, the
Company believes that factors such as seasonal and quarterly fluctuations in the
financial results of the Company or the overall economy and condition of the
financial markets could cause the price of the Common Stock to fluctuate
substantially.
DILUTION; RETAINED DEFICIT
Purchasers of Common Stock in the Offering will incur immediate and
substantial dilution in net tangible book value per share. See "Dilution." At
August 3, 1996, the Company had a retained deficit of $22.4 million and a
stockholders' deficit of $7.3 million.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of Common Stock
offered hereby (after deducting underwriting discounts and commissions and
estimated offering expenses) are expected to be approximately $26.9 million
($31.1 million if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the estimated net proceeds to redeem $16.0 million in
aggregate principal amount of the Subordinated Notes (as defined herein) and
accrued interest of approximately $1.5 million, and to repay a $1.0 million Term
Loan (as defined herein) and accrued interest thereon, with the balance to be
used to reduce the outstanding balance on the Revolving Loan Agreement (as
defined herein). Amounts repaid under the Revolving Loan Agreement may be
reborrowed subject to satisfaction of borrowing base requirements. As of
September 10, 1996 the Anderson Shareholders owned $11,426,000 principal amount
of the Subordinated Notes and the Funds owned the remaining $4,574,000. The
Subordinated Notes bear interest at the rate of 12% per annum and mature on
November 1, 2002. The Term Loan bears interest at a floating rate (8.92% at
September 10, 1996) and matures in November 1997. The borrowings under the
Revolving Loan Agreement bear interest at a floating rate (8.02% at September
10, 1996), and the Revolving Loan Agreement expires in November 2000.
CAPITALIZATION
The following table sets forth the Company's capitalization as of August 3,
1996 and as adjusted to give retroactive effect to the reverse stock split
described in Note 10 of Notes to Consolidated Financial Statements and to give
effect to the sale by the Company of 2,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $15 per share and
application of the estimated net proceeds therefrom as described in "Use of
Proceeds."
<TABLE>
<CAPTION>
AUGUST 3, 1996
(IN THOUSANDS)
---------------------------
ACTUAL AS ADJUSTED(1)
-------- ---------------
<S> <C> <C>
LONG-TERM DEBT:
Revolving Loan Agreement............................................ $ 17,561 $ 9,135
Term Loan........................................................... 1,000 0
Subordinated Notes.................................................. 16,000 0
Unamortized debt discount related to Subordinated Notes............. (1,413) 0
-------- ---------------
Total long-term debt.............................................. 33,148 9,135
-------- ---------------
STOCKHOLDERS' INVESTMENT (DEFICIT):
Preferred Stock, par value $.01 per share, 1,000,000 shares
authorized, no shares outstanding.................................
Common Stock, par value $.01 per share, 12,000,000 shares
authorized, 3,834,262 shares issued and outstanding, 5,834,262 as
adjusted............................................................ 38 58
Paid-in capital..................................................... 15,129 42,009
Retained earnings (deficit)......................................... (22,434) (23,548)
-------- ---------------
Total stockholders' investment (deficit).......................... (7,267) 18,519
-------- ---------------
TOTAL CAPITALIZATION.............................................. $ 25,881 $ 27,654
-------- ---------------
-------- ---------------
</TABLE>
- ------------
(1) Reflects the issuance and sale of 2,000,000 shares of Common Stock offered
hereby, the application of the estimated net proceeds thereof as described
in "Use of Proceeds", and the effect on retained earnings (deficit) of an
extraordinary item of approximately $1.1 million representing the write-off
of unamortized debt discount and debt issuance costs, net of taxes. This
presentation excludes currently outstanding stock options and the shares
reserved for issuance under the Company's stock option plans. See
"Management--Stock Option Plans," "Certain Transactions--Advisory
Agreements" and Note 8 of Notes to Consolidated Financial Statements.
13
<PAGE>
DIVIDEND POLICY
The Company currently anticipates that it will retain all available funds
for use in the operation and expansion of its business and does not anticipate
paying any cash dividends in the foreseeable future. In addition, the Revolving
Loan Agreement prohibits the Company from declaring, paying or making any
dividend or distribution on its Common Stock other than dividends or
distributions payable in stock.
DILUTION
The Company's net tangible book value at August 3, 1996 was a deficit of
$(7,267,000) or $(1.90) per share of Common Stock after giving retroactive
effect to the reverse stock split discussed in Note 10 of Notes to Consolidated
Financial Statements. Without taking into account any changes in net tangible
book value after August 3, 1996, other than to give effect to the sale by the
Company of 2,000,000 shares of Common Stock offered hereby (at an assumed
initial public offering price of $15 per share), the Company's pro forma net
tangible book value at August 3, 1996 would have been $18,519,000, or $3.18 per
share of Common Stock. This represents an immediate increase in net tangible
book value of $5.08 per share to existing shareholders and an immediate dilution
in net tangible book value of $11.82 per share to new investors purchasing
shares in the Offering. The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price.............................................. $15.00
------
Net tangible book value (deficit) before the Offering(1)................. $(1.90)
Increase in net tangible book value attributable to new investors........ 5.08
------
Pro forma net tangible book value per share after the Offering........... 3.18
------
Dilution to new investors(2)............................................... $11.82
------
------
</TABLE>
- ------------
(1) Net tangible book value (deficit) per share is determined by dividing the
net tangible book value (deficit) of the Company (tangible assets less
liabilities) by the number of shares of Common Stock outstanding as of
August 3, 1996.
(2) Dilution is determined by subtracting pro forma net tangible book value per
share after the Offering from the amount of cash paid by a new investor for
a share of Common Stock.
The following table sets forth as of August 3, 1996 the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by the existing stockholders and by new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................. 3,834,262 65.7% $18,167,184 37.7% $ 4.74
New investors......................... 2,000,000 34.3 30,000,000 62.3 15.00
--------- ------- ----------- ------- -------------
Total................................. 5,834,262 100.0% $48,167,184 100.0% $ 8.26
--------- ------- ----------- ------- -------------
--------- ------- ----------- ------- -------------
</TABLE>
The foregoing tables assume no exercise of outstanding stock options after
August 3, 1996. At August 3, 1996, 182,581 shares of Common Stock were subject
to outstanding options, at a weighted average exercise price of $6.44 per share.
To the extent these options are exercised there will be further dilution to new
investors. See "Management--Stock Option Plans," "Certain Transactions--Advisory
Agreements" and Note 8 of Notes to Consolidated Financial Statements.
14
<PAGE>
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, 1992, January 31, 1993, January 29, 1994, January
28, 1995, and February 3, 1996 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 1992 and 1993, which are pro forma
amounts as explained in footnote 4. The data for the twenty-six week periods
ended July 29, 1995 and August 3, 1996 have been derived from unaudited
financial statements of the Company. The unaudited financial statements include
all adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of its financial position and
results of operations for these periods. Operating results for the twenty-six
week period ended August 3, 1996 are not necessarily indicative of the results
that may be expected for any future period. The following data should be read in
conjunction with the consolidated financial statements of the Company and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
------------------------------------------------------------------- --------------------
JANUARY 31, JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1992 1993 1994(1) 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------- -------- ---------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $32,033 $ 36,366 $40,119 $52,266 $67,077 $ 29,355 $39,019
Cost of goods sold,
including warehouse,
distribution, and store
occupancy costs......... 22,132 24,998 27,731 36,225 46,642 20,538 27,272
----------- ----------- ----------- ----------- ----------- -------- ---------
Gross profit............ 9,901 11,368 12,388 16,041 20,435 8,817 11,747
Store operating,
selling, and
administrative
expenses(3)............. 7,224 7,861 8,579 10,453 13,471 5,624 7,767(2)
Depreciation and
amortization............ 657 814 932 1,066 1,322 662 826
----------- ----------- ----------- ----------- ----------- -------- ---------
Operating income........ 2,020 2,693 2,877 4,522 5,642 2,531 3,154
Interest expense........ 453 325 488 654 1,685(7) 410 1,814(7)
----------- ----------- ----------- ----------- ----------- -------- ---------
Income before provision
for income taxes....... 1,567 2,368 2,389 3,868 3,957 2,121 1,340
Provision for income
taxes................... 588(4) 906(4) 920 1,479 1,514 811 514
----------- ----------- ----------- ----------- ----------- -------- ---------
Net income.............. $ 979(4) $ 1,462(4) $ 1,469 $ 2,389 $ 2,443 $ 1,310 $ 826
----------- ----------- ----------- ----------- ----------- -------- ---------
----------- ----------- ----------- ----------- ----------- -------- ---------
Net income per share.... $ .15(4) $ .22(4) $ .23 $ .37 $ .42(5) $ .20 $ .21(5)
----------- ----------- ----------- ----------- ----------- -------- ---------
----------- ----------- ----------- ----------- ----------- -------- ---------
Weighted average shares
outstanding............. 6,342 6,505 6,505 6,505 5,838(7) 6,505 3,938(7)
----------- ----------- ----------- ----------- ----------- -------- ---------
----------- ----------- ----------- ----------- ----------- -------- ---------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
------------------------------------------------------------------- --------------------
JANUARY 31, JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1992 1993 1994(1) 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------- -------- ---------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Number of stores open at end of
period:
Hibbett Sports.................... 34 33 41 52 56 54 62
Sports & Co....................... 0 0 0 0 3 1 3
Sports Additions.................. 4 6 8 8 8 7 8
--- --- --- --- --- --- ---
Total............................ 38 39 49 60 67 62 73
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
Net sales growth.................. 13.7% 13.5% 10.3% 30.3% 28.3% 28.0% 32.9%
Comparable store net sales
increase (decrease)(6)........... 2.4% 10.6% (0.3%) 15.6% 6.2% 6.3% 13.9%
</TABLE>
<TABLE>
<CAPTION>
AS OF
-------------------------------------------------------------------------------
JANUARY 31, JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, AUGUST 3,
1992 1993 1994(1) 1995 1996 1996
----------- ----------- ----------- ----------- ----------- ---------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................... $ 2,825 $ 2,097 $ 4,030 $ 7,459 $10,907 $16,478
Total assets........................ 12,638 14,569 17,507 22,787 36,702 40,408
Total debt.......................... 4,661 4,810 6,179 5,328 31,912(7) 33,148(7)
Stockholders' investment
(deficit)........................... 4,666 4,402 5,871 8,259 (8,093)(7) (7,267)(7)
</TABLE>
- ------------
(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 $513,000 pre-tax gain on the sale of the Company's former
headquarters and distribution facility and a one-time pre-tax compensation
expense of $462,000 related to stock options issued on August 1, 1996. See
"Certain Transactions--Advisory Agreements."
(3) Includes management fees. See "Certain Transactions--Advisory Agreements"
and Note 6 of Notes to Consolidated Financial Statements.
(4) 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 provisions for income
taxes for the fiscal years ended January 31, 1992 and 1993 give 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 years.
(5) The net proceeds from the Offering will be used to retire a substantial
portion of the Company's debt. Accordingly, a presentation of supplemental
net income per share before extraordinary item is calculated by dividing net
income after adjustment for applicable interest expense ($741,000 and
$1,457,000 for the fiscal year ended February 3, 1996 and the twenty-six
week period ended August 3, 1996, respectively) by the adjusted number of
weighted average shares outstanding (7,838,267 shares and 5,938,224 shares
at February 3, 1996 and August 3, 1996, respectively) after giving effect to
the estimated number of shares that would be required to be sold at an
assumed initial public offering price of $15 per share to repay $26,900,000
of debt. Supplemental net income per share before an extraordinary item of
approximately $1.1 million (to reflect the expense related to the write-off
of unamortized debt discount and debt issuance costs, net of taxes) for the
fiscal year ended February 3, 1996 and the twenty-six week period ended
August 3, 1996 was $.41 and $.38, respectively. Supplemental net income per
share after an extraordinary item of approximately $1.1 million (to reflect
the expense related to the write off of unamortized debt discount and debt
issuance costs, net of taxes) for the fiscal year ended February 3, 1996 and
the twenty-six week period ended August 3, 1996 was $.26 and $.20,
respectively.
(6) Comparable store net sales data for a period reflect stores open throughout
that period and the corresponding period of the prior fiscal year. For the
periods indicated, comparable store net sales do not include sales by Sports
& Co. superstores or Team Sales.
(7) In November 1995, the Company completed the Recapitalization. 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. See "Certain Transactions--Transactions Related to
the Recapitalization."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Hibbett is a leading rapidly-growing operator of full-line sporting goods
stores in small to mid-sized markets in the southeastern United States. The
Company operates 82 stores in ten states. Hibbett began operations in 1945 in
Florence, Alabama as Dixie Supply Company, a retailer of athletic, marine and
aviation equipment. In 1952, the Company changed its operating strategy to focus
on team sports oriented merchandise and its name to Hibbett & Sons. In the mid
1960s, the Company refocused its operating strategy on retailing and changed its
name to Hibbett Sporting Goods, Inc. In 1980, the Anderson family of Florence,
Alabama (the "Anderson Shareholders") purchased Hibbett and continued to expand
the Company's store base at a moderate pace, while investing in professional
management and systems. Beginning in fiscal 1994, Hibbett accelerated its store
opening rate to approximately 10 stores per year.
On November 1, 1995, The SK Equity Fund, L.P. and SK Investment Fund, L.P.
(collectively, the "Funds") acquired the majority of the outstanding shares of
Common Stock as part of a recapitalization of the Company (the
"Recapitalization"). In connection with the Recapitalization, the Company (i)
sold to the Funds approximately 75% of the Company's Common Stock, (ii)
repurchased a portion of the Common Stock held by the Anderson Shareholders
(leaving them with approximately 22% of the Company's outstanding Common Stock),
(iii) issued $16,000,000 in aggregate principal amount of its subordinated notes
("Subordinated Notes") and (iv) issued $4,125,000 in aggregate principal amount
of its senior subordinated notes ("Senior Subordinated Notes"). See "Certain
Transactions--Transactions Related to the Recapitalization." In connection with
the Recapitalization, the Company also refinanced its bank facilities with a
$26,000,000 credit facility provided by Heller Financial, Inc. ("Heller"),
consisting of a $25,000,000 revolving loan agreement (the "Revolving Loan
Agreement") and a $1,000,000 term loan (the "Term Loan"). The Senior
Subordinated Notes which financed the construction of the Company's new
headquarters and distribution center were subsequently redeemed in February 1996
from proceeds of the sale and leaseback of this facility.
In fiscal 1997, the Company has further accelerated its rate of new store
openings to take advantage of the growth opportunities in its target markets.
The Company plans to open approximately 18 Hibbett Sports stores in fiscal 1997
(14 have been opened to date) and approximately 27 Hibbett Sports stores in
fiscal 1998. The Company has also opened an additional Sports & Co. superstore
in September 1996. To support its expansion plans, the Company has increased its
staffing levels in finance, merchandising, real estate, distribution and field
management. In January 1996, the Company moved into its new headquarters and
distribution center which currently has the capacity to service in excess of 150
Hibbett Sports stores and has significant expansion potential to support the
Company's growth for the foreseeable future. While operating margins may be
impacted in periods in which incremental expenses have been incurred to support
acceleration of the Company's expansion plans, over the long term, the Company
expects to benefit from leveraging its expenses over a larger store base as it
continues to implement its expansion plans.
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 January 28, 1995 and January 29, 1994 include 52
weeks of operations while the fiscal year ended February 3, 1996 includes 53
weeks of operations.
Hibbett was incorporated under the laws of the state of Alabama and will
reincorporate in Delaware prior to the closing of the Offering.
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected statement of operations items
expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
----------------------------------------- ---------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1994 1995 1996 1995 1996
----------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution and store occupancy costs... 69.1 69.3 69.5 70.0 69.9
----- ----- ----- -------- ---------
Gross profit............................. 30.9 30.7 30.5 30.0 30.1
Store operating, selling, and
administrative expenses(1)............. 21.4 20.0 20.1 19.2 19.9(2)
Depreciation and amortization............ 2.3 2.0 2.0 2.2 2.1
----- ----- ----- -------- ---------
Operating income......................... 7.2 8.7 8.4 8.6 8.1(2)
Interest expense......................... 1.2 1.3 2.5 1.4 4.7
----- ----- ----- -------- ---------
Income before provision for income
taxes.................................... 6.0 7.4 5.9 7.2 3.4
Provision for income taxes............... 2.3 2.8 2.3 2.8 1.3
----- ----- ----- -------- ---------
Net income............................... 3.7% 4.6% 3.6% 4.4% 2.1%
----- ----- ----- -------- ---------
----- ----- ----- -------- ---------
</TABLE>
- ------------
(1) Includes management fees. See "Certain Transactions--Advisory Agreements"
and Note 6 of Notes to Consolidated Financial Statements.
(2) Includes a $513,000 pre-tax gain on the sale of the Company's former
headquarters and distribution facility and a one-time pre-tax compensation
expense of $462,000 related to stock options issued on August 1, 1996. See
"Certain Transactions--Advisory Agreements." Excluding these items, store
operating, selling and administrative expenses would have represented 20.0%
of net sales, and operating income would have been 8.0% of net sales for the
twenty-six weeks ended August 3, 1996.
TWENTY-SIX WEEKS ENDED AUGUST 3, 1996 COMPARED TO TWENTY-SIX WEEKS ENDED JULY
29, 1995
Net sales. Net sales increased $9.7 million, or 32.9%, to $39.0 million for
the twenty-six weeks ended August 3, 1996, from $29.4 million for the comparable
period in the prior year. This increase is attributable to the opening of eight
Hibbett Sports stores, two Sports & Co. superstores and one Sports Additions
store and a 13.9% increase in comparable store net sales. During the twenty-six
weeks ended August 3, 1996, the Company opened six Hibbett Sports stores. The
increase in comparable store net sales was due primarily to increased footwear
sales and improved inventory processing at the distribution center. New stores
and stores not in the comparable store net sales calculation accounted for $5.9
million of the increase in net sales and increases in comparable store net sales
contributed $3.8 million. Comparable store net sales data for a period reflect
stores open throughout that period and the corresponding period of the prior
fiscal year. For the periods indicated, comparable store net sales do not
include sales by Sports & Co. superstores or Team Sales.
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 $11.7 million, or 30.1% of net sales, in the twenty-six weeks
ended August 3, 1996, as compared to $8.8 million, or 30.0% of net sales, in the
same period of the prior fiscal year. Improved leveraging of store occupancy
costs over higher sales were offset by higher markdowns in the current year
period as well as the addition of distribution center personnel.
18
<PAGE>
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses for the twenty-six weeks ended August 3,
1996 include a net gain on the disposal of assets which primarily relates to the
gain on the sale of the former headquarters and distribution facility which was
replaced by the Company's new headquarters and distribution center, which net
gain has been substantially offset by a one-time compensation expense of
approximately $462,000 related to the issuance of stock options on August 1,
1996. See "Certain Transactions--Advisory Agreements." Excluding these items,
store operating, selling and administrative expenses were $7.8 million, or 20.0%
of net sales, for the twenty-six weeks ended August 3, 1996, as compared to $5.6
million, or 19.2% of net sales, for the comparable period a year ago. 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, including the addition of a chief financial officer, as well as
additional personnel in the Company's real estate, loss prevention, merchandise,
operations and training departments.
Depreciation and amortization. Depreciation and amortization as a percentage
of net sales declined slightly to 2.1% in the twenty-six weeks ended August 3,
1996 from 2.2% in the prior year period. This decrease as a percentage of net
sales is primarily due to a write-off of the unamortized portion of leasehold
improvements for one of the Company's stores in the prior year period due to the
change in the terms of that lease.
Interest expense. The $1,404,000 increase in interest expense for the
twenty-six weeks ended August 3, 1996 compared to the prior year period is due
primarily to the interest expense associated with the Subordinated Notes which
were issued in connection with the Recapitalization in November 1995 and also to
an increase in borrowings under the Revolving Loan Agreement to fund new store
openings.
Net income. Net income decreased $484,000, or 36.9%, to $826,000 in the
twenty-six weeks ended August 3, 1996 from $1,310,000 in the comparable period
in the prior year. This decrease was attributable to factors described above.
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. Additionally, distribution costs were
higher as a result of the higher occupancy costs associated with the Company's
new headquarters and distribution center.
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, including the addition of one real estate professional, one loss
prevention professional, one merchandise buyer and one visual merchandise
manager.
19
<PAGE>
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.
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.
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 Christmas 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 such as the NCAA basketball championship.
20
<PAGE>
The following tables set forth certain unaudited financial data for the
quarters indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------
OCT 29, 1994 JAN 28, 1995 APR 29, 1995 JUL 29, 1995
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................ $ 12,967 $ 16,372 $ 15,001 $ 14,355
Operating income......................... 1,105 1,375 1,476 1,055
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------
OCT 28, 1995 FEB 3, 1996 MAY 4, 1996 AUG 3, 1996
------------ ------------ ------------ ------------
(14 WEEKS)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................ $ 15,737 $ 21,984 $ 20,251 $ 18,768
Operating income......................... 1,323 1,788(1) 2,429(2) 725(3)
</TABLE>
- ------------
(1) Includes pre-opening expenses for two Sports & Co. superstores opened in the
fourth quarter of fiscal 1996.
(2) Includes a $513,000 pre-tax gain on sale of the Company's former
headquarters and distribution facility. Excluding this gain, operating
income would have been $1,916,000.
(3) Includes a one-time compensation expense of $462,000 related to the issuance
of stock options on August 1, 1996. See "Certain Transactions--Advisory
Agreements". Excluding this expense, operating income would have been
$1,187,000.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements relate primarily to new store openings
and working capital requirements. The Company's working capital needs 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 credit 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. Net income levels have increased in each of the last three
fiscal years. In addition, the Company has continued to increase inventory
levels throughout these periods and in the twenty-six weeks ended August 3, 1996
as the number of stores has increased and the 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 the twenty-six weeks ended August 3,
1996. These activities resulted in cash flows provided by (used in) operating
activities in each of the last three fiscal years and in the twenty-six week
period ending August 3, 1996 of $269,000, $3.2 million, $(158,000), and $(4.3)
million, respectively.
With respect to cash flows from investing activities, during the first
quarter of fiscal 1997, the Company completed the sale-leaseback of its new
headquarters and distribution center and the sale of the former headquarters and
warehouse facilities for combined proceeds of $5.6 million and used the proceeds
to repay $4.3 million then outstanding under the Senior Subordinated Notes
issued to finance the new headquarters and distribution center on a temporary
basis and to fund its working capital
21
<PAGE>
requirements. Capital expenditures for fiscal 1996 were $8.2 million compared
with $2.2 million in fiscal 1995 and $1.6 million in fiscal 1994. The increase
in these expenditures for fiscal 1996 was primarily the result of the
construction of the new headquarters and distribution center for $4.7 million.
Cash flows from financing activities have historically represented the
Company's financing of its long-term growth. As previously discussed, in fiscal
1996 the Company completed the Recapitalization. This resulted in the
refinancing of all existing debt, the repurchase and retirement of previously
existing shares of Common Stock for cash and debt and the issuance of debt and
new shares of Common Stock in exchange for cash. The net impact of these
financing activities provided $7.6 million in cash in fiscal 1996 and resulted
in a substantial increase in total debt outstanding and a deficit in
stockholders' investment. See "Certain Transactions--Transactions Related to the
Recapitalization."
The Company estimates capital expenditures in fiscal 1997 to be
approximately $3.2 million,
(i) approximately 70% of which will be used to fund the opening of approximately
18 Hibbett Sports stores and one Sports & Co. superstore and to remodel selected
existing stores and (ii) approximately 30% of which will be used to fund capital
expenditures related to the headquarters and distribution center. The Company
estimates capital expenditures in fiscal 1998 to be approximately $3.6 million
which includes resources budgeted to (i) fund the opening of approximately 27
Hibbett Sports stores, (ii) remodel selected existing stores and (iii) fund
headquarters and distribution center-related capital expenditures.
The Company's principal source of liquidity is its $25.0 million Revolving
Loan Agreement provided by Heller. Borrowings under the Revolving Loan Agreement
bear interest at the Company's option either at 2 1/4% plus LIBOR or 1/4% plus
the higher of the prime rate and the federal funds rate. The Revolving Loan
Agreement is secured by a lien on inventory, accounts receivable, equipment and
certain other assets. Availability of funds under the Revolving Loan Agreement
is restricted to a borrowing base consisting of designated percentages of
eligible inventory and accounts receivable. In addition, the Revolving Loan
Agreement requires the maintenance of certain specified financial ratios,
restricts levels of capital expenditures and restricts the incurrence of debt
and payments in respect of capital stock and junior indebtedness. As of August
3, 1996, the Company had $17.6 million of borrowings outstanding under the
Revolving Loan Agreement and availability to borrow up to an additional $1.7
million. The Revolving Loan Agreement expires on November 1, 2000. The Company
also has an outstanding $1.0 million Term Loan from Heller that matures on
November 1, 1997.
If Saunders Karp & Megrue, L.P. and the Funds, collectively, cease to
beneficially own and control, directly or indirectly, at least 40% of the issued
and outstanding Common Stock, Heller may declare the amounts then outstanding
under the Revolving Loan Agreement immediately due and payable, which would
require the Company to refinance and replace the Revolving Loan Agreement with
another credit facility.
The Company plans to use the proceeds of the Offering (i) to repay $16.0
million aggregate principal amount of the Subordinated Notes issued in
connection with the Recapitalization and accrued interest of approximately $1.5
million, (ii) to repay $1.0 million principal amount of the Term Loan borrowed
in connection with the Recapitalization and accrued interest thereon and (iii)
to reduce the outstanding level of its borrowings under the Revolving Loan
Agreement. Upon the repayment of the Subordinated Notes and the Term Loan and
the reduction of the outstanding level of its borrowings under the Revolving
Loan Agreement, concurrent with the Offering, the Company will record an
extraordinary loss of approximately $1.1 million, net of taxes, reflecting a
write-off of unamortized debt issuance costs and debt discount. Based on its
current operating and store opening plans, the Company believes that it can fund
its cash needs for the foreseeable future through borrowings under the Revolving
Loan Agreement and cash generated from operations. See "Use of Proceeds."
22
<PAGE>
BUSINESS
GENERAL
Hibbett 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 footwear, apparel and equipment 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.
Hibbett has received the Nike Retailer Excellence Award for the Southeast region
for eight consecutive years based on its performance in the full-line sporting
goods category.
The Company operates 70 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 Hibbett Sports stores are
typically the primary, full-line sporting goods retailers in their markets
because of, among other factors, their extensive selection of traditional team
and individual sports merchandise and customer service.
INDUSTRY OVERVIEW
According to the National Sporting Goods Association ("NSGA"), United States
retail sales of sporting goods (including athletic footwear, apparel and
equipment) totaled approximately $36 billion in 1995. 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 such as Sports
Authority 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 does not currently support larger-format stores. In these markets,
customers generally shop for sporting goods at either (i) a discount store or
department store, (ii) a sporting goods retailer that focuses on a specialty
category, such as athletic footwear, or an activity, such as golf or tennis, and
that is either an independent local operator or part of a national chain or
(iii) a full-line sporting goods retailer that is typically a single-store
operation or part of a small chain.
With over 30 years of operating experience in small to mid-sized markets
(population range from 30,000 to 250,000), the Company believes that it is
well-positioned to continue to compete effectively against such other sporting
goods retailers. 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. Compared to Hibbett, (i) discounters and
department stores typically offer more limited sporting goods assortments, fewer
high-quality name brands and more limited customer service; (ii) specialty
sporting goods retailers typically focus on a specific category, such as
athletic footwear, or an activity, such as golf or tennis, and therefore lack
the wide range of products offered by Hibbett; and (iii) full-line sporting
goods retailers are typically single store operations that lack the systems,
vendor relationships and economies of scale of Hibbett.
BUSINESS STRATEGY
Unique Emphasis on Small Markets. The Company targets markets ranging in
population from 30,000 to 250,000. Hibbett will continue to aggressively target
markets of this size. 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
23
<PAGE>
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.
Strong Regional Focus. With over 30 years of experience as a full-line
sporting goods retailer in the Southeast, the Company believes that Hibbett
benefits from strong name recognition, a loyal customer base and operating and
cost efficiencies. Although the core merchandise assortment tends to be similar
for each Hibbett Sports store, important local and regional differences
frequently exist. Management believes that its ability to merchandise to local
sporting or community interests differentiates Hibbett from its national
competitors. The Company's regional focus also enables it to achieve significant
cost benefits including lower corporate expenses, reduced distribution costs and
increased economies of scale from its marketing activities.
Low Cost Operating Strategy. In addition to the cost benefits of the
Company's small market emphasis and regional focus, Hibbett maintains tight
control over its operating costs through the use of its management information
systems. The Company's systems assist management in making timely and informed
merchandise decisions, maintaining tight inventory control and monitoring
store-level and corporate expenses.
Emphasis on Training and Customer Satisfaction. Management seeks to exceed
customer expectations in order to build loyalty and generate repeat business.
The Company strives to hire enthusiastic sales personnel with an interest in
sports and provides them with extensive training to create a sales staff with
strong product knowledge dedicated to outstanding customer service. Hibbett's
training programs focus on both selling skills and continuing product/technical
training and are conducted through in-store clinics, video presentations and
interactive group discussions.
Investment in Management and Infrastructure. The Company's experienced
management team and its recently upgraded information and distribution systems
are expected to facilitate the Company's future growth. The Company's new
headquarters and distribution center is currently capable of servicing in excess
of 150 Hibbett Sports stores and has significant expansion potential to support
the Company's growth for the foreseeable future. Through its comprehensive
information systems, the Company monitors all aspects of store operations on a
daily basis and is able to control inventory levels and operating costs.
STORE LOCATIONS
The Company operates 82 stores in ten states, including 70 Hibbett Sports
stores, eight Sports Additions stores and four Sports & Co. superstores. Seventy
of the stores are located in malls, and 12, including the four Sports & Co.
superstores, are in strip center locations. Over 80% of the Company's stores are
in markets with a population of less than 250,000.
24
<PAGE>
A map showing the states in which the Company operated stores as of
September 30, 1996 and the states containing potential expansion markets is set
forth below:
[MAP TO COME]
Identified Potential
Expansion Markets
<TABLE>
<S> <C> <C> <C> <C>
STORE LOCATIONS
ALABAMA - 26 GEORGIA - 9 KENTUCKY - 7 MISSISSIPPI - 13 NORTH
CAROLINA - 5
Auburn Athens Bowling Green Columbus (2) Albemarle
Birmingham (8) Brunswick Corbin Corinth Elizabeth City
Decatur Dalton Elizabethtown Hattiesburg Hendersonville
Florence (3) Gainesville Madisonville Jackson New Bern
Gadsden LaGrange Owensboro Laurel Roanoke Rapids
Huntsville (3) Rome Paducah McComb
Jasper Valdosta Somerset Meridian (2) TENNESEE
Mobile Warner Robbins Oxford Chattanooga
Muscle Shoals Waycross LOUISIANA - 2 Pascagoula Cleveland
Oxford (2) Hammond Tupelo Columbia
Selma ILLINOIS - 1 Monroe Vicksburg Dyersburg (2)
Troy Carbondale Jackson (2)
Tuscaloosa (2) Kingsport
SOUTH McMinnville
CAROLINA - 3 Morristown
Aiken
FLORIDA - 3 Greenwood Murfreesboro
Lake City Rock Hill Nashville
Panama City Tullahoma
Santa Rosa
</TABLE>
EXPANSION STRATEGY
The Company believes its business and expansion strategies have contributed
to its increasing net sales and operating profits. Over the past five fiscal
years, net sales have increased at a 20.3% compound annual growth rate to $67.1
million in fiscal 1996, and operating income has increased at a 29.3% compound
annual growth rate to $5.6 million in fiscal 1996. Over this period, the
Company's net sales growth has been driven by new store openings and increases
in comparable store net sales. The Company increased its store base from 38
stores at the end of fiscal 1992 to 67 stores at the end of fiscal 1996. See
comparable store net sales information in "Summary Consolidated Financial and
Operating Data."
The Company is accelerating 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
25
<PAGE>
management. 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.
Management anticipates that Hibbett Sports will remain the Company's primary
growth vehicle as it continues to expand. The Company plans to open
approximately 18 Hibbett Sports stores in fiscal 1997 and approximately 27
Hibbett Sports stores in fiscal 1998. As of September 30, 1996 the Company has
opened 14 Hibbett Sports stores and has signed leases for the remaining four
planned to be opened in fiscal 1997. Hibbett Sports stores are typically
profitable in the first year of operations. In September 1996, the Company has
opened an additional Sports & Co. superstore in Monroe, Louisiana. In the
future, the Company anticipates that it will selectively open Sports Additions
stores and Sports & Co. superstores as opportunities arise. See "Risk Factors--
Expansion Plans."
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 the small
to mid-sized markets. Sixty Hibbett Sports stores are located in enclosed malls,
the majority of which are the only enclosed malls in the county, and the
remaining eight are located in strip centers. The Company uses exciting design
and in-store atmosphere, eye-catching in-store signage and gift-with-purchase
promotional programs to channel mall traffic into the stores.
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 such as the recent
University of Kentucky national championship in men's basketball. For example,
Hibbett Sports stores in the state of Kentucky had a selection of national
championship apparel and accessories prominently displayed in the front of each
store the morning following the game and promoted this merchandise with local
radio advertising.
Sports & Co.
The Company opened the first Sports & Co. superstore 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.
See "Risk Factors--Expansion Plans."
Sports Additions
Sports Additions 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
26
<PAGE>
stores. All Sports Additions stores are currently located in the malls in which
Hibbett Sports stores are also present.
MERCHANDISING
Merchandising Strategy. The Company's merchandising strategy is to provide a
broad assortment of quality athletic footwear, apparel and equipment 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. No single product category accounts for
more than 50% of sales. The Company's pricing strategy is to offer competitive
prices to its customers. The Company's management information systems track
different retail prices for the same item at different stores, enabling more
competitive pricing by location. In addition, information from the Company's
point-of-sale computer system is regularly reviewed and analyzed by the
purchasing staff to assist it in making merchandise allocation and markdown
decisions.
Brand Name Merchandise. 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 works with its
vendors to educate the sales staff at the store level on new products and
trends.
The following list represents the top 25 brand names (based on sales)
offered by the Company:
<TABLE>
<S> <C> <C>
Adidas K-Swiss Rollerblade
Asics Louisville Slugger Russell
Champion Mizuno Spalding
Columbia New Balance Starter
Converse New Era The Game
Dodger Nike Umbro
Easton Pro Line Wilson
Everlast Rawlings
Fila Reebok
</TABLE>
Regional Merchandise. 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.
Purchasing. The Company's merchandise staff, consisting of the Vice
President of Merchandising and nine merchandise buyers, analyze 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
27
<PAGE>
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 1996, the Company's largest vendor, Nike,
represented approximately 35% of its total purchases. Hibbett has received the
Nike Retailer Excellence Award for the Southeast region for eight consecutive
years based on its performance in the full-line sporting goods category.
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 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 1996 it accounted for the majority of 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.
The cooperative promotional program with its vendors plays an integral part
in the Company's advertising strategy by funding a significant portion of its
advertising budget and increasing Hibbett's name recognition. The Company holds
an annual marketing meeting at which it presents to its major vendors a number
of advertising alternatives. At that meeting, vendors select their preferred
advertising and promotional programs which often cover a number of different
media and are based on multiple themes, and during the ensuing twelve-month
period the Company develops and implements the selected programs in close
cooperation with those vendors. For example, the Company has recently developed
a joint television commercial with Nike and has begun placing vendor sponsored
advertising signage on its delivery trucks.
CUSTOMER SATISFACTION
Customer Service. Commitment to customer satisfaction and service is an
integral part of Hibbett's operating strategy. Management seeks to exceed
customer expectations in order to build loyalty and generate repeat business.
The Company strives to hire enthusiastic sales personnel with an interest in
sports and provides them with extensive training to create a sales staff with
strong product knowledge, dedicated to customer service. The Company also offers
services such as special order programs, monogramming, sewing and screening
services and large order processing for local groups in an effort to further
maximize customer satisfaction.
Training. The Company provides continuing sales and technical/product
training for its sales personnel. A key part of the training process is its
testing program. All store personnel are required to take a written test and
perform role playing exercises before moving on to a higher sales position and
ultimately advancing within the organization. The Company utilizes a number of
training tools to develop competent salespeople and future managers, including:
(i) a two-part salesperson training program designed to teach new hires and
seasoned employees how to be effective salespeople; (ii) a continuing
product/technical training program taught through in-store clinics,
instructional manuals or video presentations designed to educate the sales
personnel on technical facets and the use of a particular product; and (iii)
store training meetings designed to educate all salespeople at the store level
as a group on a particular topic.
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STORE OPERATIONS
Effective interaction between the corporate office and the stores is a key
element of Hibbett's operating strategy. Close communications are maintained
among senior management, district managers, store managers and sales personnel.
Senior management is easily accessible to store managers and staff. In addition,
the close proximity of the stores encourages regular visits by the district
managers to address store issues and concerns, to provide encouragement and to
discuss national, regional and local trends in the sporting goods sector. Senior
management conducts monthly meetings at the Company's corporate headquarters
with all of the district managers. The outcome of these meetings is communicated
to the store base by the district managers on a regular basis as well as in
similar all-day sessions with the store managers. These meetings facilitate
constant two-way communication between headquarters and the store base.
The Company's management structure consists of one district manager for
approximately every ten stores and at the store level, on average, one store
manager, two assistant store managers and five or six sales personnel including
trainees. Additional trainees and part-time personnel are typically hired to
assist the store personnel with increased traffic and sales volume in the fourth
quarter. Store managers are responsible for the operations of individual stores
including recruiting and hiring store personnel. The Company strongly favors
internal development of its store managers and constantly looks for motivated
and talented people to promote from within.
DISTRIBUTION
The Company maintains a single 130,000 square foot distribution center in
Birmingham, Alabama for all 82 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 is
capable of servicing in excess of 150 Hibbett Sports stores and 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. Upon receipt, the merchandise is inspected, entered into
the Company's computer system, allocated to stores, ticketed (to the extent that
it was not pre-ticketed by the vendor) and boxed for distribution to the
Company's stores. For more efficient processing, the Company also operates a
"cross-dock" system for merchandise that has been pre-split by store and
pre-ticketed by the vendor before arriving at the distribution center. The
Company continually strives to improve its allocation methods to manage its
inventory more efficiently. 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.
MANAGEMENT INFORMATION SYSTEMS
The Company utilizes integrated information systems centralized at the
corporate level. The Company's systems are designed to track product movement
throughout the store base. Detailed sales transaction records are accumulated on
each store's POS system and polled nightly by the Company's main system which
runs on an IBM AS/400 system. This information is communicated to the
merchandise buyers, who use the Company's inventory control system to order
merchandise as needed. The Company recently upgraded its systems to manage a
store base in excess of 150 stores.
Inventory. The Company's inventory control systems, written by Island
Pacific Software, report purchasing, receiving, shipping, sales and individual
SKU level inventory stocking information. Information from the Company's
point-of-sale computer system is regularly reviewed and analyzed by the
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<PAGE>
purchasing staff to assist in making merchandise allocation and markdown
decisions. The Company uses an automatic reorder system to maintain in-stock
positions on key items. This system provides management with the information
needed to determine the proper timing and quantity of reorders. Through the
Island Pacific Software package, the Company is able to accommodate different
retail prices for the same item at different stores and as a result to price
merchandise competitively by market.
EDI and Quick-Ship. Current electronic data interchange capabilities include
the transmission of purchase orders directly to some of the Company's vendors.
The Company has recently implemented EDI on its IBM AS/400 system. This allows
for the scheduling of EDI transmissions and receiving as well as the required
processes before and after communications. Management believes the Company's EDI
effort with vendors will continue to grow in the future as retailers and
suppliers focus on further increasing operating efficiencies.
Financial Reporting. The financial reporting systems provide the Company
with detailed financial reporting to support management's operational decisions
and cost control efforts. All accounting, accounts payable, accounts receivable,
payroll and human resources software is written and maintained by Lawson
Software, Inc. and resides on the Company's IBM AS/400 system. This system
provides functions such as scheduling of payments, receiving of payments,
general ledger interface, vendor tracking, and flexible reporting options.
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. The Company believes that Team Sales' operations generate
goodwill in the community and introduce young sports enthusiasts to Hibbett as a
supplier of sporting goods. Although Team Sales represents a small percentage of
the Company's sales and profits, management believes that through the operation
of Team Sales the Company is able to enhance many of its vendor relationships.
PROPERTIES
The Company currently leases all of its existing 82 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. A majority
of the Company's store leases contain provisions that would permit the landlord
to terminate the lease or to increase rent upon a change in control of the
Company. The Recapitalization constituted a change in control that triggered
these rights for a majority of the Company's landlords as of November 1, 1995,
the date of the consummation of the Recapitalization. Many of such leases also
require the Company to give notice of any change in control. No notice was given
to landlords prior to the Recapitalization. As of September 30, 1996, the
Company has not received any notice regarding any landlord's intention to either
terminate a lease or to increase rent as a result of the Recapitalization. In
addition, the Offering may constitute a similar change in control under some of
the Company's leases and the Company's reincorporation in Delaware may be
prohibited under some of the leases. In addition, many of the
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<PAGE>
Company's leases 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.
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
cities. 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 speciality 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, competition is also intense. The Company's Sports & Co. superstores
compete with sporting goods superstores, athletic footwear superstores and mass
merchandisers. Competitors of Sports & Co.'s 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 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
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 380 full-time and approximately 610
part-time employees at August 3, 1996, 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.
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.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
August 3, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Michael J. Newsome........................ President; Chief Operating Officer;
57 Director
Susan H. Fitzgibbon....................... 32 Chief Financial Officer
Joy A. McCord............................. 41 Vice President of Merchandising
Cathy E. Pryor............................ 33 Vice President of Store Operations
John F. Megrue............................ 38 Chairman of the Board; Director
Clyde B. Anderson......................... 36 Director
Barry H. Feinberg......................... 51 Director
F. Barron Fletcher, III................... 29 Director
Thomas A. Saunders, III................... 60 Director
</TABLE>
Michael J. Newsome has been the President and the Chief Operating Officer of
the Company since 1981. Since joining the Company as an outside salesman over 30
years ago, Mr. Newsome has held numerous positions at Hibbett, including as
retail clerk, outside salesman to schools, store manager, district manager,
division manager and president. Prior to joining the Company, Mr. Newsome worked
in the sporting goods retail business for six years.
Susan H. Fitzgibbon has been the Chief Financial Officer of the Company
since April 1996. Prior to joining the Company, she held various financial
positions at Bruno's Inc., a supermarket store operator, from December 1992
through April 1996, serving most recently as Controller. Prior to Bruno's Inc.,
Ms. Fitzgibbon spent six years at Arthur Andersen LLP during which she worked
extensively with retailing clients.
Joy A. McCord has been the Vice President of Merchandising at the Company
since 1995. Ms. McCord is responsible for buying, advertising and inventory
control. Ms. McCord has been with the Company for nine years. During that time,
she has held positions as sporting goods buyer for four years and general
merchandise manager for five years. Prior to joining the Company, she worked as
a department manager at Loveman's department stores for two years and
merchandise buyer at Parisian department stores for eight years. Ms. McCord has
over 19 years of experience in the retailing industry.
Cathy E. Pryor has been the Vice President of Store Operations at the
Company since 1995. Her responsibilities include overseeing all of the stores,
directing district managers, organizing training and overseeing management
information systems. Ms. Pryor has been with the Company for eight years. During
that time, she has held positions as a district manager and Director of Store
Operations. Prior to joining the Company, she worked at Champs as a district
manager. Ms. Pryor has over eleven years of experience in the sporting goods
retail business.
John F. Megrue has been a Director and Chairman of the Board of the Company
since 1995. Mr. Megrue has been a partner of SKM Partners, L.P., which serves as
the general partner of Saunders Karp & Megrue, L.P., a private equity investment
firm, and each of the Funds, since 1992. From 1989 to 1992, Mr. Megrue served as
a Vice President and Principal at Patricof & Co., a private equity investment
firm, and prior thereto he served as a Vice President at C.M. Diker Associates,
a private equity investment firm. Mr. Megrue is also a Vice Chairman and
director of Dollar Tree Stores, Inc.
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Clyde B. Anderson has been a Director of the Company since 1987. Mr.
Anderson has served as the Chief Executive Officer of Books-A-Million, Inc., a
book retailer, since July 1992 and as director and President of Books-A-Million,
Inc. since November 1987.
Barry H. Feinberg has been a Director of the Company since 1996. Mr.
Feinberg has been an advisor to Saunders Karp & Megrue, L.P. since 1994. He is a
founding partner of Kaiser, Feinberg & Associates, a marketing consulting firm,
specializing in multi-market retail organizations. From 1974 until 1991, he was
with Silo, Inc., a national consumer electronics retailer, where he served as
President and CEO from 1978 to 1991. Mr. Feinberg currently teaches courses in
retailing and retail marketing at the Wharton School at the University of
Pennsylvania. He also serves as a director of Deb Shops, Inc.
F. Barron Fletcher, III has been a Director of the Company since 1995. Mr.
Fletcher joined Saunders Karp & Megrue, L.P. as an associate in 1992 and is
currently a principal. Prior to joining Saunders Karp & Megrue, L.P., from 1991
through 1992, Mr. Fletcher was a financial analyst with Wasserstein Perella &
Co. where he served in the merchant banking department and also in mergers and
acquisitions. Prior to that, Mr. Fletcher was a financial analyst with Trammell
Crow Ventures which specialized in leveraged acquisitions and divestitures in
the real estate industry.
Thomas A. Saunders, III, has been a Director of the Company since 1995. Mr.
Saunders has been a partner of SKM Partners, L.P., which serves as the general
partner of Saunders Karp & Megrue, L.P. and each of the Funds, since 1990.
Before founding Saunders Karp & Megrue, L.P., Mr. Saunders served as a Managing
Director of Morgan Stanley & Co. Incorporated from 1974 to 1989 and as Chairman
of The Morgan Stanley Leveraged Equity Fund II, L.P., from 1987 to 1989. Mr.
Saunders is a member of the Board of Visitors of the Virginia Military Institute
and is the Chairman of the Board of Trustees of the University of Virginia's
Darden Graduate School of Business Administration. Mr. Saunders is also a
Trustee of the Cold Spring Harbor Laboratory and a director of Dollar Tree
Stores, Inc.
Prior to the closing of the Offering, the Company's Certificate of
Incorporation will provide that the number of directors constituting the Board
of Directors shall be such number, not more than nine or less than six, as is
established from time to time by resolution of the Board of Directors pursuant
to the Bylaws. The Board of Directors currently consists of six directors who,
prior to the closing of the Offering, will be divided into three classes of two
directors, designated Class I, Class II and Class III. Messrs. Feinberg and
Fletcher will be designated as Class I directors, Messrs. Newsome and Saunders
will be designated as Class II directors and Messrs. Anderson and Megrue will be
designated as Class III directors. The initial Class I directors will serve
until the annual shareholder meeting in 1997, the initial Class II directors
will serve until the annual shareholder meeting in 1998 and the initial Class
III directors will serve until the annual shareholder meeting in 1999.
All of the current members of the Board of Directors were elected pursuant
to the Stockholders Agreement. See "Certain Transactions--Stockholders
Agreement."
It will be necessary for the Company to have two independent directors
within 90 days after the date of this Prospectus in order to maintain its Nasdaq
National Market listing. Failure to have such directors within such period could
result in a delisting of the Common Stock from the Nasdaq National Market.
The Company's Board of Directors intends to establish an audit committee
(the "Audit Committee") and a compensation committee (the "Compensation
Committee"). The Audit Committee will recommend the annual engagement of the
Company's auditors, with whom the Audit Committee will review the scope of audit
and non-audit assignments, related fees, the accounting principles used by the
Company in financial reporting and the adequacy of the Company's internal
control procedures. The Compensation Committee will determine officers' salaries
and bonuses, and will administer the Company's stock plans. The two new
independent directors will be appointed to the Audit and Compensation
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Committees at the time they are elected to the Board of Directors of the
Company. Further, the approval of disinterested directors will be required for
any material agreements or arrangements between the Company and directors,
officers, existing principal shareholders and their affiliates. The Company
intends to establish an executive committee and Clyde B. Anderson will be
appointed the chairman thereof. See "Certain Transactions--Advisory Agreements."
DIRECTOR COMPENSATION
During fiscal 1996, Clyde B. Anderson was paid $45,000 for his services as a
director. Following the completion of the Offering, pursuant to the Bylaws, each
non-employee director will be entitled to an annual fee of $10,000 plus $500 for
each meeting, which fee may be waived by that director. All directors currently
in office intend to waive their fees.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the President and
each other executive officer whose compensation for services rendered in fiscal
1996 exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
--------------------------------
AWARDS
----------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
------------------------------------------- RESTRICTED UNDERLYING ------- ALL OTHER
NAME AND PRINCIPAL OTHER STOCK OPTIONS LTIP COMPENSA-
POSITION YEAR(1) SALARY BONUS COMPENSATION AWARDS /SARS (2) PAYOUTS TION (3)
- ------------------------- ------- -------- ------- ------------ ---------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael J. Newsome,
President, Chief
Operating Officer and
Director................. 1996 $112,692 $96,705 -- -- 40,983 -- $ 6,750
Cathy E. Pryor, Vice
President of Store
Operations............... 1996 $ 75,654 $31,894 -- -- 12,684 -- $ 4,291
</TABLE>
- ------------
(1) Hibbett's fiscal year ends on the Saturday nearest to January 31 of each
year.
(2) Consists of stock options granted pursuant to the Hibbett Sporting Goods,
Inc. Stock Option Plan.
(3) Consists of contributions by the Company under the Hibbett Sporting Goods,
Inc. 401(k) Profit Sharing Plan.
STOCK OPTION PLANS
The Company's shareholders approved and adopted the Hibbett Sporting Goods,
Inc. Stock Option Plan (as amended from time to time, the "Original Plan") as of
August 25, 1995, in order to provide selected officers and employees of the
Company who are responsible for the conduct and management of its business with
equity-based incentives in connection with the performance of their duties and
responsibilities with the Company. Under the Original Plan, 66,352 shares of
Common Stock are reserved for issuance. Options on all of these shares have been
granted and the Company's Board of Directors has discontinued future grants of
stock options under the Original Plan. As of April 1, 1996, the Company's
shareholders approved and adopted the Hibbett Sporting Goods, Inc. 1996 Stock
Option Plan (as amended from time to time, the "1996 Plan") under which future
grants of stock options under the Company's stock option program will be made.
Under the 1996 Plan, 238,566 shares of Common Stock have been reserved for
issuance.
The Original Plan and the 1996 Plan (collectively, the "Plans") provide for
the grant of stock options, which may be non-qualified stock options or
incentive stock options for tax purposes. Following the completion of the
Offering, the Plans will be administered by a Compensation Committee consisting
of members of the Company's Board of Directors who are "non-employee directors"
within the meaning
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<PAGE>
set forth in Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of
1934, as amended. Under the Plans, all full-time employees selected by the
Compensation Committee will be eligible to receive options.
The Compensation Committee is authorized to determine the terms and
conditions of all option grants, subject to the limitations that the option
price per share under the Plans may not be less than the fair market value of a
share of Common Stock on the date of grant and the term of an option may not be
longer than ten years. Payment of the option price may be made in the discretion
of the Compensation Committee in cash or common stock or a combination thereof.
Options granted under the Plans are not transferable except by will or the laws
of descent and distribution, and are exercisable during the optionee's life only
by the optionee.
In the event of a change in control (as defined in the Plans), the
Compensation Committee may take any action it deems appropriate with respect to
outstanding options.
The Plans may be amended or terminated by the Compensation Committee from
time to time to the extent deemed appropriate; provided however that no
amendment shall be made (i) which would impair the rights of an optionee without
such optionee's consent or (ii) in the case of the Original Plan, which would
increase the number of shares reserved for issuance under such Plan or change
the class of employee eligible to participate in such Plan absent shareholder
approval.
Options to purchase a total of 66,352 shares of Common Stock have been
granted under the Original Plan to six employees of the Company, including a
grant to Mr. Newsome of an option to purchase 40,983 shares of Common Stock and
a grant to Ms. Pryor of an option to purchase 12,684 shares of Common Stock. Ms.
Pryor's options granted under the Original Plan vest over a three year period in
equal installments beginning on the first anniversary of the grant date. Mr.
Newsome's options vest over five years in equal installments beginning on the
first anniversary of the grant date. On April 1, 1996 options to purchase a
total of 45,409 shares of Common Stock were granted under the 1996 Plan to 36
employees, including a grant to Ms. Pryor of an option to purchase 10,655 shares
of Common Stock. Effective upon consummation of the Offering, grants of options
to purchase a total of 32,787 shares of Common Stock at a price equal to the
public offering price will be made under the 1996 Plan to four employees,
including Mr. Newsome and Ms. Pryor. Mr. Newsome and Ms. Pryor will be granted
options to purchase 11,475 and 8,197 shares of Common Stock, respectively.
Options granted under the 1996 Plan vest over a five year period, in equal
installments, beginning on the first anniversary of the grant date.
STOCK PLAN FOR OUTSIDE DIRECTORS
The Company's Board of Directors has adopted, and the Company's shareholders
have approved the Outside Director Stock Plan, which plan shall become effective
upon consummation of the Offering. The Outside Director Stock Plan provides for
awards of nonqualified options to directors of the Company who are not employees
of the Company, Saunders Karp & Megrue, L.P. or any affiliate of either of them
("Eligible Directors"). The purpose of the Outside Director Stock Plan is to
promote the interests of the Company and its shareholders by increasing the
proprietary interest of Eligible Directors in the growth and performance of the
Company.
Pursuant to the Outside Director Stock Plan, on the closing date (the
"Effective Date") of the Offering each Eligible Director will be granted an
option to purchase 5,000 shares of Common Stock and each Eligible Director
elected following the Effective Date will be granted an option to purchase 5,000
shares of Common Stock upon his initial election to the Board. On the last day
of each fiscal year of the Company (beginning with the fiscal year commencing on
a date following the Offering), each Eligible Director shall be granted an
additional option for 2,500 shares of Common Stock; provided that any person
elected as an Eligible Director during a fiscal year will be granted an option
for a prorated portion of 2,500 shares on the last day of the fiscal year during
which such person was elected. Each
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option will: (i) vest immediately; and (ii) expire on the earlier of the tenth
anniversary of the grant date or one year from the date on which an optionee
ceases to be an Eligible Director. The exercise price per share of Common Stock
will be 100% of the fair market value per share on the grant date.
The maximum number of shares of Common Stock in respect of which options may
be granted under the Outside Director Stock Plan is 50,000. Shares of Common
Stock subject to options that are forfeited, terminated or canceled will again
be available for awards. The shares of Common Stock to be delivered under the
Outside Director Stock Plan will be made available from the authorized but
unissued shares of Common Stock or from treasury shares. The number and class of
shares available under the Outside Director Plan and/or subject to outstanding
options may be adjusted by the Board of Directors to prevent dilution or
enlargement of rights in the event of various changes in the capitalization of
the Company.
The Outside Director Stock Plan will be administered by the Board of
Directors. Subject to the provisions of the Outside Director Stock Plan, the
Board shall be authorized to interpret the Outside Director Stock Plan, to
establish, amend, and rescind any rules and regulations relating to it and to
make all other determinations necessary or advisable for its administration;
provided, however, that the Board will have no discretion with respect to the
selection of directors to receive options, the number of shares of Common Stock
subject to any such options, the purchase price thereunder or the timing or term
of grants of options. The determinations of the Board in the administration of
the Outside Director Stock Plan will be final and conclusive. The validity,
construction and effect of the Outside Director Stock Plan and any rules and
regulations relating to it will be determined in accordance with the laws of the
State of Delaware.
The options granted under the Outside Director Stock Plan may not be
assigned or transferred, except by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order.
No option may be granted under the Outside Director Stock Plan after the
tenth annual meeting of the Company's shareholders following the consummation of
the Offering unless the plan is extended by the shareholders.
The Outside Director Stock Plan may be amended by the Company's Board of
Directors, as it shall deem advisable or to conform to any change in any law or
regulation applicable thereto; provided that the Company's Board of Directors
may not, except in the limited circumstances described above, without the
authorization and approval of shareholders: (i) increase the number of shares of
Common Stock which may be purchased pursuant to options, either individually or
in the aggregate; (ii) change the requirement that option grants be priced at
fair market value; or (iii) modify in any respect the class of individuals who
constitute Eligible Directors.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors has adopted and the Company's shareholders
have approved the Hibbett Sporting Goods, Inc. Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan"). Under the Employee Stock Purchase Plan, a
maximum of 75,000 shares of Common Stock may be purchased from the Company by
the employees through payroll withholding pursuant to a series of quarterly
offerings following the consummation of the Offering. The Employee Stock
Purchase Plan is established pursuant to the provisions of Section 423 of the
Code. All full-time employees who have completed one year of service, except for
employees who own Common Stock of the Company or options on such stock which
represent more than 5% of the Common Stock of the Company, are eligible to
participate. The Employee Stock Purchase Plan will be administered by a
committee of the Board of Directors (the "Committee"). The Committee shall have
discretion to administer, interpret and construe any and all provisions of the
Employee Stock Purchase Plan. The Committee's determinations will be conclusive.
In the event of certain corporate transactions or events affecting the Common
Stock or structure of the Company, the Committee may make certain adjustments
set forth in the Employee
36
<PAGE>
Stock Purchase Plan. The Board may amend, alter or terminate the Plan at any
time; provided that shareholder approval must generally be obtained for any
change that would require shareholder approval under any regulatory or tax
requirement that the Board deems desirable to comply with or obtain relief under
and subject to the requirement that no rights under an outstanding option may be
impaired by such action without the consent of the holder thereof. The purchase
price of the Common Stock will be 85% of the fair market value of the Common
Stock on the date of the offering commencement or termination, whichever is
lower. The Shares of Common Stock which may be purchased pursuant to the
Employee Stock Purchase Plan will be made available from authorized but unissued
shares of Common Stock or from treasury shares. No employee will be granted any
right to purchase Common Stock with a value in excess of $25,000 per year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options made to the executive officers named in the Summary Compensation
Table during the fiscal year ended February 3, 1996.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------------- --------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5% (3) 10% (3)
- --------------------------- ------------ -------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Newsome......... 40,983(1) 61.77% 6.10 11/01/05 $157,224 $398,436
Cathy E. Pryor............. 12,684(2) 19.12% 1.89 8/25/01 $ 8,153 $ 18,497
</TABLE>
- ------------
(1) These options have a term of ten years and vest over a five year period, in
equal installments beginning on the first anniversary of the grant date.
These options were granted as of November 1, 1995 under the Original Plan
pursuant to the terms of the Employment Agreement. See "--Employment
Agreement."
(2) These options have a term of six years and vest over a three year period, in
equal installments beginning on the first anniversary of the grant date.
(3) The dollar amounts shown are based on certain assumed rates of appreciation
and the assumption that the options will not be exercised until the end of
the expiration periods applicable to the options. Actual realizable values,
if any, on stock option exercises and common stock holdings are dependent on
the future performance of the Common Stock. There can be no assurance that
the assumed rates of appreciation will be achieved.
37
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
No options were exercised by the executive officers named in the Summary
Compensation Table during fiscal 1996. No stock appreciation rights were
exercised by such executive officers or were outstanding at the end of the year.
The following table sets forth certain information concerning unexercised
options and fiscal year-end option values for the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- ---------------------------------------------- ------------------------- -----------------------------
<S> <C> <C>
Michael J. Newsome............................ 0/40,983 0/0
Cathy E. Pryor................................ 0/12,684 0/53,388
</TABLE>
- ------------
(1) Based on the fair market value of the Company's Common Stock at the end of
fiscal 1996 ($6.10 per share), as determined by the Company's Board of
Directors less the exercise price payable for such shares.
EMPLOYMENT AGREEMENT
Michael J. Newsome, President and Chief Operating Officer of the Company,
has entered into an employment agreement with the Company and a letter agreement
with the Board of Directors of the Company (collectively, the "Employment
Agreement") which took effect on November 1, 1995. The Employment Agreement has
an initial term that expires on November 1, 1998 and provides for annual base
salary and annual incentive bonuses and the grant of the options set forth
above. If the Company terminates Mr. Newsome's employment without cause, as
defined in the Employment Agreement (other than by reason of death or
disability), or Mr. Newsome terminates his employment for good reason, as
defined in the Employment Agreement, the Employment Agreement provides that Mr.
Newsome will continue to receive his base salary and certain benefits for what
would have been the remainder of the employment term determined without regard
to such termination. Notwithstanding the foregoing, such payments will cease if
Mr. Newsome breaches the noncompetition clause, described below. If the Company
terminates Mr. Newsome's employment without cause or Mr. Newsome terminates his
employment with good reason, the Company will have the right to purchase and Mr.
Newsome will have the right to sell the shares of Common Stock held by him on
October 31, 1995 at a price equal to the fair market value, as determined by the
Compensation Committee of the Board of Directors. If the Company terminates Mr.
Newsome's employment for cause or Mr. Newsome terminates his employment for any
reason other than good reason, the Employment Agreement provides that the
Company will have a right to repurchase such shares at book value, as defined in
the Employment Agreement. The Employment Agreement includes a noncompetition
clause requiring Mr. Newsome not to compete with the Company following a
termination of his employment for a period which may be as long as the longer of
(i) two years after ceasing to be employed and (ii) what would have been the
remaining term of employment without regard to such termination of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors does not currently have a compensation committee, but
anticipates establishing one within 90 days of the closing of the Offering. The
functions of the compensation committee other than administration of the Plans,
as discussed above, are currently performed by the Board of Directors of the
Company. Mr. Newsome, the President of the Company, serves on the Board of
Directors and on the committee established to administer the Plans prior to
establishment of the compensation committee.
38
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the beneficial
ownership of the Common Stock as of August 3, 1996 and as adjusted to reflect
the sale of 2,000,000 shares of Common Stock offered hereby by (i) each person
(or group within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934) known by the Company to own beneficially more than five percent of the
Company's Common Stock, (ii) each of the executive officers named in the Summary
Compensation Table, (iii) each director and (iv) all directors and executive
officers as a group:
<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING
----------------------------- -----------------------------
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED PERCENT BENEFICIALLY OWNED PERCENT
- --------------------------------------------- ------------------ ------- ------------------ -------
<S> <C> <C> <C> <C>
The SK Equity Fund, L.P.(2)
SK Investment Fund, L.P.(2)
Allan Karp(2)
John F. Megrue(2)
Thomas A. Saunders, III(2)
Two Greenwich Plaza
Suite 100
Greenwich, CT 06830........................ 2,886,721 74% 2,886,721 49%
Clyde B. Anderson(3)
402 Industrial Lane
Birmingham, AL 35211....................... 338,844 9% 338,844 6%
Michael J. Newsome(4)
451 Industrial Lane
Birmingham, AL 35211....................... 122,950 3% 122,950 2%
All Directors and Executive Officers as a
group(3)(5).................................. 3,354,857 86% 3,354,857 57%
</TABLE>
- ------------
(1) As used in this table "beneficial ownership" means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. A person is deemed as of any date to have "beneficial ownership"
of any security that such person has a right to acquire within 60 days and
such security is deemed to be outstanding for purposes of calculating the
ownership percentage of such person, but is not deemed to be outstanding for
purposes of calculating the ownership percentage of any other person.
(2) Includes 2,855,484 shares owned by The SK Equity Fund, L.P. and 31,237
shares owned by SK Investment Fund, L.P. SKM Partners, L.P. is the general
partner of each of The SK Equity Fund, L.P. and SK Investment Fund, L.P.
Messrs. Karp, Megrue and Saunders are general partners of SKM Partners,
L.P., and, therefore, may be deemed to have beneficial ownership of the
shares shown as being owned by the Funds above. Messrs. Karp, Megrue and
Saunders disclaim beneficial ownership of such shares, except to the extent
that any of them has a limited partnership interest in SK Investment Fund,
L.P.
(3) Includes 35,885 shares owned by various trusts for the benefit of Mr.
Anderson's children in respect of which Mr. Anderson's wife is the trustee
and 70,820 shares issuable upon the exercise of options granted on August 1,
1996. See "Certain Transactions--Advisory Agreements."
(4) Mr. Newsome retains voting power with respect to 16,393 shares held by his
relatives. All 122,950 shares owned by Mr. Newsome and his relatives are
subject to call by the Company at "book value" or "fair market value" if Mr.
Newsome's employment is terminated under certain circumstances set forth in
the Employment Agreement. See "Management--Employment Agreement."
(5) Includes shares held by the Funds as a result of affiliations described in
note (2) above and options to purchase 6,342 shares held by the executive
officers, which will become exercisable within 60 days.
39
<PAGE>
Prior to the consummation of the Offering, the Anderson Shareholders
collectively own approximately 22% of the Company's Common Stock, including the
Common Stock shown as being owned by Clyde B. Anderson in the table above. After
the consummation of the Offering, the Anderson Shareholders will collectively
own approximately 14% of the Company's Common Stock. The Anderson Shareholders
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not, without the prior written consent of Smith Barney Inc. offer,
sell, grant any option to purchase or otherwise dispose of the Company's Common
Stock or any securities convertible into or exchangeable for such Common Stock.
CERTAIN TRANSACTIONS
The Company believes that the terms of each transaction described below are
comparable to, or more favorable to the Company than, the terms that would have
been obtained in an arms' length transaction with an unaffiliated party.
Transactions Related to the Recapitalization
Prior to November 1, 1995, all of the issued and outstanding common stock of
the Company was owned by Charles C. Anderson, Sr., Joel R. Anderson, Charles C.
Anderson, Jr., Terry C. Anderson, Clyde B. Anderson, Harold M. Anderson, certain
Anderson family trusts and certain other persons (the "Anderson Shareholders")
and by Michael J. Newsome. Pursuant to the terms of a stock purchase and
redemption agreement dated November 1, 1995 (the "Stock Purchase Agreement"),
The SK Equity Fund, L.P. (the "Equity Fund") and SK Investment Fund, L.P. (the
"Investment Fund" and, together with the "Equity Fund", the "Funds") agreed to
acquire from the Company for $24,250,000 in cash, and the Company agreed to
issue and sell (i) to the Funds: (x) 17,609,000 shares (2,886,721 shares after
giving retroactive effect to the reverse stock split discussed in Note 10 of
Notes to Consolidated Financial Statements) of Common Stock and (y) $4,574,000
aggregate principal amount of its 12% Subordinated Notes due November 1, 2002
(the "Subordinated Notes"), and (ii) to the Equity Fund $2,500,000 in the
aggregate principal amount of its 12% Senior Subordinated Note due November 2,
2000 (the "Senior Subordinated Notes") (collectively, the "Acquisition"). In
addition, pursuant to the terms of the Stock Purchase Agreement, the Company
agreed, upon the consummation of the Acquisition, to redeem from the Anderson
Shareholders 34,220,000 shares (5,609,836 shares after giving retroactive effect
to the reverse stock split discussed in Note 10 of Notes to Consolidated
Financial Statements) of Common Stock (the "Redemption") in exchange for: (i)
$22,250,000 in cash, (ii) $1,625,000 aggregate principal amount of the Senior
Subordinated Notes and (iii) $11,426,000 aggregate principal amount of the
Subordinated Notes. Thus, upon the consummation of the Acquisition and the
Redemption, the Funds and the Anderson Shareholders owned 17,609,000 and
5,030,000 shares (2,886,721 and 824,590 shares after giving retroactive effect
to the reverse stock split discussed in Note 10 of Notes to Consolidated
Financial Statements) of Common Stock, respectively, or approximately 75.3% and
21.5% of the outstanding Common Stock, respectively. The remaining 750,000
shares (122,950 shares after giving retroactive effect to the reverse stock
split discussed in Note 10 of Notes to Consolidated Financial Statements) of
Common Stock were held by Mr. Newsome. In February, 1996 the Company repaid in
full all the amounts outstanding under the Senior Subordinated Notes.
The Subordinated Notes were issued by the Company at a discount, with a
yield to maturity compounded annually of 14.92%. Pursuant to the terms of the
Subordinated Notes, payment of interest accrued thereon during the first year of
the term thereof is deferred until November 1, 1996. The Company is permitted to
redeem the Subordinated Notes at their face value plus the interest accrued
thereon until the day of redemption out of the proceeds from a public offering
of its stock. The Subordinated Notes bear interest at the rate of 12% per annum
and mature on November 1, 2002. The Company intends to redeem the Subordinated
Notes out of the proceeds of the Offering.
40
<PAGE>
Prior to November 1, 1995, in consideration for his assistance in arranging
the Recapitalization, the Company issued to Clyde B. Anderson 322,419 shares
(52,855 shares after giving retroactive effect to the reverse stock split
discussed in Note 10 of Notes to Consolidated Financial Statements) of Common
Stock which at the time of issuance had the aggregate value of $322,419.
Stockholders Agreement
In connection with the Acquisition and the Redemption, the Company, the
Anderson Shareholders, Mr. Newsome and the Funds entered into a stockholders
agreement dated as of November 1, 1995, as amended (the "Stockholders
Agreement"). Except for provisions relating to indemnification and contribution,
the Stockholders Agreement will terminate when the number of shares of Common
Stock held by the Anderson Shareholders falls below 323,688. The Company
anticipates that immediately following the consummation of the Offering the
Anderson Shareholders will hold 647,377 shares of Common Stock.
The Stockholders Agreement specifies the number of members of the Board of
Directors of the Company as not more than nine and not less than six persons as
well as the right of the Funds to nominate the majority of such members and the
right of the Anderson Shareholders to nominate one such member. Such directors
can only be removed for cause or if persons entitled to designate such directors
consents to removal in writing.
Actions of the Board require either (i) the affirmative vote of a majority
of the directors at a duly convened meeting of the Board at which a quorum, of
whom the majority must be designees of the Funds (other than the independent
directors), is present or (ii) the unanimous written consent of the Board.
Certain actions including an amendment to the Company's Articles of
Incorporation or Bylaws, a sudden and material change in the Company's line of
business, certain related party transactions and a change in the Company's
auditors prior to the completion of the fiscal 1997 audit, require the
affirmative vote of the Board, with the director designated by the Anderson
Shareholders voting in the affirmative.
Subject to certain exceptions, including the public offering of Common
Stock, the Stockholders Agreement currently provides preemptive rights to each
of the Funds, the Anderson Shareholders and Mr. Newsome to purchase their
respective pro rata portions of any newly issued stock of the Company or any
newly issued securities convertible, exchangeable or exercisable into the
Company's stock.
The Stockholders Agreement grants the Anderson Shareholders and Mr. Newsome
"tag along" rights to participate in a private sale of shares of Common Stock by
the Funds to a third party. In addition, the Stockholders Agreement grants the
Funds certain "drag along rights" to compel the Anderson Shareholders and Mr.
Newsome to participate in a private sale of all the shares of Common Stock owned
by the Funds to a third party.
The Stockholders Agreement also grants to the Funds unlimited demand
registration rights and to the Anderson Shareholders, holding the majority of
the total number of shares of Common Stock held by the Anderson Shareholders,
one demand registration right that becomes exercisable 270 days after the
closing of the Offering. The Company, notwithstanding these demand registration
rights, shall not be obligated to effect more than one demand registration in
any six-month period. The Stockholders Agreement also grants the Funds, the
Anderson Shareholders and Mr. Newsome "piggy back" registration rights, subject
to certain limitations, if the Company proposes to register its Common Stock.
Clyde B. Anderson is entitled to "tag along," "piggy back" and demand
registration rights, and is subject to "drag along rights" of the Funds, in
respect of 70,820 shares of Common Stock issuable upon the exercise of the stock
options granted to him on August 1, 1996. See "--Advisory Agreements."
41
<PAGE>
The Company is obligated to pay all reasonable fees, costs and expenses in
connection with any demand or "piggy back" registration other than underwriting
discounts or commissions. The Stockholders Agreement contains customary
indemnity provisions between the Company and the selling shareholders for losses
arising out of any demand or "piggy back" registration.
Advisory Agreements
Prior to June 1, 1995, the Company contracted with ANCO Management Services,
Inc. ("ANCO"), an affiliated entity of the Anderson Shareholders, to obtain
certain financial advisory and administrative services. From June to November 1,
1995, following the liquidation of ANCO, the Company contracted for
substantially similar services with Anderson & Anderson, LLC, another affiliated
entity of the Anderson Shareholders. Fees for those services amounted to
$227,000, $256,000 and $95,000 in fiscal 1994, 1995 and 1996, respectively. On
November 1, 1995, the Company entered into an advisory agreement with Saunders
Karp & Megrue, L.P. ("SKM"), a limited partnership the general partner of which
is SKM Partners L.P., which is also the general partner of each of the Funds.
Pursuant to the advisory agreement SKM has agreed to provide certain financial
advisory services to the Company. In consideration for these services, SKM is
entitled to receive an annual fee of $200,000, payable quarterly in advance. The
expenses incurred in respect of that fee were $50,000 in fiscal 1996 and
$100,000 during the twenty-six week period ending on August 3, 1996. The Company
also has agreed to indemnify SKM for certain losses arising out of the provision
of advisory services and to reimburse certain of SKM's out-of-pocket expenses.
In addition, on November 1, 1995, the Company paid SKM a one-time fee of
$500,000 primarily for its assistance in the arrangement, placement and
negotiation of the Term Loan and the Revolving Loan Agreement.
The Company and Clyde B. Anderson have entered into an agreement effective
as of August 1, 1996, pursuant to which the Company granted to Clyde B. Anderson
options to buy 70,820 shares of Common Stock at an exercise price of $8.48 per
share (the "August Options") and agreed to pay him an annual fee of $50,000 in
consideration for his agreement to provide advisory services to the Company. The
Board of Directors of the Company intends to appoint Mr. Anderson the chairman
of an executive committee promptly upon establishment of that committee, and Mr.
Anderson will provide advisory services to the Company in such capacity. The
August Options are exercisable beginning six months after the closing of the
Offering, and will expire nine months after the closing of the Offering. The
shares of Common Stock issuable upon the exercise of the August Options will be
subject to the provisions of the Stockholders Agreement.
Non-Competition Agreement
Messrs. Charles C. Anderson, Joel R. Anderson and Clyde B. Anderson, as
former controlling shareholders of the Company, have entered into a
non-competition agreement with the Company and the Funds in connection with the
Acquisition and Redemption. Under the agreement, Messrs. Andersons agreed not to
be engaged in the retail sales of athletic equipment, apparel, footwear or other
sporting goods in any and all states of Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina, Illinois, Tennessee and
any other state immediately adjacent to any of the foregoing states at any time
prior to November 1, 2000.
Certain Transactions with Anderson Entities
In November 1994, Hibbett paid $118,788 to reimburse Books-A-Million, Inc.
("Books-A-Million"), a book retailer in the southeastern United States
controlled by the Anderson Shareholders, for payments made under a tax sharing
arrangement.
In fiscal 1994, the Company paid $66,227 in respect of certain vehicle
purchases to Anderson Ford, a car dealership affiliated with the Anderson
Shareholders.
42
<PAGE>
During fiscal 1995, the Company borrowed funds from ANCO, an affiliated
entity of the Anderson Shareholders, to fund certain working capital needs. The
average amount outstanding under these loans during fiscal 1995 was $120,000,
the maximum amount outstanding was $810,000 and the weighted average interest
rate was 7.45%. The loans were repaid in full during fiscal 1995.
In February 1996 the Company sold its leasehold interest in its former
headquarters and distribution facility to Anderson & Anderson, LLC, an entity
affiliated with certain Anderson Shareholders, for $850,000.
Hibbett has recently entered into a sublease agreement ("Sublease
Agreement") with Books-A-Million, pursuant to which Hibbett will sublease
certain real estate from Books-A-Million in Florence, Alabama for one of its
stores. The term of the Sublease Agreement expires in June 2008. Under the
Sublease Agreement, Hibbett will make annual lease payments to Books-A-Million
of approximately $190,000.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
of the Company and there can be no assurance that an active trading market in
the Common Stock will develop subsequent to the Offering or, if developed, that
it will be sustained. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices or the Company's
ability to raise capital in the equity markets.
Upon completion of the Offering, the Company will have 5,834,262 shares of
Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options). Of these shares,
the 2,000,000 shares sold in the Offering will be freely transferable by persons
other than affiliates of the Company without registration under the Act. On the
date of this Prospectus, 3,834,262 "restricted shares" as defined in Rule 144
will be outstanding. Of such shares, and without consideration of the
contractual restrictions described below, 16,393 shares would be available for
immediate sale in the public market without restriction pursuant to Rule 144(k).
Beginning 90 days after the date of this Prospectus, and without consideration
of the contractual restrictions described below, an additional 931,148 shares
would be eligible for sale in reliance upon Rule 144 promulgated under the Act.
The holders of the remaining 2,886,721 restricted shares will not be able to
sell such shares pursuant to Rule 144 until November 1, 1997, when a two year
period will have elapsed since the shares were acquired from the Company.
Furthermore, holders of an aggregate of 3,834,262 shares are entitled to
piggyback registration rights, of which 3,711,311 shares are also entitled to
demand registration rights. In addition, Clyde B. Anderson is entitled to
piggyback and demand registration rights in respect of 70,820 shares issuable
upon the exercise of the stock options granted to him on August 1, 1996. See
"Certain Transactions--Stockholders Agreement" and "-- Advisory Agreements." To
date, none of these holders has indicated an intention to exercise such demand
registration rights.
The officers, directors and all the shareholders of the Company have agreed
not to offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of Common Stock of the Company or any securities convertible
into, or exchangeable for, shares of Common Stock, subject to certain
exceptions, owned by them without the prior written consent of Smith Barney Inc.
for a period of 180 days after the date of this Prospectus. As a result of these
contractual restrictions and the provisions of Rule 144, 947,541 shares will be
eligible for sale beginning 180 days after the date of this Prospectus subject
to Rule 144 volume limitations applicable to affiliates.
In general, under Rule 144 as currently in effect, beginning 90 days after
the Offering, a person (or persons whose shares are aggregated) may sell within
any three-month period a number of shares that does not exceed the greater of 1%
of the then outstanding shares of the Company's Common Stock
43
<PAGE>
(approximately 60,000 shares immediately after the Offering) or the average
weekly trading volume of the Company's Common Stock during the four-calendar
weeks preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission; provided that at least two years have
elapsed since the shares to be sold were last acquired from the Company or an
affiliate of the Company. Sales under Rule 144 are also subject to certain
manner of sale provisions, notice requirements and the availability of current
public information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, may sell shares under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements; provided that at least three
years have elapsed since the shares to be sold were last acquired from the
Company or an affiliate of the Company. 947,541 restricted shares have been
issued for more than three years and will be eligible for sale under Rule 144(k)
if their holders qualify for non-affiliate status.
The Company has also agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or any rights to acquire
Common Stock for a period of 180 days after the date of this Prospectus, without
the prior written consent of Smith Barney Inc., subject to certain limited
exceptions.
Following the Offering, the Company intends to file registration statements
under the Act covering approximately 430,000 shares of Common Stock issued or
reserved for issuance under the Plans. Accordingly, shares registered under such
registration statements will, subject to Rule 144 volume limitations applicable
to affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions with the Company or the contractual restrictions
described above.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 12,000,000 shares of Common Stock, and
1,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), after giving effect to the reincorporation of the Company in Delaware
prior to the completion of the Offering. The following summaries of certain
provisions of the Common Stock and Preferred Stock are subject to, and qualified
in their entirety by, the provisions of the Company's Certificate of
Incorporation, which is included as an exhibit to the Registration Statement of
which this Prospectus forms a part, and by applicable law.
COMMON STOCK
As of August 3, 1996 there were 3,834,262 shares of Common Stock outstanding
which were held of record by 27 stockholders. There will be 5,834,262 shares of
Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options) after giving
effect to the sale of the shares of Common Stock offered hereby.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders and do not have cumulative voting
rights. Subject to preferences as may be applicable to any outstanding Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." In the
event of liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior distribution rights of Preferred Stock, if any,
then outstanding. Except as provided in the Stockholders Agreement, the holders
of Common Stock will have no preemptive or conversion rights or other
subscription rights. See "Certain Transactions--Stockholders Agreement." There
are no redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and non-assessable.
44
<PAGE>
PREFERRED STOCK
The Board of Directors is empowered by the Company's Certificate of
Incorporation to designate and issue from time to time one or more classes or
series of Preferred Stock without stockholder approval. The Board of Directors
may affix and determine the relative rights, preferences and privileges of each
class or series of Preferred Stock so issued. Because the Board of Directors has
the power to establish the preferences and rights of each class or series of
Preferred Stock, it may afford the holders of any series or class of Preferred
Stock preferences, powers and rights, with respect to voting, liquidation or
otherwise, senior to the rights of the holders of Common Stock. The issuance of
Preferred Stock could have the effect of, among other things, restricting
dividends on the Common Stock, diluting the voting power of the Common Stock,
impairing the liquidation rights of the Common Stock and delaying or preventing
a change in control of the Company. There are no shares of Preferred Stock
currently outstanding, and the Board of Directors has no present plans to issue
any shares of Preferred Stock.
CHARTER AND BYLAW PROVISIONS
Stockholders' rights and related matters are governed by the Delaware
General Corporation Law, the Company's Certificate of Incorporation and its
Bylaws. Certain provisions of the Certificate of Incorporation and Bylaws of the
Company, which are summarized below, tend to limit stockholders' ability to
influence matters of corporate governance. This may make it more difficult to
change the composition of the Company's Board of Directors and may discourage or
make more difficult any attempt by a persons or group to obtain control of the
Company.
Size of Board, Classified Board, Removal of Directors and Filling
Vacancies. The Company's Certificate of Incorporation provides that subject to
the right to elect additional directors that may be granted to holders of any
class or series of Preferred Stock, the number of directors shall be fixed from
time to time as provided in the Bylaws, but may not consist of more than nine or
less than six persons. The Certificate of Incorporation further provides that
the directors other than those who may be elected by the holders of any class or
series of Preferred Stock shall be classified, with respect to the time for
which they severally hold office, into three classes, designated Class I, Class
II and Class III, as nearly equal in number as possible, and that one class
shall be elected each year and serve for a three-year term. The Bylaws provide
that the majority of the votes cast in the election of directors shall elect
those directors. Accordingly, the holders of a majority of the then outstanding
shares of voting stock can elect all the directors of the class then being
elected. The Certificate of Incorporation also provides that a director may be
removed by stockholders only for cause by a vote of the holders of more than
two-thirds of the shares entitled to vote generally in the election of
directors. The Certificate of Incorporation also provides that all vacancies on
the Company's 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.
The foregoing provisions may have the effect of making it more difficult for
stockholders to change the composition of the Board. As a result, at least two
annual meetings of stockholders may be required for the stockholders to change a
majority of the directors, whether or not the majority of the Company's
stockholders believes that such a change would be desirable.
Super Majority Voting Requirements. The affirmative vote of the holders of
more than two-thirds of the shares entitled to vote generally in the election of
directors is required to amend, alter, change or repeal any of the foregoing
provisions. In addition, under the Company's Certificate of Incorporation, the
Company's Bylaws may not be amended by the stockholders without the affirmative
vote of holders of more than two-thirds of the shares entitled to vote generally
in the election of directors. This restriction makes it more difficult for the
stockholders of the Company to amend the Bylaws and thus
45
<PAGE>
enhances the power of the Company's Board of Directors vis-a-vis stockholders
with regard to the matters of corporate governance addressed by the Bylaws.
Limitations on Calling Special Shareholder Meetings. Under the Company's
Bylaws, special meetings of the stockholders may only be called by the Chairman
of the Board, 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. This provision makes it more difficult for stockholders to require the
Company to call a special meeting of stockholders to consider any proposed
corporate action, including any sale of the Company, which may be favored by the
stockholders.
DELAWARE LAW
The Company will be a Delaware corporation and will be subject to Section
203 of the Delaware General Corporation Laws, an anti-takeover law. In general,
Section 203 prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years following the date the person became an interested stockholder, unless
(with certain exceptions) the "business combination" or the transaction in which
the person became an interested stockholder is approved in a prescribed manner.
Generally, a "business combination" includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior to the
determination of interested stockholder status, did own) 15% or more of a
corporation's voting stock, other than "interested stockholders" prior to the
time the Common Stock of the Company is quoted on the Nasdaq National Market.
The existence of this provision 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.
LIMITATION OF DIRECTORS' LIABILITY
Section 145 of the Delaware General Corporation Act permits the Company to
indemnify officers, directors or employees against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement in connection
with legal proceedings "if [as to any officer, director or employee] he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the corporation, and, with respect to any criminal act or
proceeding, had no reasonable cause to believe his conduct was unlawful",
provided that with respect to actions by, or in the right of the corporation
against, such individuals, indemnification is not permitted as to any matter as
to which such person "shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation, unless, and only
to the extent that, the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper."
Individuals who are successful in the defense of such action are entitled to
indemnification against expenses reasonably incurred in connection therewith.
The By-Laws of the Company will require the Company to indemnify directors
and officers against liabilities which they may incur under the circumstances
set forth in the preceding paragraph.
The Company is in the process of obtaining standard policies of insurance
under which coverage will be provided (a) to its directors and officers against
loss arising from claims made by reason of breach of duty or other wrongful act,
and (b) to the Company with respect to payments which may be made by the Company
to such officers and directors pursuant to the above indemnification provision
or otherwise as a matter of law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is SunTrust Bank,
Atlanta.
46
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated October , 1996, each of the Underwriters named below has
severally agreed to purchase, and the Company has agreed to sell to such
Underwriters, the respective number of shares of Common Stock set forth opposite
the name of such Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---------------------------------------------------------------- ---------
<S> <C>
Smith Barney Inc................................................
Montgomery Securities...........................................
The Robinson-Humphrey Company, Inc..............................
---------
Total................................................. 2,000,000
---------
---------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares offered hereby are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all shares
of Common Stock offered hereby (other than those covered by the over-allotment
option described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., Montgomery Securities and The
Robinson-Humphrey Company, Inc. are acting as the Representatives, propose to
offer part of the shares of Common Stock directly to the public at the public
offering price set forth on the cover page of this Prospectus and part of the
shares of Common Stock to certain dealers at a price which represents a
concession not in excess of $ per share under the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. The Representatives of
the Underwriters have advised the Company that the Underwriters do not intend to
confirm any sales to any accounts over which they exercise discretionary
authority.
The Company has granted to the Underwriters an option, exercisable for
thirty days from the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the price to public set forth on the cover
page of this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the offering of the shares offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.
The Company, its officers and directors and certain of its shareholders have
agreed that, for a period of 180 days from the date of this Prospectus, they
will not, without the prior written consent of Smith Barney Inc., offer, sell,
pledge, contract to sell, or otherwise dispose of any Common Stock (or any
security convertible into or exchangeable or exercisable for Common Stock) or
other securities of the Company that are substantially similar to Common Stock
or grant any options or warrants to purchase Common Stock or similar securities,
subject to certain limited exceptions.
Prior to the Offering, there has not been any public market for Common Stock
of the Company. Consequently, the initial public offering price for the shares
of Common Stock included in the Offering has been determined by negotiations
between the Company and the Representatives. Among the factors considered in
determining such price were the history of and prospects for the Company's
business and the industry in which it competes, an assessment of the Company's
management and the present state of the Company's development, the past and
present revenues and earnings of the Company, the prospects for growth of the
Company's revenues and earnings, the current state of the economy in the United
States and the current level of economic activity in the industry in which the
Company competes and in
47
<PAGE>
related or comparable industries, and currently prevailing conditions in the
securities markets, including current market valuations of publicly traded
companies which are comparable to the Company.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Davis Polk & Wardwell, New York, New York. Certain legal
matters relating to the Offering will be passed upon for the Underwriters by
Latham & Watkins, New York, New York. From time to time Davis Polk & Wardwell
and Latham & Watkins render certain legal services to the Funds, and Latham &
Watkins also renders certain legal services to certain of the Anderson
Shareholders.
EXPERTS
The audited consolidated financial statements and related schedule of the
Company and its subsidiaries as of January 28, 1995 and February 3, 1996, and
for each of the three fiscal years in the period ended February 3, 1996,
included in this Prospectus and the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus is a part and
which term shall encompass any amendments thereto) on Form S-1 pursuant to the
Securities Act with respect to the Common Stock being offered in the Offering.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted as permitted by the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete;
with respect to any such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. For further information
about the Company and the securities offered hereby, reference is made to the
Registration Statement and to the financial statements, schedules and exhibits
filed as a part thereof.
Upon completion of the Offering, the Company will be subject to the
information requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"), and, in accordance therewith, will file reports and other information
with the Commission. The Registration Statement, the exhibits and schedules
forming a part thereof and other information filed by the Company with the
Commission in accordance with the Exchange Act can be inspected and copies
obtained at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: 7 World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material or any
part thereof may also be obtained by mail from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports containing
unaudited summary financial information for the first three fiscal quarters of
each fiscal year.
48
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.............................................. F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of January 28, 1995, February 3, 1996, and August
3, 1996 (unaudited).............................................................. F-3
Consolidated Statements of Operations for the fiscal years ended January 29, 1994,
January 28, 1995, and February 3, 1996, and the twenty-six week periods ended
July 29, 1995 and August 3, 1996 (unaudited).......................................... F-4
Consolidated Statements of Stockholders' Investment (Deficit) for the fiscal years
ended January 29, 1994, January 28, 1995, and February 3, 1996, and the
twenty-six week period ended August 3, 1996 (unaudited).......................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended January 29, 1994,
January 28, 1995, and February 3, 1996, and the twenty-six week periods ended
July 29, 1995 and August 3, 1996 (unaudited).................................... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hibbett Sporting Goods, Inc.:
We have audited the accompanying consolidated balance sheets of HIBBETT
SPORTING GOODS, INC. (an Alabama corporation) AND SUBSIDIARIES as of January 28,
1995 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 3, 1996. 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 January 28, 1995 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 3, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
April 2, 1996 (except with respect
to the matter discussed in Note 10
as to which the date is
September 13, 1996)
F-2
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3, AUGUST 3,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 727 $ 31 $ 36
Accounts receivable, net..................................... 1,094 1,341 1,705
Inventories.................................................. 14,736 20,705 26,946
Prepaid expenses and other................................... 112 756 1,194
Refundable income taxes...................................... 0 419 493
Deferred income taxes........................................ 410 538 631
----------- ----------- -----------
17,079 23,790 31,005
----------- ----------- -----------
PROPERTY AND EQUIPMENT:
Land......................................................... 94 748 24
Buildings.................................................... 1,084 4,869 83
Equipment.................................................... 3,145 4,581 5,176
Furniture and fixtures....................................... 2,557 3,470 3,867
Leasehold improvements....................................... 4,092 5,901 6,206
Construction in progress..................................... 673 170 933
----------- ----------- -----------
11,645 19,739 16,289
Less accumulated depreciation and amortization............... 6,281 7,605 7,646
----------- ----------- -----------
5,364 12,134 8,643
----------- ----------- -----------
NONCURRENT ASSETS:
Deferred income taxes........................................ 296 308 331
Unamortized debt issuance costs, net......................... 0 434 399
Other, net................................................... 48 36 30
----------- ----------- -----------
344 778 760
----------- ----------- -----------
$22,787 $ 36,702 $ 40,408
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt......................... $ 420 $ 0 $ 0
Accounts payable............................................. 7,543 10,371 10,435
Accrued income taxes......................................... 71 0 0
Accrued expenses:
Payroll-related............................................ 809 1,079 1,402
Other...................................................... 650 887 1,074
Related-party.............................................. 127 546 1,616
----------- ----------- -----------
9,620 12,883 14,527
----------- ----------- -----------
LONG-TERM DEBT................................................. 4,908 31,912 33,148
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT (DEFICIT):
Preferred Stock, $.01 par value, 1,000,000 shares authorized,
no shares outstanding (unaudited).......................... 0 0 0
Common stock, $.01 par value, 3,000,000 shares authorized,
1,025,600 shares issued and outstanding at January 28,
1995; $.01 par value, 50,000,000 shares authorized,
23,389,000 shares issued and outstanding at February 3,
1996; and $.01 par value, 12,000,000 shares authorized,
3,834,262 shares issued and outstanding at August 3, 1996
(unaudited).................................................... 10 234 38
Paid-in capital.............................................. 117 14,933 15,129
Retained earnings (deficit).................................. 8,132 (23,260) (22,434)
----------- ----------- -----------
8,259 (8,093) (7,267)
----------- ----------- -----------
$22,787 $ 36,702 $ 40,408
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
----------------------------------------- ------------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1994 1995 1996 1995 1996
----------- ----------- ----------- ---------- ----------
(52 WEEKS) (52 WEEKS) (53 WEEKS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES...................... $40,119 $52,266 $67,077 $29,355 $39,019
COST OF GOODS SOLD, INCLUDING
WAREHOUSE, DISTRIBUTION, AND
STORE OCCUPANCY COSTS........ 27,731 36,225 46,642 20,538 27,272
Gross profit............. 12,388 16,041 20,435 8,817 11,747
STORE OPERATING, SELLING, AND
ADMINISTRATIVE EXPENSES...... 8,579 10,453 13,471 5,624 7,767
DEPRECIATION AND
AMORTIZATION................... 932 1,066 1,322 662 826
Operating income......... 2,877 4,522 5,642 2,531 3,154
INTEREST EXPENSE............... 488 654 1,685 410 1,814
Income before provision
for income taxes............... 2,389 3,868 3,957 2,121 1,340
PROVISION FOR INCOME TAXES..... 920 1,479 1,514 811 514
Net income............... $1,469 $2,389 $2,443 $1,310 $826
NET INCOME PER SHARE........... $.23 $.37 $.42 $.20 $.21
WEIGHTED AVERAGE SHARES
OUTSTANDING.................... 6,504,521 6,504,521 5,838,267 6,504,521 3,938,224
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- RETAINED
NUMBER PAID-IN EARNINGS
OF SHARES AMOUNT CAPITAL (DEFICIT)
----------- ------ ------- ---------
<S> <C> <C> <C> <C>
BALANCE, January 31, 1993.......................... 10,256 $ 1 $ 126 $ 4,274
Net income....................................... 0 0 0 1,469
----------- ------ ------- ---------
BALANCE, January 29, 1994.......................... 10,256 1 126 5,743
Net income....................................... 0 0 0 2,389
Change in par value.............................. 0 (1 ) 1 0
Issuance of shares in connection with a 100-for-1
stock split........................................ 1,015,344 10 (10) 0
----------- ------ ------- ---------
BALANCE, January 28, 1995.......................... 1,025,600 10 117 8,132
Net income....................................... 0 0 0 2,443
Issuance of shares in connection with a
38.687189-for-1 stock split.................... 38,651,981 387 (387) 0
Purchase and retirement of shares................ (34,220,000) (342 ) (43) (33,835)
Issuance of shares............................... 17,609,000 176 17,433 0
Expenses related to capital transactions......... 322,419 3 (2,187) 0
----------- ------ ------- ---------
BALANCE, February 3, 1996.......................... 23,389,000 234 14,933 (23,260)
Net income (unaudited)........................... 0 0 0 826
Retroactive effect of 1-for-6.1 reverse stock
split.............................................. (19,554,738) (196 ) 196 0
----------- ------ ------- ---------
BALANCE, August 3, 1996 (Unaudited)................ 3,834,262 $ 38 $15,129 $ (22,434)
----------- ------ ------- ---------
----------- ------ ------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
----------------------------------------- ---------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1994 1995 1996 1995 1996
----------- ----------- ----------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 1,469 $ 2,389 $ 2,443 $1,310 $ 826
----------- ----------- ----------- -------- ---------
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization........................ 989 1,124 1,475 687 943
Deferred income taxes................................ 21 (266) (140) (115) (116)
(Gain) loss on disposal of assets.................... 20 4 6 2 (504)
Interest expense funded through additional debt...... 0 0 128 0 14
(Increase) decrease in assets:
Accounts receivable, net......................... (85) (9) (247) (541) (364)
Inventories...................................... (1,966) (3,930) (5,969) (3,374) (6,241)
Prepaid expenses and other....................... (159) 71 (644) (211) (438)
Refundable income taxes.......................... (61) 61 (419) (412) (74)
Other noncurrent assets.......................... (58) 11 (474) 7 (7)
Increase (decrease) in liabilities:
Accounts payable................................. 138 2,978 2,828 418 64
Accrued income taxes............................. (187) 71 (71) (71) 0
Accrued expenses................................. 148 694 926 (93) 1,580
----------- ----------- ----------- -------- ---------
Total adjustments............................... (1,200) 809 (2,601) (3,703) (5,143)
----------- ----------- ----------- -------- ---------
Net cash provided by (used in) operating
activities................................................ 269 3,198 (158) (2,393) (4,317)
----------- ----------- ----------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................... (1,600) (2,179) (8,172) (1,683) (2,385)
Proceeds from sale of property........................... 9 26 6 6 5,553
----------- ----------- ----------- -------- ---------
Net cash provided by (used in) in investing
activities................................................ (1,591) (2,153) (8,166) (1,677) 3,168
----------- ----------- ----------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase and retirement of shares........................ 0 0 (22,250) 0 0
Issuance of shares....................................... 0 0 17,609 0 0
Expenses related to capital transactions................. 0 0 (2,184) 0 0
Principal payments on long-term debt..................... (994) (3,251) (5,328) (1,197) (4,267)
Proceeds from issuance of long-term debt................. 2,535 4,579 0 0 0
Proceeds from issuance of long-term debt to
stockholders.............................................. 0 0 6,641 0 0
Proceeds from term loan.................................. 0 0 1,000 0 0
Revolving loan borrowings and repayments, net............ 0 0 12,140 0 5,421
Borrowings (repayments) of short-term debt, net.......... (172) (2,179) 0 5,579 0
----------- ----------- ----------- -------- ---------
Net cash provided by (used in) financing
activities................................................ 1,369 (851) 7,628 4,382 1,154
----------- ----------- ----------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... 47 194 (696) 312 5
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......... 486 533 727 727 31
----------- ----------- ----------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................ $ 533 $ 727 $ 31 $1,039 $ 36
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ 327 $ 612 $ 1,038 $ 471 $ 632
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
Income taxes, net of refunds........................... $ 1,147 $ 1,500 $ 2,144 $1,345 $ 703
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
Issuance of debt (including unamortized debt discount) to
stockholders for the purchase of shares................ $ 0 $ 0 $13,051 $ 0 $ 0
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
Issuance of stock as compensation related to capital
transactions.............................................. $ 0 $ 0 $ 322 $ 0 $ 0
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
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.
Unaudited Interim Financial Statements
In the opinion of management, the unaudited consolidated balance sheet as of
August 3, 1996, and the unaudited consolidated statements of operations and cash
flows for the twenty-six week periods ended July 29, 1995 and August 3, 1996,
reflect all adjustments (which include only normal recurring adjustments)
necessary to present fairly the information set forth therein. The results of
operations for interim periods are not necessarily indicative of results for the
full year as the Company's business is seasonal. Typically, sales and net income
from operations are highest during the fourth fiscal quarter.
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.
F-7
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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 long-term debt instruments 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.
Net Income Per Share
Net income 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
net income 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 described in Note 10.
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.
Accounting for the Impairment of Long-Lived Assets
During 1995, Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, was issued. The new standard requires all businesses to
recognize an impairment loss on a long-lived asset as a charge to current income
when certain events or changes in circumstances indicate that the carrying value
of the asset may not be recoverable. The Company adopted the new standard
effective Febuary 4, 1996 with no significant impact on its financial position
or results of operations (unaudited).
Accounting for Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, allows companies to
continue to record compensation cost under Accounting Principles Board Opinion
("APB") No. 25 or to record compensation cost based on the fair value of stock
based awards. Management currently anticipates that it will
F-8
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
continue using its current accounting policy under APB No. 25; and as a result,
adoption of SFAS No. 123 will not affect the financial condition or results of
operations of the Company. SFAS No. 123 does, however, require certain pro forma
disclosures reflecting what compensation cost would have been if the fair value
based method of recording compensation expense for stock-based compensation had
been adopted. The disclosure rules under SFAS No. 123 will be adopted by the
Company in fiscal 1997.
Prior Year Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
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 in Note 10) of common stock for $1.00 per share with ($6.10 per
share after giving retroactive effect to a 1-for-6.1 reverse stock split
discussed in Note 10) 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 retroactive effect to the
1-for-6.1 reverse stock split discussed in Note 10) of common stock at $1.00
per share ($6.10 per share after giving retroactive effect to a 1-for-6.1
reverse stock split discussed in Note 10) 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 have reduced paid-in
capital.
All references in the financial statements to weighted average shares
outstanding, net income per share, and stock options have been restated to
reflect the above stock splits.
F-9
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3, AUGUST 3,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revolving loan agreement.................................. $ 0 $12,140,000 $17,561,000
Term loan agreement, due November 1997, unsecured......... 0 1,000,000 1,000,000
Subordinated notes payable to stockholders, unsecured,
12%, due November 2002, interest payable quarterly,
beginning November 1, 1996.............................. 0 16,000,000 16,000,000
Senior subordinated bridge notes payable to stockholders,
unsecured, 12%, due November 2000, interest payable
quarterly................................................. 0 4,253,000 0
Revolving convertible term loan........................... 4,580,000 0 0
Bank notes payable, unsecured, principal and interest due
quarterly, variable rates, 9% to 9.5% at January 28,
1995...................................................... 748,000 0 0
Unamortized debt discount................................. 0 (1,481,000) (1,413,000)
----------- ----------- -----------
5,328,000 31,912,000 33,148,000
Less current maturities................................... 420,000 0 0
----------- ----------- -----------
$ 4,908,000 $31,912,000 $33,148,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
At February 3, 1996 and August 3, 1996 (unaudited), the Company maintained a
secured revolving loan agreement totaling $25,000,000 which expires November
2000. Amounts available and secured under the loan agreement are based on levels
of the Company's accounts receivable and inventories. Based on the agreement,
the Company may borrow amounts against a Base Rate or a LIBOR Rate, as defined
in the agreement. Base Rate loans have no specified maturity date and interest
on the loans is payable monthly. LIBOR Rate loans have specified interest
periods (30, 60, 90, or 180 days) attached to the loan with the maturity date
being the date principal and interest are due. As amounts under the loan
agreement do not have to be repaid until the expiring date of November 2000, the
full amount outstanding is classified as long-term debt. The amounts outstanding
under the revolving loan agreement are as follows:
<TABLE>
<CAPTION>
FEBRUARY 3, AUGUST 3,
1996 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revolving loan agreement:
Base Rate loans, 8.75% and 8.50% (unaudited)...... $ 2,140,000 $ 7,561,000
LIBOR Rate loans, 7.89% and 7.80% (unaudited)..... 10,000,000 10,000,000
----------- -----------
$12,140,000 $17,561,000
----------- -----------
----------- -----------
</TABLE>
The Company's term loan also allows the Company to specify the interest rate
against which amounts are borrowed, the Base Rate or LIBOR Rate. At February 3,
1996 and August 3, 1996, the full amount of the term loan was borrowed against
the LIBOR Rate which was 9.45% and 7.77% (unaudited), respectively.
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. In January 1996, the Company issued
F-10
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT--(CONTINUED)
$128,000 of additional notes as satisfaction for interest on the Company's
bridge notes. A portion of the proceeds of these borrowings was utilized to
retire existing debt.
The Company's debt agreements contain certain restrictive covenants common
to such agreements. The Company was in compliance, or had received a
noncompliance waiver for fiscal year 1996, with respect to all of its covenants
at February 3, 1996. The Company was in compliance with respect to all of its
covenants at August 3, 1996 (unaudited). In addition, the revolving loan
agreement prohibits the Company from declaring, paying, or making any dividend
or distribution on its common stock other than dividends or distributions
payable in stock.
Long-term debt contractually matures in each of the next five fiscal years
as follows: $0 in 1997, $1,000,000 in 1998, $0 in 1999, $0 in 2000, $16,393,000
in 2001, and $16,000,000 thereafter. However, the senior subordinated bridge
notes ($4,253,000) were repaid in advance during the twenty-six week period
ended August 3, 1996 (unaudited).
During fiscal 1995 and the majority of fiscal 1996, the Company maintained
working capital lines of credit under which the average borrowings outstanding
were $4,009,000 and $5,200,0000, and the maximum borrowings outstanding were
$6,620,000 and $6,697,000 in fiscal 1995 and 1996, respectively. The weighted
average interest rate was approximately 7.35% and 9.0% in fiscal 1995 and 1996,
respectively. In addition, during fiscal 1995, the Company also borrowed funds
to meet working capital needs from a related party. The average amount of
borrowings outstanding under these loans during fiscal 1995 was $120,000, the
maximum amount outstanding was $810,000, and the weighted average interest rate
was 7.45%. No borrowings related to these former working capital lines of credit
were outstanding at January 28, 1995, February 3, 1996, or August 3, 1996
(unaudited).
The revolving convertible term loan consisted of an unsecured $7,000,000
line of credit supported by a bank note payable program, of which $4,580,000 was
outstanding at January 28, 1995. Borrowings under this loan bear interest at the
bank's prime rate plus .5% (9% at January 28, 1995). All amounts outstanding
under the revolving convertible term loan were repaid upon the establishment of
the new revolving loan agreement in fiscal 1996.
The estimated fair value of the Company's long-term debt was $32,657,000 and
$33,722,000 (unaudited) at February 3, 1996 and August 3, 1996, respectively.
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.
F-11
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LEASES--(CONTINUED)
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of February 3, 1996 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
- ------------------------------------------------
<S> <C>
1997............................................ $ 3,688,000
1998............................................ 3,625,000
1999............................................ 3,306,000
2000............................................ 3,117,000
2001............................................ 2,383,000
Thereafter...................................... 10,789,000
-----------
$26,908,000
-----------
-----------
</TABLE>
Rental expense for all operating leases consisted of the following:
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
----------------------------------------- ------------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1994 1995 1996 1995 1996
----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Minimum rentals................ $ 1,749,000 $ 2,469,000 $ 3,080,000 $1,204,000 $1,610,000
Contingent rentals............. 315,000 392,000 487,000 448,000 702,000
----------- ----------- ----------- ---------- ----------
$ 2,064,000 $ 2,861,000 $ 3,567,000 $1,652,000 $2,312,000
----------- ----------- ----------- ---------- ----------
</TABLE>
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 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 1994, 1995,
and 1996 was $89,000, $108,000, and $165,000, respectively, and was $45,000 and
$47,000 (unaudited) for the twenty-six week periods ended July 29, 1995 and
August 3, 1996, 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
$50,000 in fiscal 1996 and $100,000 for the twenty-six week period ended August
3, 1996 (unaudited).
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
F-12
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. RELATED-PARTY TRANSACTIONS--(CONTINUED)
to $227,000, $256,000, and $95,000 in fiscal years 1994, 1995, and 1996,
respectively, and $54,000 and $0 (unaudited) in the twenty-six week periods
ended July 29, 1995 and August 3, 1996, 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 and $14,587,000 (unaudited) at February 3, 1996 and August 3, 1996,
respectively. Related to these notes, the Company incurred approximately
$620,000 of interest expense in fiscal 1996, 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. For the twenty-six
week period ended August 3, 1996, the Company incurred approximately $960,000
(unaudited) of interest expense related to these notes.
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 10) of
common stock with an aggregate value of approximately $322,000. These costs were
recorded as a reduction to paid-in captial.
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 $27,000 in fiscal 1996, and no excess rentals were
paid in fiscal 1996. Future minimum lease payments under this noncancelable
sublease aggregate $2,369,000.
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 twenty-six week period ended August 3, 1996.
On August 1, 1996, the Company entered into an agreement with a minority
shareholder which provides 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 (unaudited).
7. INCOME TAXES
A summary of the components of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
----------------------------------------- ---------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1994 1995 1996 1995 1996
----------- ----------- ----------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal:
Current.......................... $ 799,000 $ 1,553,000 $ 1,476,000 $823,000 $ 561,000
Deferred......................... 19,000 (237,000) (126,000) (102,000) (104,000)
----------- ----------- ----------- -------- ---------
818,000 1,316,000 1,350,000 721,000 457,000
----------- ----------- ----------- -------- ---------
State:
Current.......................... 100,000 192,000 178,000 103,000 69,000
Deferred......................... 2,000 (29,000) (14,000) (13,000) (12,000)
----------- ----------- ----------- -------- ---------
102,000 163,000 164,000 90,000 57,000
----------- ----------- ----------- -------- ---------
Provision for income taxes......... $ 920,000 $ 1,479,000 $ 1,514,000 $811,000 $ 514,000
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
</TABLE>
F-13
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES--(CONTINUED)
The provision for income taxes differs from the amounts computed by applying
federal statutory rates due to the following:
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
----------------------------------------- ---------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1994 1995 1996 1995 1996
----------- ----------- ----------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax provision computed at the
federal statutory rate (34%)....... $ 812,000 $ 1,315,000 $ 1,345,000 $721,000 $ 455,000
Effect of state income taxes, net
of benefits...................... 66,000 127,000 118,000 59,000 44,000
Other.............................. 42,000 37,000 51,000 31,000 15,000
----------- ----------- ----------- -------- ---------
$ 920,000 $ 1,479,000 $ 1,514,000 $811,000 $ 514,000
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
</TABLE>
Temporary differences which create deferred tax assets are detailed below:
<TABLE>
<CAPTION>
JANUARY 28, 1995 FEBRUARY 3, 1996 AUGUST 3, 1996
-------------------- -------------------- --------------------
CURRENT NONCURRENT CURRENT NONCURRENT CURRENT NONCURRENT
-------- ---------- -------- ---------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Depreciation........................... $ 0 $296,000 $ 0 $308,000 $ 0 $331,000
Inventory.............................. 253,000 0 371,000 0 321,000 0
Accruals............................... 147,000 0 153,000 0 296,000 0
Other.................................. 10,000 0 14,000 0 14,000 0
-------- ---------- -------- ---------- -------- ----------
410,000 296,000 538,000 308,000 631,000 331,000
Valuation allowance.................... 0 0 0 0 0 0
-------- ---------- -------- ---------- -------- ----------
Deferred tax asset, net................ $410,000 $296,000 $538,000 $308,000 $631,000 $331,000
-------- ---------- -------- ---------- -------- ----------
-------- ---------- -------- ---------- -------- ----------
</TABLE>
The Company has not recorded a valuation allowance for deferred tax assets
as realization is considered more likely than not.
8. STOCK OPTIONS AND STOCK PURCHASE PLANS
Stock Options
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. The difference in the total
exercise price of the options and the estimated fair value at the date of the
grant is recorded as compensation expense over the vesting period. As of
February 3, 1996, options for all 66,352 shares were outstanding at that date.
The weighted average exercise price of the options granted in fiscal 1996 was
$4.49 per share. 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.
Subsequent to February 3, 1996, 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. The difference in
F-14
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. STOCK OPTIONS AND STOCK PURCHASE PLANS--(CONTINUED)
the total exercise price of the options and the estimated fair value at the date
of the grant is recorded as compensation expense over the vesting period. As of
September 13, 1996, a total of 193,157 shares of the Company's authorized and
unissued common stock were reserved for future grants under the 1996 Option
Plan, and options for 45,409 shares were outstanding at that date. The exercise
price of the options outstanding under the 1996 Option Plan was $6.10 per share.
Options outstanding become exercisable 20% at the end of each of the following
five successive years. Effective upon Closing of the Initial Public Offering
described in Note 11, grants of options to purchase 32,787 shares of Common
Stock at a price equal to the public offering price will be made under the 1996
Option Plan (unaudited).
On August 1, 1996, the Company granted options pursuant to the agreement
discussed in Note 6 for 70,820 shares which are exercisable at $8.48 per share,
and become exercisable six months after, and will expire no later than nine
months after, the Closing of the Initial Public Offering described in Note 11.
The Company recorded compensation expense of $462,000 related to these options
in the twenty-six week period ended August 3, 1996 (unaudited).
Stock Purchase Plans
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 (unaudited).
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.
10. SUBSEQUENT EVENTS
On September 13, 1996, the Board of Directors approved a 1-for-6.1 reverse
stock split of the Company's Common Stock. All net income per share, weighted
average shares outstanding, stock options, and stock option per share amounts
have been retroactively restated for all periods presented to reflect this
reverse stock split.
In addition, the Board of Directors approved a plan of reorganization which
includes (i) reincorporation of the Company in the state of Delaware prior to
the closing of the offering, (ii) a decrease in the number of authorized shares
of common stock from 50,000,000 to 12,000,000 shares, and (iii) the
authorization of 1,000,000 shares of preferred stock, par value $.01 per share
(unaudited).
F-15
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INITIAL PUBLIC OFFERING (UNAUDITED)
The Company is proceeding with the Offering of 2,000,000 shares of common
stock at an initial public price of $15 per share. The estimated net proceeds to
the Company of $26,900,000 will be used to repay the subordinated notes payable
to stockholders and approximately $1,500,000 accrued interest thereon, and to
repay the term loan and accrued interest thereon, with the balance to be used to
reduce borrowings on the revolving loan agreement.
Supplemental net income per share before extraordinary item is calculated by
dividing net income after adjustment for applicable interest expense ($741,000
and $1,457,000 for the fiscal year ended February 3, 1996 and the twenty-six
week period ended August 3, 1996, respectively) by the adjusted number of
weighted average shares outstanding (7,838,267 shares and 5,938,224 shares at
February 3, 1996 and August 3, 1996, respectively) after giving effect to the
estimated number of shares that would be required to be sold at an assumed
initial public offering price of $15 per share to repay $26,900,000 of debt
(unaudited). Supplemental net income per share before an extraordinary item of
approximately $1,114,000 (to reflect the expense related to the write-off of
unamortized debt discount and debt issuance costs, net of taxes) for the fiscal
year ended February 3, 1996 and the twenty-six week period ended August 3, 1996
was $.41 and $.38 (unaudited), respectively. Supplemental net income per share
after an extraordinary item of approximately $1,114,000 (to reflect the expense
related to the write-off of unamortized debt discount and debt issuance costs,
net of taxes) for the fiscal year ended February 3, 1996 and the twenty-six week
period ended August 3, 1996 was $.26 and $.20 (unaudited), respectively.
F-16
<PAGE>
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN 2,000,000 SHARES
CONNECTION WITH THE OFFER CONTAINED
HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES [HIBBETT SPORTS "FOR
OTHER THAN THOSE TO WHICH IT RELATES OR THE REAL SPORT" LOGO]
AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO
WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------- COMMON STOCK
TABLE OF CONTENTS
PAGE
----
Prospectus Summary................... 3
Risk Factors......................... 8
Use of Proceeds...................... 13
Capitalization....................... 13
Dividend Policy...................... 14
Dilution............................. 14
Selected Consolidated Financial and ----------
Operating Data..................... 15
Management's Discussion and Analysis PROSPECTUS
of Financial Condition and Results , 1996
of Operations...................... 17
Business............................. 23 ----------
Management........................... 32
Principal Shareholders............... 39
Certain Transactions................. 40
Shares Eligible for Future Sale...... 43
Description of Capital Stock......... 44
Underwriting......................... 47
Legal Matters........................ 48
Experts.............................. 48
Additional Information............... 48
Index to Consolidated Financial
Statements.........................F-1 SMITH BARNEY INC.
-------------------
MONTGOMERY SECURITIES
UNTIL , 1996 (25 DAYS AFTER
THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE
COMMON STOCK, WHETHER OR NOT THE ROBINSON-HUMPHREY
PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. COMPANY, INC.
THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ---------------------------------------- --------------------------------------
- ---------------------------------------- --------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
[Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee............................................... $ 11,897
NASD Filing Fee................................................ 3,950
NASDAQ/National Market filing fee.............................. 32,086
Transfer Agent's Fees.......................................... 5,000
Printing and Engraving......................................... 165,000
Legal Fees..................................................... 500,000
Accounting Fees................................................ 100,000
Blue Sky Fees.................................................. 15,000
Miscellaneous.................................................. 167,067
----------
Total...................................................... $1,000,000
----------
----------
</TABLE>
Each of the amounts set forth above, other than the Registration Fee, NASD
Filing Fee and NASDAQ/National Market filing fee, is an estimate.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Act permits the Registrant
to indemnify officers, directors or employees against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement in connection
with legal proceedings "if [as to any officer, director or employee] he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the corporation, and, with respect to any criminal act or
proceeding, had no reasonable cause to believe his conduct was unlawful",
provided that with respect to actions by, or in the right of the corporation
against, such individuals, indemnification is not permitted as to any matter as
to which such person "shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation, unless, and only
to the extent that, the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper."
Individuals who are successful in the defense of such action are entitled to
indemnification against expenses reasonably incurred in connection therewith.
The By-Laws of the Registrant require the Registrant to indemnify directors
and officers against liabilities which they may incur under the circumstances
set forth in the preceding paragraph.
The Registrant is in the process of obtaining standard policies of insurance
under which coverage will be provided (a) to its directors and officers against
loss arising from claims made by reason of breach of duty or other wrongful act,
and (b) to the Registrant with respect to payments which may be made by the
Registrant to such officers and directors pursuant to the above indemnification
provision or otherwise as a matter of law.
The proposed form of Underwriting Agreement filed as Exhibit 1 to this
Registration Statement provides for indemnification of directors and officers of
the Registrant by the underwriters against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since June 1, 1993, the Registrant has sold the following securities without
registration under the Securities Act of 1933, as amended (the "Act"):
1. Immediately prior to the Recapitalization, in consideration for his
assistance in arranging the Recapitalization, the Company issued to Clyde B.
Anderson 52,855 shares of Common Stock. Section 4(2) of the Act was relied upon
for exemption from the registration requirements.
II-1
<PAGE>
2. On November 1, 1995, as part of the Recapitalization, The SK Equity Fund,
L.P. purchased 2,855,484 shares of Common Stock for $17,418,455 in cash, and
SK Investment Fund, L.P. purchased 31,237 shares of Common Stock for $190,545.
Section 4(2) of the Act was relied upon for exemption from the registration
requirements.
3. Effective as of August 1, 1996 the Company granted to Clyde B. Anderson
options to buy 70,820 shares of Common Stock at an exercise price of $8.48 per
share. The options are exercisable beginning six months after the closing of the
Offering and will expire nine months after the closing of the Offering. Section
4(2) of the Act was relied upon for exemption from the registration
requirements.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- --------------------------------------------------------------------------------
<C> <S>
1** Form of Underwriting Agreement
3.1** Articles of Incorporation of the Registrant, as amended
3.2** Bylaws of the Registrant, as amended
3.3** Form of Certificate of Incorporation of the Registrant
3.4** Form of Bylaws of the Registrant
4.1** Form of Share Certificate
5.1 Opinion of Davis Polk & Wardwell
10.1.1** Loan and Security Agreement dated as of November 1, 1995 between the Registrant,
Hibbett Team Sales, Inc. and Heller Financial, Inc. (the "Heller Loan
Agreement")
10.1.2** Letter from Heller Financial, Inc. to the Registrant dated February 12, 1996 re:
certain waivers from the Heller Loan Agreement
10.1.3** Waiver by Heller Financial, Inc. dated September 13, 1996
10.2.1** Stockholders Agreement dated as of November 1, 1995 among The SK Equity Fund,
L.P., SK Investment Fund, L.P., the Registrant and certain stockholders of the
Registrant named therein (the "Stockholders Agreement")
10.2.2** Amendment No. 1 to the Stockholders Agreement dated as of June 28, 1996
10.2.3** Form of Amendment No. 2 to the Stockholders Agreement
10.3** Advisory Agreement dated November 1, 1995 between the Registrant and Saunders,
Karp & Co., L.P.
10.4** Employment and Post-Employment Agreement dated as of November 1, 1995 between
the Registrant and Michael J. Newsome
10.5** Letter from the Registrant 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 Registrant, The SK Equity Fund, L.P. and SK
Investment Fund, L.P.
10.7** The Registrant's Stock Option Plan (as amended)
10.8** The Registrant's 1996 Stock Option Plan ("1996 Plan") (as amended)
10.9.1** Lease Agreement dated as of February 12, 1996 between QRS 12-14 (AL), Inc. and
Sports Wholesale, Inc. (the "Lease Agreement")
10.9.2** Landlord's Waiver and Consent re: Lease Agreement dated February 12, 1996 by QRS
12-14 (AL), Inc.
10.10** The Registrant's Employee Stock Purchase Plan
10.11** The Registrant's Outside Director Stock Plan
10.12** Letter from the Registrant to Clyde B. Anderson dated September 13, 1996 re:
Consulting Agreement
11** Statement of Computation of Net Income Per Share
21** List of Registrant's Subsidiaries
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1 to this Registration
Statement)
27** Financial Data Schedule
</TABLE>
- ------------
** Previously filed exhibits are marked by (**).
II-2
<PAGE>
(b) Financial Statement Schedules.
Report of Independent Public Accountants 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 have been omitted because
they are not required under the related instructions or are inapplicable as the
information has been provided in the financial statements or related notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement, certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and persons controlling the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification (other than by policies of insurance) is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 3 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Birmingham, State of Alabama, on the
1st day of October, 1996.
HIBBETT SPORTING GOODS, INC.
By /s/ MICHAEL J. NEWSOME
...................................
Michael J. Newsome
President, Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Principal Executive Officer and October 1, 1996
.......................................... Director
Michael J. Newsome
/s/ SUSAN H. FITZGIBBON Principal Financial Officer, October 1, 1996
.......................................... Controller and Principal
Susan H. Fitzgibbon Accounting Officer
* Director October 1, 1996
..........................................
Clyde B. Anderson
* Director October 1, 1996
..........................................
Thomas A. Saunders, III
* Director October 1, 1996
..........................................
F. Barron Fletcher, III
* Director October 1, 1996
..........................................
John F. Megrue
* Director October 1, 1996
..........................................
Barry H. Feinberg
</TABLE>
*By /s/ SUSAN H. FITZGIBBON
..................................
Susan H. Fitzgibbon
Attorney-in-fact
II-4
<PAGE>
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. (an Alabama
corporation) AND SUBSIDIARIES, included in this registration statement and have
issued our report dated April 2, 1996 (except with respect to the matter
discussed in Note 10 as to which the date is September 13, 1996). 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 II of the registration statement
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
April 2, 1996
S-1
<PAGE>
HIBBETT SPORTING GOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
TWENTY-SIX WEEK
FISCAL YEAR ENDED PERIOD ENDED
----------------------------------------- ---------------------
JANUARY 29, JANUARY 28, FEBRUARY 3, JULY 29, AUGUST 3,
1994 1995 1996 1995 1996
----------- ----------- ----------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance of allowance for doubtful
accounts at beginning of period.... $13,000 $19,000 $ 61,000 $ 61,000 $ 86,000
Charged to costs and expenses...... 14,000 43,000 62,000 9,000 24,000
Write-offs net of recoveries....... (8,000) (1,000) (37,000) (16,000) (5,000)
----------- ----------- ----------- -------- ---------
Balance of allowance for doubtful
accounts at end of period.......... $19,000 $61,000 $ 86,000 $ 54,000 $ 105,000
----------- ----------- ----------- -------- ---------
----------- ----------- ----------- -------- ---------
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C>
1** Form of Underwriting Agreement
3.1** Articles of Incorporation of the Registrant, as amended
3.2** Bylaws of the Registrant, as amended
3.3** Form of Certificate of Incorporation of the Registrant
3.4** Form of Bylaws of the Registrant
4.1** Form of Share Certificate
5.1 Opinion of Davis Polk & Wardwell
10.1.1** Loan and Security Agreement dated as of November 1, 1995 between the Registrant,
Hibbett Team Sales, Inc. and Heller Financial, Inc. (the "Heller Loan Agreement")
10.1.2** Letter from Heller Financial, Inc. to the Registrant dated February 12, 1996 re:
certain waivers from the Heller Loan Agreement
10.1.3** Waiver by Heller Financial, Inc. dated September 13, 1996
10.2.1** Stockholders Agreement dated as of November 1, 1995 among The SK Equity Fund,
L.P., SK Investment Fund, L.P., the Registrant and certain stockholders of the
Registrant named therein (the "Stockholders Agreement")
10.2.2** Amendment No. 1 to the Stockholders Agreement dated as of June 28, 1996
10.2.3** Form of Amendment No. 2 to the Stockholders Agreement
10.3** Advisory Agreement dated November 1, 1995 between the Registrant and Saunders,
Karp & Co., L.P.
10.4** Employment and Post-Employment Agreement dated as of November 1, 1995 between the
Registrant and Michael J. Newsome
10.5** Letter from the Registrant 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 Registrant, The SK Equity Fund, L.P.
and SK Investment Fund, L.P.
10.7** The Registrant's Stock Option Plan (as amended)
10.8** The Registrant's 1996 Stock Option Plan ("1996 Plan") (as amended)
10.9.1** Lease Agreement dated as of February 12, 1996 between QRS 12-14 (AL), Inc. and
Sports Wholesale, Inc. (the "Lease Agreement")
10.9.2** Landlord's Waiver and Consent re: Lease Agreement dated February 12, 1996 by
QRS 12-14 (AL), Inc.
10.10** The Registrant's Employee Stock Purchase Plan
10.11** The Registrant's Outside Director Stock Plan
10.12** Letter from the Registrant to Clyde B. Anderson dated September 13, 1996 re:
Consulting Agreement
11** Statement of Computation of Net Income Per Share
21** List of Registrant's Subsidiaries
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5.1 to this Registration
Statement)
27** Financial Data Schedule
</TABLE>
- ------------
** Previously filed exhibits are marked by (**).
EXHIBIT 5.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
212-450-4000
October 1, 1996
Hibbett Sporting Goods, Inc.
451 Industrial Lane
Birmingham, Alabama 35211
Ladies and Gentlemen:
Hibbett Sporting Goods, Inc., an Alabama corporation (the "Company"),
has filed a Registration Statement on Form S-1, Registration No. 333-07023 (the
"Registration Statement"), with the Securities and Exchange Commission pursuant
to the Securities Act of 1933, as amended, for the registration of 2,300,000
shares of the Company's common stock (the "Shares"), $.01 par value per share,
including 300,000 shares subject to the underwriters' over-allotment option, as
described in the Registration Statement. The Company plans to reincorporate in
Delaware prior to the time the Registration Statement is declared effective
under the Securities Act of 1933, as amended.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments as we have deemed necessary for the
purposes of rendering this opinion.
Based on the foregoing, we are of the opinion that when the Company has
reincorporated in Delaware, when the price at which the Shares to be sold has
been approved by or on behalf of the Board of Directors of the Company, and when
the Shares have been duly issued and delivered against payment therefor in
accordance with the terms of the Underwriting Agreement referred to in the
prospectus that is part of the Registration Statement, the Shares will be
validly issued, fully paid and non-assessable.
<PAGE>
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the General Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the related Prospectus.
Very truly yours,
/s/ Davis Polk & Wardwell
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 2, 1996 (except with respect to the matter discussed in Note 10 as
to which the date is September 13, 1996) included in or made a part of this
Registration Statement of Hibbett Sporting Goods, Inc. on Form S-1 (No. 333-
07023) and to the reference to our Firm under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
ARTHUR ANDERSON LLP
Birmingham, Alabama
September 30, 1996
