<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
AMENDMENT NO. 1
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>
DELAWARE 5941 63-1074067
(State or other jurisdiction of (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
incorporation or organization) CLASSIFICATION 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
VICE PRESIDENT AND 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>
STEVEN DELLA ROCCA BRUCE S. MENDELSOHN
LATHAM & WATKINS AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
885 THIRD AVENUE, SUITE 1000 1333 NEW HAMPSHIRE AVENUE, N.W., SUITE 400
NEW YORK, NEW YORK 10022 WASHINGTON, D.C. 20036
(212) 906-1200 (202) 887-4000
</TABLE>
------------------------------
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement of
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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>
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1997
P R O S P E C T U S
1,133,197 SHARES
[LOGO]
HIBBETT SPORTING GOODS, INC.
COMMON STOCK
---------
Of the 1,133,197 shares of Common Stock, par value $.01 per share (the
"Common Stock"), being offered hereby (the "Offering"), 200,000 shares are being
sold by Hibbett Sporting Goods, Inc. ("Hibbett" or the "Company") and 933,197
shares are being sold by the Selling Stockholders (as defined herein). See
"Principal and Selling Stockholders." The Company will not receive any of the
proceeds from the sale of Common Stock by the Selling Stockholders.
The Common Stock is traded on the Nasdaq National Market under the symbol
"HIBB." On October 7, 1997 the last reported sale price of the Common Stock on
the Nasdaq National Market was $29.50 per share. See "Price Range of Common
Stock."
--------------
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.
<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS PROCEEDS TO PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS (1) COMPANY(2) SELLING STOCKHOLDERS
<S> <C> <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 $500,000 payable by
the Company.
(3) Certain Selling Stockholders have granted to the Underwriters a 30-day
option to purchase up to 169,980 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 Selling Stockholders 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
, 1997 at the offices of Smith Barney Inc., 333 West 34th Street, New
York, NY 10001.
--------------
SMITH BARNEY INC.
NATIONSBANC MONTGOMERY SECURITIES, INC.
THE ROBINSON-HUMPHREY COMPANY
BANCAMERICA ROBERTSON STEPHENS
, 1997
<PAGE>
[Inside Front Cover: The Company's logo and color pictures of the Company's
stores]
---------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVERALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS, AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
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 YEAR 1993 REFER TO THE FISCAL YEAR 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 15, 1997.
UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS' OVERALLOTMENT OPTION IS NOT EXERCISED.
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 primarily in the southeastern United States. Hibbett's stores
offer a broad assortment of quality athletic equipment, footwear and apparel at
competitive prices with superior customer service. The Company's merchandise
assortment features a core selection of brand name merchandise emphasizing team
and individual sports complemented by a selection of localized apparel and
accessories designed to appeal to a wide range of customers within each market.
The Company believes that its stores are among the primary retail distribution
alternatives for brand name vendors that seek to reach Hibbett's target markets.
Hibbett has received the Nike Retailer Excellence Award for the Southeast region
for nine consecutive years based on its performance in the full-line sporting
goods category.
The Company operates 96 Hibbett Sports stores as well as nine smaller-format
Sports Addition 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 primarily in enclosed malls as well as
dominant strip centers. 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 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.
3
<PAGE>
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 sophisticated information and distribution systems are
expected to facilitate the Company's future growth. The Company's headquarters
and distribution center 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's expansion strategy is to continue to open new Hibbett Sports
stores in its target markets. The Company plans to open approximately 32 Hibbett
Sports stores in fiscal 1998 (19 have been opened to date) and at least 42
Hibbett Sports stores in fiscal 1999. The Company also opened an additional
Sports Addition store in July 1997. The Company anticipates that it will
selectively open Sports Addition 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 24.2% compound annual growth rate to $86.4
million in fiscal 1997, and operating income has increased at a 28.0% compound
annual growth rate to $7.2 million in fiscal 1997. The Company increased its
store base from 39 stores at the end of fiscal 1993 to 109 stores as of
September 15, 1997. The Company's net sales have increased 28.8% to $86.4
million in fiscal 1997 and 34.7% to $52.6 million in the first twenty-six weeks
of fiscal 1998 versus the prior periods. The Company's net sales growth has been
driven by new store openings and increases in comparable store net sales. The
Company opened 22 new stores in fiscal 1997 and 17 new stores in the first
twenty-six weeks of fiscal 1998. The Company achieved comparable store net sales
increases of 10.2% in fiscal 1997 and 8.8% during the first twenty-six weeks of
fiscal 1998.
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
Company.............................. 200,000 shares
Selling Stockholders................. 933,197 shares (1)
--------
Total.............................. 1,133,197 shares
Common Stock to be outstanding after
the Offering......................... 6,392,330 shares of Common Stock(1)
The net proceeds to the Company from the Offering
will be used to fund future growth and for working
capital and general corporate purposes. The Company
will not receive any of the proceeds from the sale
of the shares of Common Stock offered by the
Selling Stockholders. See "Use of Proceeds" and
"Principal and Selling Stockholders."
Use of Proceeds........................
Nasdaq National Market symbol.......... "HIBB"
</TABLE>
- ------------------------
(1) Excludes 68,676 shares of Common Stock that are issuable under outstanding
options that are currently exercisable or will become exercisable within 90
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
-------------------------------------------------------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1993 1994(1) 1995 1996 1997 1996 1997
----------- ----------- ----------- ------------ ----------- --------- ---------
<CAPTION>
(52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $36,366 $40,119 $52,266 $67,077 $86,401 $39,019 $52,558
Gross profit.................. 11,368 12,388 16,041 20,435 26,384 11,747 15,877
Operating income.............. 2,693 2,877 4,522 5,642 7,224(2) 3,154(2) 3,892
Interest expense (income),
net......................... 325 488 654 1,685(3) 2,642(3) 1,814(3) (11)(3)
Income before provision for
income taxes................ 2,368 2,389 3,868 3,957 4,582 1,340 3,903
Extraordinary item, net....... -- -- -- -- (1,093)(4) -- --
Net income.................... 1,462(5) 1,469 2,389 2,443 1,737 826 2,410
Net income per share.......... $ .22(5) $ .23 $ .37 $ .42 $ .37 $ .21 $ .38
Weighted average shares
outstanding................. 6,505 6,505 6,505 5,838(3) 4,666(3) 3,938(3) 6,264(3)
SELECTED OPERATING DATA:
Number of stores open at end
of period:
Hibbett Sports.............. 33 41 52 56 77 62 93
Sports & Co................. 0 0 0 3 4 3 4
Sports Addition............. 6 8 8 8 8 8 9
----------- ----------- ----------- ------------ ----------- --------- ---------
Total..................... 39 49 60 67 89 73 106
----------- ----------- ----------- ------------ ----------- --------- ---------
----------- ----------- ----------- ------------ ----------- --------- ---------
Net sales growth.............. 13.5% 10.3% 30.3% 28.3% 28.8% 32.9% 34.7%
Comparable store net sales
increase (decrease)(6)...... 10.6% (0.3)% 15.6% 6.2% 10.2% 13.9% 8.8%
</TABLE>
<TABLE>
<CAPTION>
AT AUGUST 2, 1997
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED (7)
--------- ---------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................................... $ 19,641 $ 24,042
Total assets......................................................................................... 49,994 54,395
Total debt........................................................................................... 704 0
Stockholders' investment............................................................................. 29,789 34,894
</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 the Recapitalization (as defined herein) of
the Company and a change in controlling ownership of the common stock
outstanding. 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. In October 1996, the
Company completed its initial public offering of 2,300,000 shares of common
stock at the initial public offering price of $16 per share. The net
proceeds to the Company of $32,868,000 were used to repay long-term debt and
accrued interest thereon, incurred as a result of the Recapitalization.
6
<PAGE>
(4) In connection with the initial public offering, a substantial portion of the
Company's long-term debt was repaid, resulting in a loss of $1,093,000 (net
of applicable tax benefit of $677,000). The loss was classified as an
extraordinary item.
(5) 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 year ended January 31, 1993 gives effect to the
application of pro forma income taxes that would have been reported had the
Company been a taxable corporation for federal and state income tax purposes
for such fiscal year.
(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) As adjusted to give effect to the sale by the Company of 200,000 shares of
Common Stock offered hereby at an assumed public offering price of $29.50
per share (the last reported sale price on October 7, 1997), less the
estimated underwriting discount and offering expenses payable by the
Company. See "Use of Proceeds" and "Capitalization."
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. CERTAIN INFORMATION SET FORTH IN THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS, AS SUCH TERM IS DEFINED IN SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). CERTAIN
FACTORS DISCUSSED HEREIN COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE IN THE FORWARD-LOOKING STATEMENTS.
EXPANSION PLANS
Since January 29, 1994, Hibbett has substantially increased its store base,
growing from 49 stores to 109 stores as of September 15, 1997. The Company plans
to open approximately 32 Hibbett Sports stores in fiscal 1998 (19 have been
opened to date) and at least 42 Hibbett Sports stores in fiscal 1999. The
Company also opened an additional Sports Addition store in July 1997. The
Company's continued growth 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 are incurred as a result of new store openings.
See "--Retail Industry; Seasonality and Quarterly Fluctuations," "--Quarterly
Fluctuations" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview."
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 1997, the Company's largest
vendor, Nike, represented approximately 40% of its purchases. The loss of key
8
<PAGE>
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
markets. However, the Company believes that the competitive environment for
sporting goods remains different in small to mid-sized markets where retail
demand may not support larger format stores. In smaller markets such as those
targeted by the Company's Hibbett Sports format, national chains compete by
focusing on a specialty category like athletic footwear in the case of Foot
Locker and Foot Action. Accordingly, many of the stores with which the Company
competes are units of national chains that have substantially greater financial
and other resources than the Company. Hibbett Sports format stores compete with
national chains that focus on athletic footwear, local sporting goods stores,
department and discount stores and traditional shoe stores. Although its Hibbett
Sports format may face competition from a variety of competitors, the Company
believes that its Hibbett Sports format is able to compete effectively by
distinguishing itself as a full-line sporting goods store 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. superstores may carry similiar 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.
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
9
<PAGE>
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. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Quarterly Fluctuations."
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 and Chief Operating
Officer, Susan H. Fitzgibbon, Vice President and 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.
See "Management."
POTENTIAL ACCELERATION OF THE COMPANY'S REVOLVING CREDIT FACILITY
Upon completion of the Offering, The SK Equity Fund, L.P. and SK Investment
Fund, L.P. (collectively, the "Funds") will own approximately 38.9% of the
outstanding Common Stock, and the Anderson Stockholders (as defined herein) will
own approximately 4.7% of the outstanding Common Stock. See "Principal and
Selling Stockholders." A material reduction in the collective ownership interest
of the Funds and the Anderson Stockholders may in certain circumstances lead to
the acceleration of the Company's Revolving Credit Facility, requiring
refinancing or waiver. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
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
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
10
<PAGE>
may have rights senior to those of the Common Stock. See "Description of Capital
Stock--Preferred Stock." The Company is also 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 6,392,330 shares of
Common Stock outstanding (assuming no exercise of outstanding options). Of these
shares, the 1,133,197 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"). The Company and all of
its officers and directors and the Selling Stockholders have agreed that, for a
period of 90 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 the termination of such 90-day period,
2,890,671 shares of Common Stock may be sold only if registered under the Act or
pursuant to certain volume and other limitations under Rule 144 applicable to
affiliates or pursuant to another exemption from registration under the Act. In
addition, holders of 2,880,656 shares are entitled to piggyback registration
rights, of which 2,785,642 shares are also entitled to demand registration
rights. See "Shares Eligible for Future Sale" and "Underwriting."
POSSIBLE VOLATILITY OF STOCK PRICE
The Common Stock is quoted on the Nasdaq National Market. The market price
of the Common Stock could be subject to significant fluctuations in response to
operating results and other factors. In addition, the stock market in recent
years has experienced extreme price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of companies. These
fluctuations, as well as general economic and market conditions, may adversely
affect the market price of the Common Stock. In addition, the absence or
discontinuance of the listing of the Common Stock on the Nasdaq National Market
could adversely affect the liquidity and price of the Common Stock. See "Price
Range of Common Stock."
11
<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 $5.1 million. The
Company intends to use such net proceeds to fund future growth and for working
capital and general corporate purposes. The Company will not receive any of the
proceeds from the sale of the shares of Common Stock offered by the Selling
Stockholders. See "Principal and Selling Stockholders."
CAPITALIZATION
The following table sets forth the Company's capitalization as of August 2,
1997 and as adjusted to give effect to the sale by the Company of 200,000 shares
of Common Stock offered hereby and application of the estimated net proceeds
therefrom as described in "Use of Proceeds."
<TABLE>
<CAPTION>
AUGUST 2, 1997
(IN THOUSANDS)
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(1)
---------- --------------
<CAPTION>
<S> <C> <C>
LONG-TERM DEBT:
Revolving Credit Facility............................................................. $ 704 $ 0
---------- --------------
STOCKHOLDERS' INVESTMENT:
Preferred Stock, par value $.01 per share, 1,000,000 shares authorized, no shares
outstanding......................................................................... 0 0
Common Stock, par value $.01 per share, 12,000,000 shares authorized, 6,192,330 shares
issued and outstanding, 6,392,330 as adjusted....................................... 62 64
Paid-in capital....................................................................... 48,840 53,943
Retained earnings (deficit)........................................................... (19,113) (19,113)
---------- --------------
Total stockholders' investment...................................................... 29,789 34,894
---------- --------------
TOTAL CAPITALIZATION................................................................ $ 30,493 $ 34,894
---------- --------------
---------- --------------
</TABLE>
- ------------------------
(1) 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.
DIVIDEND POLICY
Since its initial public offering, the Company has not declared or paid any
dividends on its Common Stock. 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. Any future decision to declare or pay dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operation, capital requirements and such other
factors as the Board of Directors deems relevant.
12
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is presently traded on the Nasdaq National Market
under the symbol "HIBB" and has been since the initial public offering on
October 11, 1996. The following table sets forth, for the periods indicated, the
high and low sales prices for the Common Stock, as quoted on the Nasdaq National
Market.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED FEBRUARY 1, 1997:
Third Quarter (from October 11, 1996)................................... $21 1/2 $19 1/2
Fourth Quarter.......................................................... 19 1/2 12 1/8
FISCAL YEAR ENDED JANUARY 31, 1998:
First Quarter........................................................... 17 3/4 15
Second Quarter.......................................................... 23 1/2 15
Third Quarter (through October 7, 1997)................................. 30 22
</TABLE>
As of September 15, 1997, there were 49 holders of record of the Company's
Common Stock. On October 7, 1997, the last reported sale price for the Company's
Common Stock on the Nasdaq National Market was $29.50 per share.
13
<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, 1993, January 29, 1994, January 28, 1995,
February 3, 1996, and February 1, 1997 set forth below have been derived from
audited financial statements of the Company, except for the provision for income
taxes, net income and net income per share in fiscal 1993, which is a pro forma
amount as explained in footnote 4. The data for the twenty-six week periods
ended August 3, 1996 and August 2, 1997 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 2, 1997 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
--------------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1993 1994(1) 1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
(52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (UNAUDITED)
(IN THOUSANDS, EXCEPT SELECTED OPERATING AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 36,366 $ 40,119 $ 52,266 $ 67,077 $ 86,401 $ 39,019 $ 52,558
Cost of goods sold, including
warehouse, distribution, and
store occupancy costs.......... 24,998 27,731 36,225 46,642 60,017 27,272 36,681
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit..................... 11,368 12,388 16,041 20,435 26,384 11,747 15,877
Store operating, selling, and
administrative expenses(2)..... 7,861 8,579 10,453 13,471 17,339(3) 7,767(3) 10,912
Depreciation and amortization.... 814 932 1,066 1,322 1,821 826 1,073
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income................. 2,693 2,877 4,522 5,642 7,224 3,154 3,892
Interest expense (income), net... 325 488 654 1,685(4) 2,642(4) 1,814(4) (11)(4)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before provision for
income taxes................... 2,368 2,389 3,868 3,957 4,582 1,340 3,903
Provision for income taxes....... 906(5) 920 1,479 1,514 1,752 514 1,493
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before extraordinary
item........................... 1,462(5) 1,469 2,389 2,443 2,830 826 2,410
Extraordinary item, net.......... -- -- -- -- (1,093)(6) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income....................... $ 1,462(5) $ 1,469 $ 2,389 $ 2,443 $ 1,737 $ 826 $ 2,410
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income per share............. $ .22(5) $ .23 $ .37 $ .42 $ .37 $ .21 $ .38
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted average shares
outstanding.................... 6,505 6,505 6,505 5,838(4) 4,666(4) 3,938(4) 6,264(4)
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
SELECTED OPERATING DATA:
Number of stores open at end of
period:
Hibbett Sports................... 33 41 52 56 77 62 93
Sports & Co...................... 0 0 0 3 4 3 4
Sports Addition.................. 6 8 8 8 8 8 9
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total.......................... 39 49 60 67 89 73 106
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net sales growth................. 13.5% 10.3% 30.3% 28.3% 28.8% 32.9% 34.7%
Comparable store net sales
increase (decrease)(7)......... 10.6% (0.3)% 15.6% 6.2% 10.2% 13.9% 8.8%
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AS OF
-----------------------------------------------------------------------------
JANUARY 31, JANUARY 29, JANUARY 28, FEBRUARY 3, FEBRUARY 1,
1993 1994(1) 1995 1996 1997
----------- ----------- ----------- ----------- -----------
AUGUST 2,
1997
------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 2,097 $ 4,030 $ 7,459 $ 10,907 $ 16,280 $ 19,641
Total assets................................. 14,569 17,507 22,787 36,702 40,358 49,994
Total debt................................... 4,810 6,179 5,328 31,912(4) -- (4) 704
Stockholders' investment (deficit)........... 4,402 5,871 8,259 (8,093)(4) 26,512(4) 29,789
</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 management fees. See "Certain Transactions--Advisory Agreements"
and Note 6 of Notes to Consolidated Financial Statements.
(3) 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."
(4) 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. In October 1996, the Company completed its initial
public offering of 2,300,000 shares of Common Stock at the initial public
offering price of $16 per share. The net proceeds to the Company of
$32,868,000 were used to repay long-term debt and accrued interest thereon,
incurred as a result of the Recapitalization.
(5) 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 year ended January 31, 1993 gives effect to the
application of pro forma income taxes that would have been reported had the
Company been a taxable corporation for federal and state income tax purposes
for such fiscal year.
(6) In connection with the initial public offering, a substantial portion of the
Company's long-term debt was repaid, resulting in a loss of $1,093,000 (net
of applicable tax benefit of $677,000). The loss was classified as an
extraordinary item.
(7) 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.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Hibbett is a rapidly-growing operator of full-line sporting goods stores in
small to mid-sized markets primarily in the southeastern United States. The
Company operates 109 stores in fourteen 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 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 Stockholders
(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"). 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 headquarters
and distribution center were subsequently redeemed in February 1996 from
proceeds of the sale and leaseback of this facility.
In October 1996 the Company completed its initial public offering of
2,300,000 shares of common stock at the initial public offering price of $16 per
share. The net proceeds to the Company of $32,868,000 were used to repay the
Subordinated Notes and accrued interest thereon and the Term Loan and accrued
interest thereon incurred as a result of the Recapitalization, and to reduce
borrowings under the Revolving Loan Agreement.
The Company's expansion strategy is to continue to open new Hibbett Sports
stores in its target markets. The Company plans to open approximately 32 Hibbett
Sports stores in fiscal 1998 (19 have been opened to date) and at least 42
Hibbett Sports stores in fiscal 1999. The Company also opened an additional
Sports Addition store in July 1997.
In fiscal 1996 and fiscal 1997, the Company increased its staffing levels in
finance, merchandising, real estate, distribution and field management to
support its expansion plans. In addition, in January 1996, the Company moved
into its new headquarters and distribution center which has significant
expansion potential to support the Company's growth for the foreseeable future.
While operating margins were impacted in periods in which these incremental
expenses were incurred to support acceleration of the Company's expansion plans
and may be impacted in future periods in which incremental expenses are incurred
as a result of new store openings, 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 February 1, 1997 and January 28, 1995 include 52
weeks of operations. The fiscal year ended February 3, 1996 includes 53 weeks of
operations.
16
<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 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
------------- ------------- ------------- ----------- -----------
<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...... 69.3 69.5 69.5 69.9 69.8
----- ----- ----- ----- -----
Gross profit.................................. 30.7 30.5 30.5 30.1 30.2
Store operating, selling, and administrative
expenses(1)................................. 20.0 20.1 20.1 19.9 20.8
Depreciation and amortization................. 2.0 2.0 2.1 2.1 2.0
----- ----- ----- ----- -----
Operating income.............................. 8.7 8.4 8.3 8.1 7.4
Interest expense (income), net................ 1.3 2.5 3.0 4.7 --
----- ----- ----- ----- -----
Income before provision for income taxes...... 7.4 5.9 5.3 3.4 7.4
Provision for income taxes.................... 2.8 2.3 2.0 1.3 2.8
----- ----- ----- ----- -----
Income before extraordinary item.............. 4.6 3.6 3.3 2.1 4.6
Extraordinary item, net....................... -- -- (1.3) -- --
----- ----- ----- ----- -----
Net income.................................... 4.6% 3.6% 2.0% 2.1% 4.6%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
- ------------------------
(1) Includes management fees. See "Certain Transactions--Advisory Agreements"
and Note 6 of Notes to Consolidated Financial Statements.
TWENTY-SIX WEEKS ENDED AUGUST 2, 1997 COMPARED TO TWENTY-SIX WEEKS ENDED AUGUST
3, 1996
NET SALES. Net sales increased $13.5 million, or 34.7%, to $52.6 million
for the twenty-six weeks ended August 2, 1997, from $39.0 million for the
comparable period in the prior year. This increase is attributable to the
opening of thirty-one Hibbett Sports stores, one Sports & Co. superstore and one
Sports Addition store in the last fifty-two weeks ended August 2, 1997, and an
8.8% increase in comparable store net sales. The increase in comparable store
net sales was due primarily to increased footwear sales and improved inventory
processing at the distribution center. During the twenty-six weeks ended August
2, 1997, the Company opened sixteen Hibbett Sports stores and one Sports
Addition store. New stores and stores not in the comparable store net sales
calculation accounted for $10.7 million of the increase in net sales and
increases in comparable store net sales contributed $2.8 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 the Company's four larger
Sports & Co. superstores or Hibbett Team Sales (as defined herein).
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 $15.9 million, or 30.2% of net sales, in the twenty-six weeks
ended August 2, 1997, as compared to $11.7 million, or 30.1% of net sales, in
the same period of the prior fiscal year. A slight decline in product margin was
offset by improved leveraging of warehouse and distribution costs in the current
year period.
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES. Store operating,
selling and administrative expenses were $10.9 million or 20.8% of net sales,
for the twenty-six weeks ended August 2, 1997, as compared to $7.8 million, or
19.9% of net sales, for the comparable period a year ago. 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
$513,000 pre-tax gain on the sale of the former
17
<PAGE>
headquarters and distribution facility. The net gain was substantially offset by
a one-time pre-tax 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. The increase as a percentage of net sales is primarily
attributable to the costs associated with the opening of seventeen new stores in
the current year period as compared to six stores in the prior year period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization as a
percentage of net sales declined slightly to 2.0% in the twenty-six weeks ended
August 2, 1997 from 2.1% in the prior year due to the increase in net sales.
INTEREST EXPENSE (INCOME), NET. The $1.8 million decrease in interest
expense for the twenty-six weeks ended August 2, 1997 compared to the prior year
period is primarily the result of the repayment of long-term debt incurred as a
result of the Recapitalization (see Note 2 to the Consolidated Financial
Statements) from the proceeds of the initial public offering in October 1996.
FISCAL 1997 COMPARED TO FISCAL 1996
NET SALES. Net sales increased $19.3 million, or 28.8%, to $86.4 million
for the fifty-two weeks ended February 1, 1997, from $67.1 million for the
fifty-three weeks ended February 3, 1996. New stores and stores not in the
comparable store net sales calculation accounted for $14.3 million of the
increase in net sales and increases in comparable store net sales contributed
$5.0 million. Excluding the effect of the additional week of sales in the prior
year period, net sales increased 30.4%. The increase in sales in fiscal 1997 is
attributable to the opening of twenty-one Hibbett Sports stores and one Sports &
Co. superstore and a 10.2% increase in comparable store net sales for the 52
week comparable period. The increase in comparable store net sales was due
primarily to increased footwear sales and improved inventory processing at the
new distribution center.
GROSS PROFIT. Gross profit was $26.4 million, or 30.5% of net sales, in the
fifty-two weeks ended February 1, 1997, as compared to $20.4 million, or 30.5%
of net sales, in the prior fiscal year. Improved leveraging of store occupancy
costs over higher sales was offset by higher markdowns in the current year.
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES. Store operating,
selling and administrative expenses for the fifty-two weeks ended February 1,
1997 include a net gain of $533,000 on the disposal of assets which primarily
relates to the $513,000 gain on the sale of the former headquarters and
distribution facility. The net gain was substantially offset by a one-time
compensation expense of approximately $462,000 related to the issuance of stock
options on August 1, 1996. Excluding these items, store operating, selling and
administrative expenses were $17.4 million, or 20.1% of net sales, for the
fifty-two weeks ended February 1, 1997, as compared to $13.5 million, or 20.1%
of net sales, for the fifty-three weeks in the year ago period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization as a
percentage of net sales increased slightly to 2.1% in the fifty-two weeks ended
February 1, 1997 from 2.0% in the prior year.
INTEREST EXPENSE. The $957,000 increase in interest expense for the
fifty-two weeks ended February 1, 1997 compared to the prior year is due
primarily to the interest expense associated with the subordinated notes which
were issued in connection with the Recapitalization in November 1995 (see Note 2
to the Consolidated Financial Statements) and, to a lesser extent, to an
increase in borrowings under the revolving loan agreement to fund new store
openings. In connection with the initial public offering, the Company repaid a
substantial portion of its long-term debt.
EXTRAORDINARY ITEM, NET. The $1.1 million extraordinary item is the result
of the early extinguishment of debt with the proceeds of the initial public
offering. This item is shown net of the applicable income tax benefit of
$677,000.
18
<PAGE>
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 four Hibbett Sports stores, three Sports & Co. superstores and
one Sports Addition 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 Addition 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.
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.
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.
19
<PAGE>
The following tables set forth certain unaudited financial data for the
quarters indicated:
<TABLE>
<CAPTION>
FISCAL 1996 QUARTER ENDED
-----------------------------------------------------
<S> <C> <C> <C> <C>
JUL 29,
APR 29, 1995 1995 OCT 28, 1995
------------ ----------- ------------
FEB 3, 1996
------------
(14 WEEKS)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales............................................... $ 15,001 $ 14,354 $ 15,737 $ 21,985
Operating income........................................ 1,476 1,055 1,322 1,789(1)
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1997 QUARTER ENDED
-----------------------------------------------------
<S> <C> <C> <C> <C>
MAY 4, 1996 AUG 3, 1996 NOV 2, 1996 FEB 1, 1997
------------ ------------ ------------ -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................................ $ 20,251 $ 18,768 $ 20,618 $ 26,764
Operating income......................................... 2,429(2) 725(3) 1,543 2,527
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1998 QUARTER ENDED
-------------------------
<S> <C> <C> <C> <C>
MAY 3, 1997 AUG 2, 1997
------------ -----------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales............................................... $ 26,165 $ 26,393
Operating income........................................ 2,281 1,611
</TABLE>
- ------------------------
(1) Includes pre-opening expenses for two Sports & Co. superstores.
(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 pre-tax 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 loan facilities.
Net cash provided by (used in) operating activities has historically been
driven by net income levels combined with fluctuations in inventory and accounts
payable balances. Income before extraordinary item has 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 2, 1997 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 fiscal 1996, fiscal 1997 and the
twenty-six weeks ended August 2, 1997. 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 2, 1997, of $3.2 million,
$(158,000), $1.8 million and $(630,000), respectively.
20
<PAGE>
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. The Company used the proceeds to (1) repay $4.3 million
then outstanding under the Senior Subordinated Notes issued to temporarily
finance the new headquarters and distribution center, and (2) to fund its
working capital requirements. Capital expenditures for fiscal 1997 were $4.3
million compared with $8.2 million in fiscal 1996 and $2.2 million in fiscal
1995. The increase in these expenditures for fiscal 1996 was primarily the
result of the construction of the new headquarters and distribution center for
approximately $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. In fiscal 1997, the Company used the net proceeds of
$32.9 million from the initial public offering to repay long-term debt incurred
in connection with the Recapitalization.
In October 1996, the Company entered into a new unsecured $20 million
Revolving Credit Facility (the "Revolving Credit Facility") provided by AmSouth
Bank of Alabama. Borrowings under the Revolving Credit Facility bear interest at
an annual interest rate based upon, at the Company's option, either at a base
rate, a quoted cost of funds rate, or a LIBOR rate. As of August 2, 1997, the
Company had $704,000 outstanding under the Revolving Credit Facility which
expires October 31, 1999. Based on its current operating and store opening
plans, the Company believes that it can adequately fund its cash needs for the
foreseeable future through borrowings under the Revolving Credit Facility and
cash generated from operations.
The Company estimates capital expenditures in fiscal 1998 to be
approximately $3.9 million,
(i) approximately 70% of which will be used to fund the opening of approximately
32 Hibbett Sports stores and one Sports Addition store 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 1999 to be approximately $7.1 million
which includes resources budgeted to (i) fund the opening of at least 42 Hibbett
Sports stores, (ii) remodel selected existing stores and (iii) fund headquarters
and distribution center-related capital expenditures.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share. SFAS No. 128 will supersede Accounting Principles Bulletin No. 15
effective for financial statements for periods ending after December 15, 1997.
The Company will adopt SFAS No. 128 effective January 31, 1998, and will restate
earnings per share for all periods presented. The Company anticipates that the
amounts reported for basic and diluted earnings per share will be as disclosed
in the accompanying notes to the consolidated financial statements.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and display of "Comprehensive Income"
which is the total of net income and all other non-owner changes in
stockholders' equity and its components. The Company will adopt the standard in
fiscal 1999.
In June 1997, the FASB issued Statement No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131, which supersedes SFAS
Nos. 14, 18, 24 and 30, establishes new standards for segment reporting, using
the "management approach," in which reportable segments are based on the same
criteria on which management disaggregates a business for making operating
decisions and assessing performance. The Company is in the process of evaluating
SFAS No. 131 and its impact and will adopt the standard by fiscal 1999.
21
<PAGE>
BUSINESS
GENERAL
Hibbett is a rapidly-growing operator of full-line sporting goods stores in
small to mid-sized markets primarily in the southeastern United States.
Hibbett's stores offer a broad assortment of quality athletic equipment,
footwear and apparel at competitive prices with superior customer service. The
Company's merchandise assortment features a core selection of brand name
merchandise emphasizing team and individual sports complemented by a selection
of localized apparel and accessories designed to appeal to a wide range of
customers within each market. The Company believes that its stores are among the
primary retail distribution alternatives for brand name vendors that seek to
reach Hibbett's target markets. Hibbett has received the Nike Retailer
Excellence Award for the Southeast region for nine consecutive years based on
its performance in the full-line sporting goods category.
The Company operates 96 Hibbett Sports stores as well as nine smaller-format
Sports Addition 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 primarily in enclosed malls as well as
dominant strip centers. 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 $40 billion in 1996. 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
22
<PAGE>
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 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 sophisticated information and distribution systems are
expected to facilitate the Company's future growth. The Company's headquarters
and distribution center 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 109 stores in fourteen states, including 96 Hibbett
Sports stores, nine Sports Addition stores and four Sports & Co. superstores.
Ninety of the stores are located in malls, and 19, including the four Sports &
Co. superstores, are in dominant strip center locations. Over 80% of the
Company's stores are in markets with a population of less than 250,000.
23
<PAGE>
A map showing the states in which the Company operated stores as of
September 15, 1997 and the states containing potential expansion markets is set
forth below:
[MAP]
<TABLE>
<S> <C> <C> <C> <C>
STORE LOCATIONS
ALABAMA - 27 FLORIDA - 6 KENTUCKY - 8 MISSISSIPPI - 14 OKLAHOMA - 1
Auburn Lake City Bowling Green Columbus (2) Muskogee
Birmingham (8) Lake Wales Corbin Corinth SOUTH CAROLINA - 6
Decatur Leesburg Elizabethtown Hattiesburg Aiken
Enterprise Panama City Hazard Jackson Greenwood
Florence (3) Santa Rosa Madisonville Laurel Laurens
Gadsden Sebring Owensboro McComb Myrtle Beach (2)
Huntsville (3) GEORGIA - 12 Paducah Meridian (2) Rock Hill
Jasper Albany Somerset Oxford TENNESSEE - 15
Mobile Athens LOUISIANA - 2 Pascagoula Chattanooga
Muscle Shoals Brunswick Hammond Starkville Cleveland
Oxford (2) Dalton Monroe Tupelo Columbia
Selma Gainesville Vicksburg Cookville
Troy LaGrange MISSOURI - 1 Dyersburg (2)
Tuscaloosa (2) Milledgeville Sikeston Jackson (2)
ARKANSAS - 4 Rome NORTH CAROLINA - 11 Kingsport
Conway Valdosta (2) Albemarle Maryville
Hot Springs Warner Robbins Elizabeth City McMinnville
Russellville Waycross Greenville Morristown
Searcy ILLINOIS - 1 Hendersonville Murfreesboro
Carbondale Highpoint Nashville
Kinston Tullahoma
Lexington VIRGINIA - 1
New Bern Martinsville
Roanoke Rapids
Salisbury
Sanford
</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 24.2% compound annual growth rate to $86.4
million in fiscal 1997, and operating income has increased at a 28.0% compound
annual growth rate to $7.2 million in fiscal 1997. The Company increased its
store base from 39 stores at the end of fiscal 1993 to 109 stores as of
September 15, 1997. The Company's net sales have increased 28.8% to $86.4
million in fiscal 1997 and 34.7% to $52.6 million in the first twenty-six weeks
of fiscal 1998 versus the prior periods. The Company's net sales growth has been
driven by new store openings and increases in comparable store net sales. The
Company opened 22 new stores in fiscal 1997 and 17 new stores in the first
twenty-six weeks of fiscal 1998. The Company achieved comparable store net sales
increases of 10.2% in fiscal 1997 and 8.8% during the first twenty-six weeks of
fiscal 1998. See comparable store net sales information in "Summary Consolidated
Financial and Operating Data."
The Company's expansion strategy is to continue to open new Hibbett Sports
stores in its target markets. The Company has identified over 500 potential
markets for future Hibbett Sports stores within
24
<PAGE>
the states in which it operates and in contiguous states. Hibbett's clustered
expansion program, which calls for opening new stores within a two-hour driving
radius of another Company location, allows it to take advantage of efficiencies
in distribution, marketing and regional management. In evaluating potential
markets, the Company considers population, economic conditions, local
competitive dynamics and availability of suitable real estate. Although
approximately 85% of Hibbett Sports stores are located in enclosed malls, the
stores also operate profitably in dominant strip center locations. As the
Company continues to expand, it will open new stores in mall and dominant 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 32 Hibbett Sports stores in fiscal 1998 and at least 42 Hibbett
Sports stores in fiscal 1999. As of September 15, 1997, the Company had opened
19 Hibbett Sports stores and has substantially secured leases for the remaining
thirteen planned to be opened in fiscal 1998. Hibbett Sports stores are
typically profitable in the first year of operations. In July 1997, the Company
opened an additional Sports Addition store in Valdosta, Georgia. In the future,
the Company anticipates that it will selectively open Sports Addition 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. Eighty-one Hibbett Sports stores are located in enclosed
malls, the majority of which are the only enclosed malls in the county, and the
remaining fifteen are located in dominant strip centers. The Company uses
exciting design and in-store atmosphere and eye-catching in-store signage 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.
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 equipment, footwear, and apparel 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 ADDITION
Sports Addition stores are small, mall-based stores, averaging 1,850 square
feet with approximately 90% of merchandise consisting of athletic footwear and
the remainder consisting of caps and a limited assortment of apparel. Sports
Addition stores offer a broader assortment of athletic footwear, with a greater
emphasis on fashion than the athletic footwear assortment offered by Hibbett
Sports stores. All Sports Addition stores are currently located in the malls in
which Hibbett Sports stores are also present.
25
<PAGE>
MERCHANDISING
MERCHANDISING STRATEGY. The Company's merchandising strategy is to provide
a broad assortment of quality athletic equipment, footwear and apparel at
competitive prices. The Company's stores offer a core selection of brand name
merchandise with an emphasis on team and individual sports. This merchandise mix
is complemented by a selection of localized apparel and accessories designed to
appeal to a wide range of customers within each market. The Company's leading
product category is athletic footwear, followed by apparel and sporting
equipment, ranked according to sales. 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 Russell
Louisville
Asics Slugger Spalding
Champion Majestic Starter
Columbia Mizuno Timberland
Converse New Balance Umbro
Easton New Era Wilson
Everlast Nike Worth Sports
Fila Rawlings
K-2 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 products within its stores. In
addition, as the Company continues to increase its store base and enter new
26
<PAGE>
markets, the vendors have increased their brand presence within these regions.
The Company also places significant emphasis on and works with its vendors to
establish the most favorable pricing and to receive cooperative marketing funds.
Management believes the Company maintains excellent working relationships
with vendors. During fiscal 1997, the Company's largest vendor, Nike,
represented approximately 40% of its total purchases. Hibbett has received the
Nike Retailer Excellence Award for the Southeast region for nine 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 1997 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 developed a joint
television commercial with Nike and has placed 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.
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
27
<PAGE>
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 109 of its existing stores and manages the
distribution process centrally from its corporate headquarters which are located
in the same building as the distribution center. In January 1996 the Company
moved its operations to this newly constructed distribution center which has
significant expansion potential to support the Company's growth for the
foreseeable future. The Company believes strong distribution support for its
stores is a critical element of its expansion strategy and is central to its
ability to maintain a low cost operating structure. As the Company continues its
expansion, it intends to open new stores in locations that can be supplied from
the Company's distribution center.
The Company receives substantially all of its merchandise at its
distribution center. 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's systems have capacity to manage a store
base in excess of 200 stores and can be easily expanded to manage a store base
of approximately 1,000 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
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.
28
<PAGE>
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 equipment, apparel 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 109 store locations and
expects that its policy of leasing rather than owning will continue as it
expands. The Company's leases typically provide for a short initial lease term
with options on the part of the Company to extend. Management believes that this
lease strategy enhances the Company's flexibility to pursue various expansion
opportunities resulting from changing market conditions and to periodically
re-evaluate store locations. The Company's ability to open new stores is
contingent upon locating satisfactory sites, negotiating favorable leases and
recruiting and training additional qualified management personnel.
As current leases expire, the Company believes that it will be able either
to obtain lease renewals if desired for present store locations or to obtain
leases for equivalent or better locations in the same general area. To date, the
Company has not experienced difficulty in either renewing leases for existing
locations or securing leases for suitable locations for new stores. The
Company's store leases may contain certain provisions with which the Company may
not be in compliance. Based primarily on the Company's belief that it maintains
good relations with its landlords, that most of its leases are at market rents
and that it has historically been able to secure leases for suitable locations,
management believes that these provisions will not have a material adverse
effect on the business or financial condition of the Company.
The Company moved its operations to the newly-built corporate offices and
distribution center in Birmingham, Alabama in January 1996. The offices and the
distribution center are leased by the Company under a long term operating lease.
Team Sales owns its warehousing and distribution center located in Birmingham,
Alabama.
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
29
<PAGE>
for market share by utilizing a variety of store formats and merchandising
strategies. In recent years, the growth of large format retailers has resulted
in significant consolidation in large metropolitan markets. However, the Company
believes that the competitive environment for sporting goods remains different
in small to mid-sized markets where retail demand may not support larger format
stores. In smaller markets such as those targeted by the Company's Hibbett
Sports format, national chains compete by focusing on a specialty category like
athletic footwear in the case of Foot Locker and Foot Action. Accordingly, many
of the stores with which the Company competes are units of national chains that
have substantially greater financial and other resources than the Company.
Hibbett Sports format stores compete with national chains that focus on athletic
footwear, local sporting goods stores, department and discount stores and
traditional shoe stores. Although its Hibbett Sports format may face competition
from a variety of competitors, the Company believes that its Hibbett Sports
format is able to compete effectively by distinguishing itself as a full-line
sporting goods store with an emphasis on team and individual sports merchandise
complemented by a selection of localized apparel and accessories. The larger
markets targeted by Sports & Co. superstores are also highly competitive. The
Company believes the principal competitive factors in its markets are service,
breadth of merchandise offered, availability of brand names, availability of
local merchandise and price. The Company believes it competes favorably with
respect to these factors in the small to mid-sized markets in the Southeast.
However, there can be no assurance that the Company will continue to be able to
compete successfully against existing or future competitors. Expansion by the
Company into markets served by its competitors, entry of new competitors or
expansion of 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 524 full-time and approximately 852
part-time employees at September 15, 1997, none of whom are represented by a
labor union. The number of part-time employees fluctuates depending on seasonal
needs. There can be no assurance that the Company's employees will not, in the
future, elect to be represented by a union. The Company considers its
relationship with its employees to be good and has not experienced significant
interruptions of operations due to labor disagreements.
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.
30
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
August 2, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Michael J. Newsome................................... 58 President; Chief Operating Officer; Director
Susan H. Fitzgibbon.................................. 33 Vice President and Chief Financial Officer
Joy A. McCord........................................ 42 Vice President of Merchandising
Cathy E. Pryor....................................... 34 Vice President of Store Operations
John F. Megrue....................................... 39 Chairman of the Board; Director
Clyde B. Anderson.................................... 37 Director
F. Barron Fletcher, III.............................. 30 Director
Thomas A. Saunders, III.............................. 61 Director
H. Ray Compton....................................... 54 Director
Carl Kirkland........................................ 56 Director
</TABLE>
Michael J. Newsome has been the President, the Chief Operating Officer and a
Director 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 a Vice President and 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 20 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 twelve 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 also serves as Vice Chairman and
director of Dollar Tree Stores, Inc and director of The Children's Place Retail
Stores, Inc.
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.
31
<PAGE>
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.
H. Ray Compton has been a Director of the Company since January 1997. Mr.
Compton has been a director, Executive Vice President and Chief Financial
Officer of Dollar Tree Stores, Inc. since 1986 when he co-founded that company.
Carl Kirkland has been a Director of the Company since January 1997. Mr.
Kirkland is a co-founder of Kirkland's, Inc., a leading specialty retailer of
decorative home accessories and gift items, and has served as the Chief
Executive Officer and a director of Kirkland's since 1967. Mr. Kirkland also
serves on the board of directors of Union Planters National Bank in Jackson,
Tennessee.
The Company's Certificate of Incorporation provides 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 seven directors who are divided into three classes, designated Class
I, Class II and Class III. Messrs. Fletcher and Megrue are designated as Class I
directors, Messrs. Newsome, Saunders and Kirkland are designated as Class II
directors and Messrs. Anderson and Compton are designated as Class III
directors. The Class I directors will serve until the annual stockholder meeting
in 2000, the Class II directors will serve until the annual stockholder meeting
in 1998 and the Class III directors will serve until the annual stockholder
meeting in 1999.
Certain members of the Board of Directors were elected pursuant to the
Stockholders Agreement. See "Certain Transactions--Stockholders Agreement."
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established an Executive Committee, an Audit Committee and a
Compensation Committee. No member of the Audit Committee or Compensation
Committee is or will be an officer or employee of the Company or any of its
subsidiaries. The Company does not have a Nominating Committee.
The Executive Committee is authorized to exercise certain of the powers and
authorities of the Board of Directors in the management of the business and
affairs of the Company. The authority of the Executive Committee does not extend
to certain fundamental corporate transactions. The members of the Executive
Committee are Messrs. Anderson, Fletcher and Megrue (Chairman). The Executive
Committee is newly established and did not meet in the fiscal year ended
February 1, 1997.
The duties of the Audit Committee are to recommend to the Board the
selection of independent certified public accountants to audit annually the
books and records of the Company, to review the activities and the reports of
the independent certified public accountants, and to report the results of such
review to the Board. The Audit Committee also monitors the adequacy of the
Company's internal controls. The members of the Audit Committee are Messrs.
Anderson, Compton (Chairman), Kirkland and
32
<PAGE>
Megrue. The Audit Committee is newly established and did not meet in the fiscal
year ended February 1, 1997.
The duties of the Compensation Committee are to make recommendations and
reports to the Board with respect to the salaries, bonuses and other
compensation to be paid to the Company's officers and to administer all plans
relating to the compensation of such officers. The members of the Compensation
Committee are Messrs. Anderson (Chairman), Compton, Kirkland and Megrue. The
Compensation Committee may establish a separate subcommittee, to be comprised of
not less than two of its members, each of whom shall be "non-employee directors"
within the meaning set forth in Rule 16b-3 under the Exchange Act, and "outside
directors" within the meaning set forth in Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the treasury regulations
thereunder (the "Compensation Subcommittee"), for the purpose of taking certain
actions relating to the compensation of one or more of the Company's executives
in order to be consistent with the provisions of these regulations. The
Compensation Committee is newly established and did not meet in the fiscal year
ended February 1, 1997.
DIRECTOR COMPENSATION
During fiscal 1996, Clyde B. Anderson was paid $38,750 for his services as a
director. Each non-employee director is entitled to an annual fee of $10,000
plus $500 for each meeting, which fee may be waived by that director.
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
1997 exceeded $100,000.
The following table sets forth the compensation earned by the Named
Executive Officers in the fiscal year ended February 1, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------
LONG TERM COMPENSATION
---------------------------------------------
AWARDS
------------------------------
ANNUAL COMPENSATION SECURITIES PAYOUTS
------------------------------------------------------ RESTRICTED UNDERLYING -------------
NAME AND FISCAL OTHER ANNUAL STOCK OPTIONS LTIP
PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION AWARDS /SARS(#)(2) PAYOUTS
- ----------------------- ----------- --------- --------- ------------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Newsome, 1997 $ 140,000 $ 183,600 -0- -0- 22,475 -0-
President 1996 $115,000 $ 126,274 -0- -0- 40,983 -0-
and Director.......... 1995 $105,000 $ 94,566 -0- -0- -0- -0-
Susan H. Fitzgibbon(4),
Vice President and
Chief
Financial Officer..... 1997 $ 71,000 $ 35,000 -0- -0- 27,992 -0-
Joy A. McCord, 1997 $ 59,400 $ 44,000 -0- -0- 13,836 -0-
Vice President of 1996 $ 55,250 $ 22,722 -0- -0- 6,342 -0-
Merchandising......... 1995 $ 49,600 $ 16,933 -0- -0- -0- -0-
Cathy E. Pryor,
Vice President of 1997 $ 73,077 $ 64,000 -0- -0- 26,352 -0-
Store 1996 $ 63,654 $ 38,401 -0- -0- 12,684 -0-
Operations............ 1995 $ 55,560 $ 31,894 -0- -0- -0- -0-
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION(3)
- ----------------------- -----------------
<S> <C>
Michael J. Newsome, $ 6,750
President $6,750
and Director.......... $6,750
Susan H. Fitzgibbon(4),
Vice President and
Chief
Financial Officer..... -0-
Joy A. McCord, $ 3,541
Vice President of $2,873
Merchandising......... $2,574
Cathy E. Pryor,
Vice President of $ 4,309
Store $4,291
Operations............ $3,265
</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 Original Plan and the 1996
Plan, each as defined below.
(3) Consists of contributions by the Company under the Hibbett Sporting Goods,
Inc. 401(k) Profit Sharing Plan.
(4) Ms. Fitzgibbon joined the Company in April 1996.
33
<PAGE>
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
stockholders 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. The Plans are administered by the
Company's Compensation Committee consisting of members of the Company's Board of
Directors who are "non-employee directors" within the meaning 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
(unless, in the case of the 1996 Plan, the Compensation Committee provides
otherwise) 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 stockholder
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, a
grant to Ms. McCord of an option to purchase 6,342 shares of Common Stock, and a
grant to Ms. Pryor of an option to purchase 12,684 shares of Common Stock. Ms.
McCord's and 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 grants to Ms. Fitzgibbon, Ms. McCord and Ms.
Pryor of options to purchase 12,295, 4,918 and 10,655 shares of Common Stock,
respectively. On October 10, 1996, grants of options to purchase a total of
82,787 shares of Common Stock were granted under the 1996 Plan to 76 employees,
including Mr. Newsome, Ms. Fitzgibbon, Ms. McCord and Ms. Pryor. Mr. Newsome,
Ms. Fitzgibbon, Ms. McCord and Ms. Pryor were granted options to purchase
22,475, 15,697, 8,918 and 15,697 shares of Common Stock, respectively. On May 5,
1997, grants of options to purchase a total of 52,500 shares of Common Stock
were granted under the 1996 Plan to 25 employees, including Mr. Newsome, Ms.
Fitzgibbon, Ms. McCord and Ms. Pryor. Mr. Newsome, Ms. Fitzgibbon, Ms. McCord,
and Ms. Pryor were granted options to purchase
34
<PAGE>
20,000, 5,000, 3,000, and 10,000 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 stockholders
have approved the Hibbett Sporting Goods, Inc. Stock Plan for Outside Directors
(the "Outside Director Stock Plan"), which provides for awards of nonqualified
options to directors of the Company (other than Clyde B. Anderson) 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 stockholders by
increasing the proprietary interest of Eligible Directors in the growth and
performance of the Company.
Pursuant to the Outside Director Stock Plan, each Eligible Director 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
(commencing in fiscal 1998), 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 option will: (i) vest immediately upon
grant; 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. On January 10, 1997, the Company
granted 10,000 options under the Director Plan.
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 stockholders following the consummation of
the initial public offering of the Company's Common Stock unless the plan is
extended by the stockholders.
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 stockholders: (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.
35
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors has adopted and the Company's stockholders
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 Stock Purchase Plan. The Board may amend, alter or
terminate the Plan at any time; provided that stockholder approval must
generally be obtained for any change that would require stockholder 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 at the beginning of the quarter or the end of
the quarter, 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 $25,000 per year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options made to the executive officers named in the Summary Compensation
Table during the fiscal year ended February 1, 1997.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/ SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(1) IN FISCAL YEAR ($/SH) DATE 5% (4) 10% (4)
---------------- ------------- --------------- ----------- ----------- ---------- ----------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Michael J. Newsome................. 22,475(3) 17.53% $ 16.00 10/10/06 $ 225,860 $ 558,978
Susan H. Fitzgibbon................ 12,295(2) 9.59% $ 6.10 04/01/06 $ 237,529 $ 403,955
15,697(3) 12.24% $ 16.00 10/10/06 $ 157,745 $ 390,402
Joy A. McCord...................... 4,918(2) 3.84% $ 6.10 04/01/06 $ 95,012 $ 161,582
8,918(3) 6.96% $ 16.00 10/10/06 $ 89,620 $ 221,800
Cathy E. Pryor..................... 10,655(2) 8.31% $ 6.10 04/01/06 $ 205,846 $ 350,073
15,697(3) 12.24% $ 16.00 10/10/06 $ 157,745 $ 390,402
</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.
(2) These options were granted as of April 1, 1996 under the 1996 Plan.
(3) These options were granted as of October 10, 1996 under the 1996 Plan.
36
<PAGE>
(4) 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.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
No options were exercised by the Named Executive Officers during the fiscal
year ended February 1, 1997. 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
UNDERLYING UNEXERCISED IN-
UNEXERCISED THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
- --------------------------------------------- ------------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
Michael J. Newsome......................... -0- -0- 8,197/55,261 $ 83,200/338,397
Susan H. Fitzgibbon........................ -0- -0- 0/27,992 $ 0/128,719
Joy A. McCord.............................. -0- -0- 2,114/18,064 $ 30,357/112,861
Cathy E. Pryor............................. -0- -0- 4,228/34,808 $ 60,714/233,501
</TABLE>
- ------------------------
(1) Based on the fair market value of the Company's common stock at the end of
the fiscal year ended February 1, 1997 ($16.25 per share) less the exercise
price payable for such shares.
EMPLOYMENT AGREEMENT
Michael J. Newsome, President 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 a one time grant of options to acquire 40,983 shares of the
Company's Common Stock at an exercise price of $6.10 per share. In the event Mr.
Newsome's employment is terminated without cause, the Employment Agreement
provides that (i) 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, provided Mr. Newsome does not
breach the noncompetition clause contained therein, and (ii) 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 an agreed upon price.
The Employment Agreement includes a noncompetition clause.
37
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information concerning the beneficial
ownership of the Common Stock as of September 15, 1997 and as adjusted to
reflect the sale of 933,197 shares of Common Stock by the Selling Stockholders
and 200,000 shares of Common Stock by the Company in the Offering, including
beneficial ownership 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, (iv) all directors and executive officers as a group and (v) each
Selling Stockholder other than an executive officer or director (collectively,
the "Other Selling Stockholders"):
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING SHARES AFTER OFFERING
----------------------- BEING -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES PERCENT OFFERED SHARES PERCENT
- ------------------------------------------------- ---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
DIRECTORS, EXECUTIVE OFFICERS AND OVER 5%
STOCKHOLDERS:
The SK Equity Fund, L.P.(2)
SK Investment Fund, L.P.(2)
Allan W. Karp(2)
Christopher K. Reilly(2)
Thomas A. Saunders, III(2)
Two Greenwich Plaza
Suite 100
Greenwich, CT 06830............................ 2,886,721 46.6% 400,000 2,486,721 38.9%
John F. Megrue, Jr. (2)(3)
Two Greenwich Plaza,
Suite 100
Greenwich, CT 06830............................ 2,892,721 46.7% 400,000 2,492,721 39.0%
Provident Investment Counsel, Inc. (4)
300 North Lake Avenue
Pasadena, CA 91101-4022........................ 632,499 10.2% -- 632,499 9.9%
Clyde B. Anderson(5)(6).......................... 289,345 4.7% 145,300 144,045 2.3%
Michael J. Newsome(7)............................ 135,902 2.2% 20,000 115,902 1.8%
F. Barron Fletcher, III(8)....................... 800 * -- 800 *
H. Ray Compton(9)................................ 7,950 * -- 7,950 *
Carl Kirkland(10)................................ 5,000 * -- 5,000 *
Susan H. Fitzgibbon(11).......................... 5,613 * -- 5,613 *
Joy A. McCord(12)................................ 7,246 * -- 7,246 *
Cathy E. Pryor(13)............................... 13,726 * -- 13,726 *
All Directors and Executive Officers as a
group(14)...................................... 3,358,303 53.7% 565,300 2,793,003 43.3%
OTHER SELLING STOCKHOLDERS(15):
Charles C. Anderson, Sr.(16)..................... 68,055 1.1% 50,000 18,055 *
Charles C. Anderson, Jr.(17)..................... 77,109 1.2% 57,000 20,109 *
Joel R. Anderson(17)............................. 116,644 1.9% 85,000 31,644 *
Terrence C. Anderson(17)......................... 70,461 1.1% 51,000 19,461 *
First Anderson Grandchildren's Trust
f/b/o Charles C. Anderson, III................. 5,647 * 4,200 1,447 *
First Anderson Grandchildren's Trust
f/b/o Lauren A. Anderson....................... 5,647 * 4,200 1,447 *
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING SHARES AFTER OFFERING
----------------------- BEING -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES PERCENT OFFERED SHARES PERCENT
- ------------------------------------------------- ---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
First Anderson Grandchildren's Trust
f/b/o Hayley E. Anderson....................... 5,647 * 4,200 1,447 *
Second Anderson Grandchildren's Trust
f/b/o Alexandra R. Anderson.................... 5,647 * 4,200 1,447 *
Third Anderson Grandchildren's Trust
f/b/o Taylor Claire Anderson................... 5,647 * 4,200 1,447 *
Fourth Anderson Grandchildren's Trust
f/b/o Carson Caine Anderson.................... 5,647 * 4,200 1,447 *
Fifth Anderson Grandchildren's Trust
f/b/o Harold M. Anderson, Jr................... 5,647 * 4,200 1,447 *
Sixth Anderson Grandchildren's Trust
f/b/o Bentley Barbour Anderson................. 5,647 * 4,200 1,447 *
Seventh Anderson Grandchildren's Trust
f/b/o Olivia Barbour Anderson.................. 5,647 * 4,200 1,447 *
The Ashley R. Anderson Trust..................... 16,687 * 14,000 2,687 *
Joel R. Anderson, II Trust....................... 50,046 * 40,000 10,046 *
Alexandra Ruth Anderson Irrevocable Trust........ 8,197 * 4,100 4,097 *
Bentley Barbour Anderson 1995 Trust.............. 2,459 * 1,200 1,259 *
Carson Caine Anderson 1995 Trust................. 2,459 * 1,200 1,259 *
Olivia Barbour Anderson 1995 Trust............... 8,197 * 4,100 4,097 *
Clyde Christian Anderson 1996 Trust.............. 8,197 * 4,100 4,097 *
Harold M. Anderson, Jr. 1996 Trust............... 4,098 * 2,000 2,098 *
Keaton Carroll Anderson 1996 Trust............... 2,459 * 1,200 1,259 *
Taylor Claire Anderson 1996 Trust................ 4,098 * 2,000 2,098 *
Judy M. Newsome.................................. 8,197 * 8,197 0 *
Sandra B. Cochran (17)........................... 10,246 * 5,000 5,246 *
</TABLE>
* Less than 1%
- ------------------------
(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. The
address of Clyde B. Anderson and the Other Selling Stockholders is c/o Clyde
B. Anderson, 402 Industrial Lane, Birmingham, AL 35211. The address of the
Directors and Executive Officers is c/o the Company, unless otherwise noted.
(2) Includes 2,855,484 shares (prior to the Offering) owned by The SK Equity
Fund, L.P. and 31,237 shares (prior to the Offering) 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, Reilly
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, Reilly 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. Excludes an
aggregate of 803,921 shares (prior to the Offering) owned by the Anderson
Stockholders over which The SK Equity Fund, L.P. and SK Investment Fund,
L.P. may be deemed to have beneficial ownership solely by virtue of certain
provisions contained in the Stockholders Agreement. The Stockholders
Agreement may be deemed to confer on each party thereto the shared power to
vote or direct the vote of 3,690,642 shares (prior to the Offering), the
aggregate number of shares owned by all parties to the Stockholders
Agreement. Upon consummation of the Offering, the Stockholders Agreement
will terminate. See "Certain Transactions--Stockholders Agreement." Although
all parties to the Stockholders Agreement have jointly filed with the
Securities and Exchange Commission a report on Schedule 13G
39
<PAGE>
detailing their direct ownership shares of the Company's Common Stock, each
party disclaims beneficial ownership of any shares owned by the others. If
the over-allotment option is exercised by the Underwriters, The SK Equity
Fund, L.P. and SK Investment Fund, L.P. will sell an additional 169,980
shares of Common Stock, collectively, reducing their beneficial ownership to
2,316,741 shares of Common Stock, collectively.
(3) Includes 2,000 shares held as custodian for Kyle G. Megrue and 2,000 shares
held as custodian for Christopher Megrue.
(4) Includes shares over which Provident Investment Counsel, Inc., a registered
investment advisor, has discretionary authority to buy, sell and vote, as
reported in a Schedule 13G filed with the Securities and Exchange Commission
on August 31, 1997.
(5) Excludes an aggregate of 2,886,721 shares (prior to the Offering) owned by
The SK Equity Fund, L.P. and SK Investment Fund, L.P. and 514,576 shares
(prior to the Offering) owned by the Anderson Stockholders (other than Mr.
Anderson) over which Mr. Anderson may be deemed to have beneficial ownership
solely by virtue of certain provisions contained in the Stockholders
Agreement. The Stockholders Agreement may be deemed to confer on each party
thereto the shared power to vote or direct the vote of 3,690,642 shares
(prior to the Offering), the aggregate number of shares owned by all parties
to the Stockholders Agreement. Upon consummation of the Offering, the
Stockholders Agreement will terminate. See "Certain
Transactions--Stockholders Agreement." Although all parties to the
Stockholders Agreement have jointly filed with the Securities and Exchange
Commission a report on Schedule 13G detailing their direct ownership shares
of the Company's Common Stock, each such party disclaims beneficial
ownership of any shares owned by the others.
(6) Excludes 24,591 shares owned by various trusts in respect of which Mr.
Anderson's wife is the trustee and 8,196 shares owned by various trusts in
respect of which Mr. Anderson is the trustee.
(7) Includes 16,393 shares subject to options which became or will become
exercisable November 1, 1996 and 1997. 4,495 shares subject to options which
will become exercisable October 10, 1997, and 8,196 shares held in various
trusts. All 135,902 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."
(8) Mr. Fletcher is a principal of Saunders, Karp & Megrue, L.P., an affiliate
of The SK Equity Fund, L.P.
(9) Includes 5,000 shares subject to options and 950 shares held in various
trusts.
(10) Includes 5,000 shares subject to options.
(11) Includes 2,459 shares subject to options which became exercisable April 1,
1997 and 3,139 shares subject to options which will become exercisable
October 10, 1997.
(12) Includes 4,228 shares subject to options which became exercisable August
25, 1996 and 1997, 984 shares subject to options which became exercisable
April 1, 1997, and 1,784 shares subject to options which will become
exercisable October 10, 1997.
(13) Includes 8,456 shares subject to options which became exercisable August
25, 1996 and 1997, 2,131 shares subject to options which became exercisable
April 1, 1997, and 3,139 shares subject to options which will become
exercisable October 10, 1997.
(14) Includes 57,208 shares of Common Stock which the directors and executive
officers of the Company have the right to acquire within 60 days after
consummation of the Offering through the exercise of outstanding options.
(15) Although each of the Other Selling Stockholders except for Judy M. Newsome
is a party to the Stockholders Agreement, each party disclaims beneficial
ownership of any shares owned by the other parties to the Stockholders
Agreement. The Stockholders Agreement may be deemed to confer on each party
thereto the shared power to vote or direct the vote of 3,690,642 shares
(prior to the Offering), the aggregate number of shares owned by all parties
to the Stockholders Agreement. Upon consummation of the Offering, the
Stockholders Agreement will terminate. See "Certain
Transactions--Stockholders Agreement." Each of the Other Selling
Stockholders, except for Sandra B. Cochran and Judy M. Newsome, has a
familial relationship.
(16) Mr. Anderson was Chairman of the Board of Directors of the Company in 1994
and through the consummation of the Recapitalization in November 1995.
(17) Was a Director of the Company in 1994 and through the consummation of the
Recapitalization in November 1995.
40
<PAGE>
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.
STOCKHOLDERS AGREEMENT
Charles C. Anderson, Sr., Joel R. Anderson, Charles C. Anderson, Jr.,
Terrence C. Anderson, Clyde B. Anderson, Sandra B. Cochran, Harold M. Anderson,
First Anderson Grandchildren's Trust f/b/o Charles C. Anderson, III, First
Anderson Grandchildren's Trust f/b/o Lauren A. Anderson, First Anderson
Grandchildren's Trust f/b/o Hayley E. Anderson, Second Anderson Grandchildren's
Trust f/b/o Alexandra R. Anderson, Third Anderson Grandchildren's Trust f/b/o
Taylor Claire Anderson, Fourth Anderson Grandchildren's Trust f/b/o Carson Caine
Anderson, Fifth Anderson Grandchildren's Trust f/b/o Harold M. Anderson, Jr.,
Sixth Anderson Grandchildren's Trust f/b/o Bentley Barbour Anderson, Seventh
Anderson Grandchildren's Trust f/b/o Olivia Barbour Anderson, The Ashley R.
Anderson Trust, Joel R. Anderson, II Trust, Gerald H. Daugherty, Martin R.
Abroms, Alexandra Ruth Anderson Irrevocable Trust, Olivia Barbour Anderson 1995
Trust, Clyde Christian Anderson 1996 Trust, Carson Caine Anderson 1995 Trust,
Bentley Barbour Anderson 1995 Trust, Keaton Carroll Anderson 1996 Trust, Taylor
Claire Anderson 1996 Trust, Harold M. Anderson, Jr. 1996 Trust (collectively,
the "Anderson Stockholders"), the Funds, Mr. Newsome and the Company entered
into a stockholders agreement dated as of November 1, 1995, as amended (the
"Stockholders Agreement").
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 Stockholders 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 Certificate of
Incorporation or Bylaws, a sudden and material change in the Company's line of
business, and certain related party transactions, require the affirmative vote
of the Board, with the director designated by the Anderson Stockholders 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 Stockholders 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 Stockholders 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 Stockholders 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. 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 Stockholders 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 the
41
<PAGE>
57,206 shares of Common Stock issued upon the exercise of the stock options
granted to him on August 1, 1996. See "--Advisory Agreements."
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 Stockholders for losses
arising out of any demand or "piggy back" registration.
Except for certain provisions relating to indemnification and contribution,
the Stockholders Agreement will terminate when the number of shares of Common
Stock held by the Anderson Stockholders falls below 323,689. The Company
anticipates that immediately following the consummation of the Offering the
Anderson Stockholders will hold 298,921 shares of Common Stock (assuming no
exercise of the Underwriter's over-allotment option) and consequently, the
Stockholders Agreement will terminate upon consummation of the Offering (except
for the provisions relating to indemnification and contribution).
ADVISORY AGREEMENTS
Prior to June 1, 1995, the Company contracted with ANCO Management Services,
Inc. ("ANCO"), an affiliated entity of the Anderson Stockholders, 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 Stockholders. 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 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.
The Company and Clyde B. Anderson entered into an agreement effective as of
August 1, 1996, pursuant to which Mr. Anderson provided advisory services to the
Company, which agreement has terminated. In consideration of these services, Mr.
Anderson received a fee of $25,000 in fiscal 1998.
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 were exercisable beginning six months after the closing of
the initial public offering and ending nine months after the closing of the
initial public offering. In June 1997, Mr. Anderson exercised these options
(partially on a cashless basis) and received 57,206 shares of Common Stock in
exchange for approximately $392,000 in cash and 13,614 shares of Common Stock.
NON-COMPETITION AGREEMENT
Messrs. Charles C. Anderson, Joel R. Anderson and Clyde B. Anderson, as
former controlling stockholders of the Company, have entered into a
non-competition agreement with the Company and the Funds in connection with the
Recapitalization. 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.
42
<PAGE>
CERTAIN TRANSACTIONS WITH ANDERSON ENTITIES
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 Stockholders, for $850,000.
In fiscal 1996, Hibbett 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
Upon completion of the Offering, the Company will have 6,392,330 shares of
Common Stock outstanding (assuming no exercise of outstanding options). Of these
shares, the 1,133,197 shares sold in the Offering will be freely transferable by
persons other than affiliates of the Company without registration under the Act.
The Company's officers and directors and the Selling Stockholders 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 90 days after the date of this Prospectus. After the termination
of such 90-day period, 2,890,671 shares of Common Stock may be sold if
registered under the Act or pursuant to certain volume and other limitations
under Rule 144 applicable to affiliates or pursuant to another exemption from
registration under the Act. Furthermore, holders of an aggregate of 2,880,656
shares are entitled to piggyback registration rights, of which 2,785,642 shares
are also entitled to demand registration rights.
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 (approximately
64,000 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 one year has 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 two years have elapsed since the
shares to be sold were last acquired from the Company or an affiliate of the
Company. 493,935 restricted shares have been issued for more than two 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 90 days after the date of this Prospectus, without
the prior written consent of Smith Barney Inc., subject to certain limited
exceptions.
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"). The following summaries of certain provisions of the Common Stock and
Preferred Stock are subject to, and qualified in their entirety by, the
43
<PAGE>
provisions of the Company's Certificate of Incorporation, which is incorporated
by reference as an exhibit to the Registration Statement of which this
Prospectus forms a part, and by applicable law.
COMMON STOCK
As of September 15, 1997 there were 6,192,330 shares of Common Stock
outstanding which were held of record by 49 stockholders. There will be
6,392,330 shares of Common Stock outstanding (assuming no exercise of
outstanding options) upon completion of the Offering.
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.
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 person 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
44
<PAGE>
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 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 STOCKHOLDER 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 is 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
45
<PAGE>
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 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 has obtained standard policies of insurance which covers (a) its
directors and officers against loss arising from claims made by reason of breach
of duty or other wrongful act, and (b) 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 , 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
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Smith Barney Inc. ...............................................................
NationsBanc Montgomery Securities, Inc. .........................................
The Robinson-Humphrey Company, LLC ..............................................
BancAmerica Robertson Stephens...................................................
-----------
Total...................................................................... 1,133,197
-----------
-----------
</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., NationsBanc Montgomery
Securities, Inc., The Robinson-Humphrey Company, LLC and BancAmerica Robertson
Stephens 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.
Certain of the Selling Stockholders have granted to the Underwriters an
option, exercisable for thirty days from the date of this Prospectus, to
purchase up to 169,980 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 all of the Selling Stockholders
have agreed that, for a period of 90 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.
In connection with this Offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more Common Stock than the total amount
shown on the list of Underwriters and participations which appears above) and
may effect transactions which stabilize, maintain or otherwise affect the market
price of the Common Stock at levels above those which might otherwise prevail in
the open market. Such transactions may include placing bids for the Common Stock
or effecting purchases of the Common Stock for the purpose of pegging, fixing or
maintaining the price of the Common Stock or for the purpose of reducing a
syndicate short position created in connection with the Offering. A syndicate
short position may be covered by exercise of the option described above in lieu
of or in addition to open market purchases. In addition, the contractual
arrangements among the Underwriters include a provision whereby, if the
Representatives purchase Common Stock in the open market for the account of the
underwriting syndicate and the securities purchased can be traced to a
particular Underwriter or member
47
<PAGE>
of the selling group, the underwriting syndicate may require the Underwriter or
selling group member in question to purchase the Common Stock in question at the
cost price to the syndicate or may recover from (or decline to pay to) the
Underwriter or selling group member in question the selling concession
applicable to the securities in question. The Underwriters are not required to
engage in any of these activities and any such activities, if commenced, may be
discontinued at any time.
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 Latham & Watkins, New York, New York. Certain legal
matters relating to the Offering will be passed upon for the Underwriters by
Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, D.C. From time to time
Latham & Watkins render certain legal services to the Funds and to certain of
the Anderson Stockholders.
EXPERTS
The audited consolidated financial statements and related schedule of the
Company and its subsidiaries as of February 3, 1996 and February 1, 1997, and
for each of the three fiscal years in the period ended February 1, 1997,
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 such
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.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and, in accordance therewith, files
annual and quarterly reports, proxy statements 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
Commission's Public Reference Section, 450 Fifth Street, N.W., Room 1024,
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.
Copies of such material or any part thereof may also be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Common Stock of the Company is quoted on the
Nasdaq National Market. Reports and other information concerning the Company may
be inspected at the National Association of Securities Dealers, Inc. at 1801 K
Street, N.W., Washington, D.C. 20006. 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 February 3, 1996, February 1, 1997, and August 2, 1997 (unaudited)..... F-3
Consolidated Statements of Operations for the fiscal years ended January 28, 1995, February 3, 1996, and
February 1, 1997, and the twenty-six week periods ended August 3, 1996 and August 2, 1997
(unaudited)............................................................................................ F-4
Consolidated Statements of Stockholders' Investment (Deficit) for the fiscal years ended January 28,
1995, February 3, 1996, and February 1, 1997, and the twenty-six week period ended August 2, 1997
(unaudited)............................................................................................ F-5
Consolidated Statements of Cash Flows for the fiscal years ended January 28,1995, February 3, 1996, and
February 1, 1997, and the twenty-six week periods ended August 3, 1996 and August 2, 1997
(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. (a Delaware corporation, formerly an Alabama corporation)
AND SUBSIDIARIES as of February 3, 1996 and February 1, 1997, and the related
consolidated statements of operations, stockholders' investment (deficit), and
cash flows for each of the three fiscal years in the period ended February 1,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hibbett Sporting Goods, Inc.
and subsidiaries as of February 3, 1996 and February 1, 1997, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 1, 1997, in conformity with generally accepted accounting
principles.
/S/ ARTHUR ANDERSEN LLP
- --------------------------------------------------------------------------------
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 18, 1997
F-2
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, AUGUST 2,
1996 1997 1997
----------- ----------- -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents............................................................. $ 31 $ 2,269 $ 1,073
Accounts receivable, net.............................................................. 1,341 2,097 2,247
Inventories........................................................................... 20,705 24,521 33,546
Prepaid expenses and other............................................................ 756 485 1,495
Refundable income taxes............................................................... 419 128 62
Deferred income taxes................................................................. 538 626 719
----------- ----------- -------------
23,790 30,126 39,142
----------- ----------- -------------
Property and Equipment:
Land.................................................................................. 748 24 24
Buildings............................................................................. 4,869 216 216
Equipment............................................................................. 4,581 5,798 6,474
Furniture and fixtures................................................................ 3,470 4,564 5,163
Leasehold improvements................................................................ 5,901 7,321 8,045
Construction in progress.............................................................. 170 683 309
----------- ----------- -------------
19,739 18,606 20,231
Less accumulated depreciation & amortization.......................................... 7,605 8,722 9,746
----------- ----------- -------------
12,134 9,884 10,485
----------- ----------- -------------
Noncurrent Assets:
Deferred income taxes................................................................. 308 321 343
Unamortized debt issuance costs, net.................................................. 434 -- --
Other, net............................................................................ 36 27 24
----------- ----------- -------------
778 348 367
----------- ----------- -------------
$ 36,702 $ 40,358 $ 49,994
----------- ----------- -------------
----------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT (DEFICIT)
Current Liabilities:
Accounts payable...................................................................... $ 10,371 $ 10,381 $ 16,622
Accrued income taxes.................................................................. -- 436 121
Accrued expenses:
Payroll-related..................................................................... 1,079 1,875 1,323
Other............................................................................... 887 1,144 1,402
Related-party....................................................................... 546 10 33
----------- ----------- -------------
12,883 13,846 19,501
----------- ----------- -------------
Long-Term Debt.......................................................................... 31,912 -- 704
----------- ----------- -------------
Commitments and Contingencies
Stockholders' Investment (Deficit):
Preferred Stock, $.01 par value, 1,000,000 shares authorized, no shares outstanding... -- -- --
Common Stock, $.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, 6,134,261 shares issued and outstanding at February 1, 1997; and
12,000,000 shares authorized, 6,192,330 shares issued and outstanding at August 2,
1997 (unaudited)..................................................................... 234 61 62
Paid-in capital....................................................................... 14,933 47,974 48,840
Retained earnings (deficit)........................................................... (23,260) (21,523) (19,113)
----------- ----------- -------------
(8,093) 26,512 29,789
----------- ----------- -------------
$ 36,702 $ 40,358 $ 49,994
----------- ----------- -------------
----------- ----------- -------------
</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 WEEKS ENDED
----------------------
JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(52 WEEKS) (53 WEEKS) (52 WEEKS) (UNAUDITED)
Net sales........................................ $ 52,266 $ 67,077 $ 86,401 $ 39,019 $ 52,558
Cost of goods sold, including warehouse,
distribution, and store occupancy costs........ 36,225 46,642 60,017 27,272 36,681
----------- ----------- ----------- ---------- ----------
Gross profit................................. 16,041 20,435 26,384 11,747 15,877
Store operating, selling, and administrative
expenses....................................... 10,453 13,471 17,339 7,767 10,912
Depreciation and amortization.................... 1,066 1,322 1,821 826 1,073
----------- ----------- ----------- ---------- ----------
Operating income............................. 4,522 5,642 7,224 3,154 3,892
Interest expense (income), net................... 654 1,685 2,642 1,814 (11)
----------- ----------- ----------- ---------- ----------
Income before provision for income taxes and
extraordinary item........................... 3,868 3,957 4,582 1,340 3,903
Provision for income taxes....................... 1,479 1,514 1,752 514 1,493
----------- ----------- ----------- ---------- ----------
Income before extraordinary item............... 2,389 2,443 2,830 826 2,410
Extraordinary item, net of income tax benefit of
$677........................................... -- -- (1,093) -- --
----------- ----------- ----------- ---------- ----------
Net income................................... $ 2,389 $ 2,443 $ 1,737 $ 826 $ 2,410
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Earnings per common share:
Income before extraordinary item............... $ 0.37 $ 0.42 $ 0.61 $ 0.21 $ 0.38
Extraordinary item, net........................ -- -- (0.24) -- --
----------- ----------- ----------- ---------- ----------
Net income..................................... $ 0.37 $ 0.42 $ 0.37 $ 0.21 $ 0.38
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
Weighted average shares outstanding.............. 6,504,521 5,838,267 4,666,173 3,938,223 6,264,084
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</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 OF PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT)
------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
BALANCE, January 29, 1994......................................... 10,256 $ 1 $ 126 $ 5,743
Net income...................................................... -- -- -- 2,389
Change in par value............................................. -- (1) 1 --
Issuance of shares in connection with a 100-for-1 stock split... 1,015,344 10 (10) --
------------- ----- --------- ----------
BALANCE, January 28, 1995......................................... 1,025,600 10 117 8,132
Net income...................................................... -- -- -- 2,443
Issuance of shares in connection with a 38.687189-for-1 stock
split........................................................... 38,651,981 387 (387) --
Purchase and retirement of shares............................... (34,220,000) (342) (43) (33,835)
Issuance of shares.............................................. 17,609,000 176 17,433 --
Expenses related to capital transactions........................ 322,419 3 (2,187) --
------------- ----- --------- ----------
BALANCE, February 3, 1996......................................... 23,389,000 234 14,933 (23,260)
Net income...................................................... -- -- -- 1,737
Retroactive effect of 1-for-6.1 reverse stock split............. (19,554,739) (196) 196 --
Initial public offering of common stock, net of offering costs
of $1,356....................................................... 2,300,000 23 32,845 --
------------- ----- --------- ----------
BALANCE, February 1, 1997......................................... 6,134,261 61 47,974 (21,523)
Net income (Unaudited).......................................... -- -- -- 2,410
Issuance of shares from the employee stock purchase plan and the
exercise of stock options (Unaudited)........................... 58,069 1 866 --
------------- ----- --------- ----------
BALANCE, August 2, 1997 (Unaudited)............................... 6,192,330 $ 62 $ 48,840 $ (19,113)
------------- ----- --------- ----------
------------- ----- --------- ----------
</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>
FISCAL YEAR ENDED
------------------------
<S> <C> <C>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................................................... $ 2,389 $ 2,443
----------- -----------
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Extraordinary item........................................................................... -- --
Depreciation and amortization................................................................ 1,124 1,475
Deferred income taxes........................................................................ (266) (140)
(Gain) loss on disposal of assets............................................................ 4 6
Interest expense funded through additional debt.............................................. -- 128
(Increase) decrease in assets:
Accounts receivable, net................................................................... (9) (247)
Inventories................................................................................ (3,930) (5,969)
Prepaid expenses and other................................................................. 71 (644)
Refundable income taxes.................................................................... 61 (419)
Other noncurrent assets.................................................................... 11 (474)
Increase (decrease) in liabilities:
Accounts payable........................................................................... 2,978 2,828
Accrued income taxes....................................................................... 71 (71)
Accrued expenses........................................................................... 694 926
----------- -----------
Total adjustments........................................................................ 809 (2,601)
----------- -----------
Net cash provided by (used in) operating activities.......................................... 3,198 (158)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................................... (2,179) (8,172)
Proceeds from sale of property................................................................. 26 6
----------- -----------
Net cash provided by (used in) investing activities.......................................... (2,153) (8,166)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares in initial public offering......................... -- --
Repayment of subordinated and senior subordinated notes payable to stockholders................ -- --
Revolving loan borrowings and repayments, net.................................................. -- 12,140
Repayment of term loan......................................................................... -- --
Purchase and retirement of shares in the Recapitalization...................................... -- (22,250)
Issuance of shares in the Recapitalization..................................................... -- 17,609
Expenses related to the Recapitalization....................................................... -- (2,184)
Principal payments on long-term debt........................................................... (3,251) (5,328)
Proceeds from issuance of long-term debt to stockholders....................................... -- 6,641
Proceeds from term loan........................................................................ -- 1,000
Proceeds from issuance of long-term debt....................................................... 4,579 --
Proceeds from options exercised and purchase of shares under employee stock purchase plan...... -- --
Borrowings (repayments) of short-term debt, net................................................ (2,179) --
----------- -----------
Net cash provided by (used in) financing activities.......................................... (851) 7,628
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................................. 194 (696)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................................... 533 727
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR......................................................... $ 727 $ 31
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest..................................................................................... $ 612 $ 1,038
----------- -----------
----------- -----------
Income taxes, net of refunds................................................................. $ 1,500 $ 2,144
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
Issuance of debt (including unamortized debt discount) to stockholders for the purchase of
shares in the Recapitalization............................................................... $ -- $ 13,051
----------- -----------
----------- -----------
Issuance of stock as compensation related to capital transactions in the Recapitalization...... $ -- $ 322
----------- -----------
----------- -----------
Noncash recognition of paid-in capital related to exercise of stock options.................... $ -- $ --
----------- -----------
----------- -----------
<CAPTION>
TWENTY-SIX
WEEKS ENDED
-----------
<S> <C>
FEBRUARY 1, AUGUST 3,
1997 1996
----------- -----------
(UNAUDITED)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................................................... $ 1,737 $ 826
----------- -----------
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Extraordinary item........................................................................... 1,770 --
Depreciation and amortization................................................................ 1,969 943
Deferred income taxes........................................................................ (101) (116)
(Gain) loss on disposal of assets............................................................ (533) (504)
Interest expense funded through additional debt.............................................. 14 14
(Increase) decrease in assets:
Accounts receivable, net................................................................... (756) (364)
Inventories................................................................................ (3,816) (6,241)
Prepaid expenses and other................................................................. 271 (438)
Refundable income taxes.................................................................... 291 (74)
Other noncurrent assets.................................................................... 9 (7)
Increase (decrease) in liabilities:
Accounts payable........................................................................... 10 64
Accrued income taxes....................................................................... 436 --
Accrued expenses........................................................................... 517 1,580
----------- -----------
Total adjustments........................................................................ 81 (5,143)
----------- -----------
Net cash provided by (used in) operating activities.......................................... 1,818 (4,317)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................................... (4,308) (2,385)
Proceeds from sale of property................................................................. 5,267 5,553
----------- -----------
Net cash provided by (used in) investing activities.......................................... 959 3,168
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares in initial public offering......................... 32,868 --
Repayment of subordinated and senior subordinated notes payable to stockholders................ (20,267) --
Revolving loan borrowings and repayments, net.................................................. (12,140) --
Repayment of term loan......................................................................... (1,000) --
Purchase and retirement of shares in the Recapitalization...................................... -- --
Issuance of shares in the Recapitalization..................................................... -- --
Expenses related to the Recapitalization....................................................... -- --
Principal payments on long-term debt........................................................... -- (4,267)
Proceeds from issuance of long-term debt to stockholders....................................... -- --
Proceeds from term loan........................................................................ -- --
Proceeds from issuance of long-term debt....................................................... -- --
Proceeds from options exercised and purchase of shares under employee stock purchase plan...... -- --
Borrowings (repayments) of short-term debt, net................................................ -- 5,421
----------- -----------
Net cash provided by (used in) financing activities.......................................... (539) 1,154
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................................. 2,238 5
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................................... 31 31
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR......................................................... $ 2,269 $ 36
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest..................................................................................... $ 3,006 $ 632
----------- -----------
----------- -----------
Income taxes, net of refunds................................................................. $ 846 $ 703
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
Issuance of debt (including unamortized debt discount) to stockholders for the purchase of
shares in the Recapitalization............................................................... $ -- $ --
----------- -----------
----------- -----------
Issuance of stock as compensation related to capital transactions in the Recapitalization...... $ -- $ --
----------- -----------
----------- -----------
Noncash recognition of paid-in capital related to exercise of stock options.................... $ -- $ --
----------- -----------
----------- -----------
<CAPTION>
AUGUST 2,
1997
-----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................................................... $ 2,410
-----------
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Extraordinary item........................................................................... --
Depreciation and amortization................................................................ 1,073
Deferred income taxes........................................................................ (115)
(Gain) loss on disposal of assets............................................................ 7
Interest expense funded through additional debt.............................................. --
(Increase) decrease in assets:
Accounts receivable, net................................................................... (150)
Inventories................................................................................ (9,025)
Prepaid expenses and other................................................................. (1,010)
Refundable income taxes.................................................................... 66
Other noncurrent assets.................................................................... (3)
Increase (decrease) in liabilities:
Accounts payable........................................................................... 6,241
Accrued income taxes....................................................................... (315)
Accrued expenses........................................................................... 191
-----------
Total adjustments........................................................................ (3,040)
-----------
Net cash provided by (used in) operating activities.......................................... (630)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................................... (1,680)
Proceeds from sale of property................................................................. 5
-----------
Net cash provided by (used in) investing activities.......................................... (1,675)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares in initial public offering......................... --
Repayment of subordinated and senior subordinated notes payable to stockholders................ --
Revolving loan borrowings and repayments, net.................................................. --
Repayment of term loan......................................................................... --
Purchase and retirement of shares in the Recapitalization...................................... --
Issuance of shares in the Recapitalization..................................................... --
Expenses related to the Recapitalization....................................................... --
Principal payments on long-term debt........................................................... --
Proceeds from issuance of long-term debt to stockholders....................................... --
Proceeds from term loan........................................................................ --
Proceeds from issuance of long-term debt....................................................... --
Proceeds from options exercised and purchase of shares under employee stock purchase plan...... 405
Borrowings (repayments) of short-term debt, net................................................ 704
-----------
Net cash provided by (used in) financing activities.......................................... 1,109
-----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................................. (1,196)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................................... 2,269
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR......................................................... $ 1,073
-----------
-----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest..................................................................................... $ 4
-----------
-----------
Income taxes, net of refunds................................................................. $ 1,923
-----------
-----------
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
Issuance of debt (including unamortized debt discount) to stockholders for the purchase of
shares in the Recapitalization............................................................... $ --
-----------
-----------
Issuance of stock as compensation related to capital transactions in the Recapitalization...... $ --
-----------
-----------
Noncash recognition of paid-in capital related to exercise of stock options.................... $ 462
-----------
-----------
</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. 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.
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 2, 1997, and the unaudited consolidated statements of operations and cash
flows for the twenty-six week periods ended August 3, 1996 and August 2, 1997,
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.
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.
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. The Company's business is dependent to a significant degree upon close
relationships with its vendors. During fiscal 1997, the Company's largest
vendor, Nike, represented approximately 40% of its purchases.
F-7
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
STORE OPENING COSTS
Non-capital expenditures incurred in preparation for opening new retail
stores are expensed in the period each store opens.
STOCK-BASED COMPENSATION
Compensation cost is measured under the intrinsic value method in accordance
with Accounting Principles Bulletin No. 25. Pro forma disclosures of net income
and earnings per share are presented as if the fair value method had been
applied, as required under Statement of Financial Accounting Standards ("SFAS")
No. 123.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In preparing disclosures about the fair value of financial instruments,
management has assumed that the carrying amount approximates fair value for cash
and cash equivalents, receivables, short-term borrowings and accounts payable,
because of the short maturities of those instruments. The estimated fair values
of any long-term debt instruments outstanding at year end are based upon the
current interest rate environment and remaining term to maturity.
ADVERTISING COSTS
Costs incurred for producing and communicating advertising are expensed when
incurred.
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.
F-8
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In addition, the asset and liability method requires the adjustment of
previously deferred income taxes for changes in tax rates.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
During 1995, 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 February 4, 1996 with no significant
impact on its financial position or results of operations.
EARNINGS PER SHARE
Earnings per share for each of the periods presented is calculated by
dividing net income by the number of weighted average common shares outstanding.
Common Stock equivalents in the form of stock options are included in the
calculation utilizing the treasury stock method for all periods presented. All
earnings per share, weighted average shares outstanding, stock options, and
stock option per share amounts have been retroactively restated for all periods
presented to reflect the 1-for-6.1 reverse stock split discussed in Note 2.
Supplemental earnings per share is calculated by dividing net income after
adjustment for applicable interest expense of $1,491,000 (net of tax), by the
adjusted number of weighted average shares outstanding (6,134,261 shares after
giving effect to the number of shares to repay $31,012,000 of debt).
Supplemental earnings per share before and after an extraordinary item for the
fiscal year ended February 1, 1997 was $.70 and $.53, respectively.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, Earnings per Share. SFAS No. 128 revises the methodology to be
used in computing earnings per share ("EPS") such that the computations required
for primary and fully diluted EPS are to be replaced with "basic" and "diluted"
EPS. Basic EPS is computed by dividing net income by the weighted average number
of shares of common stock outstanding during the period. Diluted EPS is computed
in the same manner as fully diluted EPS, except that, among other changes, the
average share price for the period is used in all cases when applying the
treasury stock method to potentially dilutive outstanding options.
F-9
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company will adopt SFAS No. 128 effective January 31, 1998, and will
restate EPS for all periods presented. The Company anticipates that the amounts
reported for basic and diluted EPS will be as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWENTY-SIX WEEKS ENDED
----------------------------------------- ------------------------
JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
------------- ------------- ----------- ----------- -----------
UNAUDITED
<S> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income before extraordinary item................... $ 0.37 $ 0.42 $ 0.62 $ 0.22 $ 0.39
Extraordinary item, net............................ -- -- (0.24) -- --
----- ----- ----------- ----- -----
Basic earnings per share........................... $ 0.37 $ 0.42 $ 0.38 $ 0.22 $ 0.39
----- ----- ----------- ----- -----
----- ----- ----------- ----- -----
DILUTED EARNINGS PER SHARE
Income before extraordinary item................... $ 0.37 $ 0.42 $ 0.61 $ 0.21 $ 0.38
Extraordinary item, net............................ -- -- (0.24) -- --
----- ----- ----------- ----- -----
Diluted earnings per share......................... $ 0.37 $ 0.42 $ 0.37 $ 0.21 $ 0.38
----- ----- ----------- ----- -----
----- ----- ----------- ----- -----
</TABLE>
NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and display of "comprehensive income,"
which is the total of net income and all other non-owner changes in
stockholders' equity, and its components. The Company will adopt the standard in
fiscal 1999.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131, which supersedes SFAS Nos. 14,
18, 24 and 30, establishes new standards for segment reporting, using the
"management approach," in which reportable segments are based on the same
criteria on which management disaggregates a business for making operating
decisions and assessing performance. The Company is in the process of evaluating
SFAS No. 131 and its impact and will adopt the standard by fiscal 1999.
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
F-10
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. STOCKHOLDERS' INVESTMENT TRANSACTIONS (CONTINUED)
retirement of 34,220,000 shares (5,609,836 shares after giving retroactive
effect to the 1-for-6.1 reverse stock split discussed below) of common stock for
$1.00 per share ($6.10 per share after giving retroactive effect to the
1-for-6.1 reverse stock split discussed below) with $22,250,000 cash and the
issuance of $13,051,000 of debt (including unamortized debt discount), and (iv)
approved the issuance of 17,609,000 new shares (2,886,721 shares after giving
effect of the 1-for-6.1 reverse stock split discussed below) of common stock at
$1.00 per share ($6.10 per share after giving retroactive effect to the
1-for-6.1 reverse stock split discussed below) and $7,074,000 of debt (including
unamortized debt discount) for $24,250,000 cash. Expenses of $2,506,000 were
incurred in connection with the Recapitalization and reduced paid-in capital.
On September 13, 1996, the Company's Board of Directors approved a 1-for-6.1
reverse stock split of the Company's Common Stock. In addition, the Board of
Directors approved a plan of reorganization which included (i) reincorporating
the Company in the state of Delaware, (ii) decreasing the number of authorized
shares of common stock from 50,000,000 to 12,000,000 shares, and (iii)
authorizing 1,000,000 shares of preferred stock, par value $.01 per share.
On October 11, 1996, the Company completed its initial public offering of
2,300,000 shares of common stock at the initial public offering price of $16 per
share. The net proceeds to the Company of $32,868,000 were used to repay the
subordinated notes and accrued interest thereon, to repay the term loan and
accrued interest thereon, and to reduce borrowings under the revolving loan
agreement (see Note 3). All references in the financial statements to weighted
average shares outstanding, earnings per share, and stock options have been
restated to reflect the above stock splits and the reverse stock split.
3. LONG-TERM DEBT
The Company's long-term debt is as follows:
<TABLE>
<CAPTION>
FEBRUARY 3, FEBRUARY 1, AUGUST 2,
1996 1997 1997
--------------- --------------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Revolving loan agreement....................................... $ 12,140,000 $ 0 $ 704,000
Term loan agreement, due November 1997, unsecured.............. 1,000,000 0 0
Subordinated notes payable to stockholders, unsecured, 12%, due
November 2002, interest payable quarterly, beginning November
1, 1996...................................................... 16,000,000 0 0
Senior subordinated bridge notes payable to stockholders,
unsecured, 12%, due November 2000, interest payable
quarterly.................................................... 4,253,000 0 0
Unamortized debt discount...................................... (1,481,000) 0 0
--------------- --------------- -------------
31,912,000 0 704,000
Less current maturities........................................ 0 0 0
--------------- --------------- -------------
$ 31,912,000 $ 0 $ 704,000
--------------- --------------- -------------
--------------- --------------- -------------
</TABLE>
At February 1, 1997, and August 2, 1997 (unaudited) the Company maintained
an unsecured revolving credit facility (the "Facility") totaling $20,000,000
which expires October 31, 1999. There were no amounts outstanding under the
Facility at February 1, 1997, and there was $704,000 outstanding under the
Facility at August 2, 1997 (unaudited). Under the Facility, the Company may
borrow amounts against a base rate, a
F-11
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LONG-TERM DEBT (CONTINUED)
quoted costs of funds rate, or a LIBOR based rate. The average amount of
borrowings outstanding under the Facility during fiscal 1997 was $5,028,000, the
maximum amount outstanding was $6,261,000, and the weighted average interest
rate was 7.44%. The average amount of borrowings outstanding under the Facility
for the twenty-six week period ended August 2, 1997 (unaudited) was $200,000,
the maximum amount outstanding was $1,494,000 and the weighted average interest
rate was 6.56%.
The Company's Facility contains certain restrictive covenants common to such
agreements. The Company was in compliance with respect to all of its covenants
at February 1, 1997 and August 2, 1997 (unaudited).
From November 1, 1995 until October 31, 1996, the Company maintained a
revolving loan agreement totaling $25,000,000 which was secured by certain
levels of the Company's accounts receivable and inventories. In connection with
the Company's initial public offering, the amount outstanding under the
agreement was repaid and the revolving loan agreement was terminated. The
average amount of borrowings outstanding under the revolving loan agreement
during fiscal 1997 was $15,996,000, the maximum amount outstanding was
$18,522,000, and the weighted average interest rate was 9.0%. The Company's term
loan was also repaid in connection with the Company's initial public offering.
The interest rate on the amount outstanding at February 3, 1996, was 9.45%.
As part of the Recapitalization, in November 1995, the Company issued to
stockholders subordinated notes and senior subordinated bridge notes totaling
$20,125,000 with an original issue discount of $1,514,000 related solely to the
stockholders' subordinated notes. A portion of the proceeds of these borrowings
were utilized to retire existing debt. In January 1996, the Company issued
$128,000 of additional notes as satisfaction for interest on the Company's
bridge notes. The Company repaid the senior subordinated bridge notes in
February 1996. In connection with the Company's initial public offering in
October 1996, the subordinated notes were repaid. The repayment resulted in a
loss of $1,093,000 (net of the applicable income tax benefit of $677,000) which
is classified as an extraordinary item in the accompanying statement of
operations.
During most of fiscal 1996, the Company maintained working capital lines of
credit under which the average borrowings outstanding were $5,200,000, and the
maximum borrowings outstanding were $6,697,000. The weighted average interest
rate was approximately 9.0%.
The estimated fair value of the Company's long-term debt was $32,657,000 and
$704,000 (unaudited) at February 3, 1996 and August 2, 1997, 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-12
<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 1, 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
- -----------------------------------------
<S> <C>
1998..................................... $ 4,807,000
1999..................................... 4,683,000
2000..................................... 4,527,000
2001..................................... 3,760,000
2002..................................... 3,378,000
Thereafter............................... 10,805,000
-------------
$ 31,960,000
-------------
-------------
</TABLE>
Rental expense for all operating leases consisted of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED TWENTY-SIX WEEKS ENDED
------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
--------------- --------------- --------------- ------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Minimum rentals.............. $ 2,469,000 $ 3,080,000 $ 4,365,000 $ 1,952,000 $ 2,494,000
Contingent rentals........... 392,000 487,000 682,000 360,000 528,000
--------------- --------------- --------------- ------------- -------------
$ 2,861,000 $ 3,567,000 $ 5,047,000 $ 2,312,000 $ 3,022,000
--------------- --------------- --------------- ------------- -------------
--------------- --------------- --------------- ------------- -------------
</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 1995, 1996,
and 1997 was $108,000, $165,000, and $238,000, respectively, and was $47,000 and
$37,000 (unaudited) for the twenty-six week periods ended August 3, 1996, and
August 2, 1997, respectively.
6. RELATED-PARTY TRANSACTIONS
Subsequent to November 1, 1995, the Company's new majority stockholder 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 and $200,000 in fiscal 1996 and fiscal 1997, respectively, and was
$100,000 for the twenty-six week periods ended August 3, 1996 and August 2, 1997
(unaudited).
Prior to November 1, 1995, the Company's previous majority stockholders (now
minority stockholders) provided to the Company similar services as discussed
above. Fees for these services amounted to $0,
F-13
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RELATED-PARTY TRANSACTIONS (CONTINUED)
$95,000, and $256,000 in fiscal years 1997, 1996, and 1995, respectively, and $0
(unaudited) in the twenty-six week periods ended August 3, 1996, and August 2,
1997, respectively.
Subordinated notes payable to stockholders, net of the related unamortized
debt discount, were outstanding and included in long-term debt in the amount of
$18,772,000 at February 3, 1996. Related to these notes, the Company incurred
approximately $1,355,000 of interest expense in fiscal 1997. In fiscal 1996, the
Company incurred approximately $620,000 of interest expense, of which
approximately $492,000 was included in accrued expenses and approximately
$128,000 was capitalized into the senior subordinated bridge notes payable at
February 3, 1996.
In connection with services provided to the Company related to the
Recapitalization discussed in Note 2, the Company paid the majority stockholder
and minority stockholders approximately $575,000 and $63,000, respectively, and
issued to a minority stockholder 322,419 shares (52,855 shares after giving
retroactive effect to the 1-for-6.1 reverse stock split discussed in Note 2) of
common stock with an aggregate value of approximately $322,000. These costs were
recorded as a reduction to paid-in capital.
In November 1995, the Company entered into a sublease for one store with an
entity that is controlled by a minority stockholder which expires in June 2008.
Minimum lease payments were $27,000 and $191,000 in fiscal 1996 and fiscal 1997,
respectively. Future minimum lease payments under this noncancelable sublease
aggregate $2,082,000 as of August 2, 1997 (unaudited).
The Company leased its previous warehouse and office facilities under a
lease-purchase agreement which was fully paid in a previous year. Subsequent to
February 3, 1996, the Company sold an assignment of its interest in the lease on
this property to a related party for $850,000, which resulted in a gain of
approximately $513,000 in the fiscal year ended February 1, 1997.
On August 1, 1996, the Company entered into an agreement with a minority
stockholder which provided for an annual fee of $50,000 and the grant of 70,820
stock options discussed in Note 8 in consideration for his advisory services to
the Company. In consideration of these services, Mr. Anderson received a fee of
$25,000 (unaudited) in the twenty-six week period ended August 3, 1997. The
agreement has subsequently been terminated.
F-14
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
--------------- --------------- --------------- ------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal:
Current.................... $ 1,553,000 $ 1,476,000 $ 1,650,000 $ 561,000 $ 1,432,000
Deferred................... (237,000) (126,000) (90,000) (104,000) (102,000)
--------------- --------------- --------------- ------------- -------------
1,316,000 1,350,000 1,560,000 457,000 1,330,000
--------------- --------------- --------------- ------------- -------------
State:
Current.................... 192,000 178,000 203,000 69,000 176,000
Deferred................... (29,000) (14,000) (11,000) (12,000) (13,000)
--------------- --------------- --------------- ------------- -------------
163,000 164,000 192,000 57,000 163,000
--------------- --------------- --------------- ------------- -------------
Provision for income taxes... $ 1,479,000 $ 1,514,000 $ 1,752,000 $ 514,000 $ 1,493,000
--------------- --------------- --------------- ------------- -------------
--------------- --------------- --------------- ------------- -------------
</TABLE>
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
------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
--------------- --------------- --------------- ------------- -------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Tax provision computed at the
federal statutory rate
(34%)...................... $ 1,315,000 $ 1,345,000 $ 1,558,000 $ 455,000 $ 1,327,000
Effect of state income taxes,
net of benefits............ 127,000 118,000 151,000 44,000 128,000
Other........................ 37,000 51,000 43,000 15,000 38,000
--------------- --------------- --------------- ------------- -------------
$ 1,479,000 $ 1,514,000 $ 1,752,000 $ 514,000 $ 1,493,000
--------------- --------------- --------------- ------------- -------------
--------------- --------------- --------------- ------------- -------------
</TABLE>
Temporary differences which create deferred tax assets are detailed below:
<TABLE>
<CAPTION>
FEBRUARY 3, 1996 FEBRUARY 1, 1997 AUGUST 2, 1997
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT NONCURRENT CURRENT NONCURRENT CURRENT NONCURRENT
---------- ----------- ---------- ----------- ---------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Depreciation.......................... $ 0 $ 308,000 $ 0 $ 321,000 $ 0 $ 343,000
Inventory............................. 371,000 0 101,000 0 118,000 0
Accruals.............................. 153,000 0 539,000 0 625,000 0
Other................................. 14,000 0 (14,000) 0 (24,000) 0
---------- ----------- ---------- ----------- ---------- -----------
Deferred tax asset, net............... $ 538,000 $ 308,000 $ 626,000 $ 321,000 $ 719,000 $ 343,000
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
</TABLE>
The Company has not recorded a valuation allowance for deferred tax assets
as realization is considered more likely than not.
F-15
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The Company's fiscal year ended January 28, 1995 is currently under
examination by the Internal Revenue Service. While the outcome of the audit is
not determinable at this time, the Company does not expect the audit findings to
have a material adverse impact on the financial position of the Company
(unaudited).
8. STOCK OPTION AND STOCK PURCHASE PLANS
STOCK OPTION PLANS
The Company utilizes the intrinsic value method of accounting for stock
option grants. As the option exercise price is generally equal to the fair value
of the shares of common stock at the date of the option grant, no compensation
cost is recognized.
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. Options granted vest over a
three-year period for 25,369 shares and a five-year period for 40,983 shares and
expire on the tenth anniversary of the date of grant.
In fiscal 1997, the Company adopted the Hibbett Sporting Goods, Inc. 1996
Stock Option Plan, as amended (the "1996 Option Plan"). The 1996 Option Plan
authorizes the granting of stock options for the purchase of up to 238,566
shares of common stock. Options granted vest over a five-year period and expire
on the tenth anniversary of the date of grant. As of February 1, 1997, a total
of 110,370 shares were reserved for future grants under the 1996 Option Plan,
and options for 127,914 shares were outstanding at that date.
On August 1, 1996, the Company granted options pursuant to the agreement
discussed in Note 6 for 70,820 shares which became exercisable six months after
October 17, 1996, the date of the Company's initial public offering.
A summary of the status of the Company's stock options plans is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------
FEBRUARY 3, 1996 FEBRUARY 1, 1997
---------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- ----------------- --------- -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year......................... 0 $ 0.00 66,352 $ 4.49
Granted................................................ 66,352 4.49 199,016 11.07
Exercised.............................................. 0 0.00 0 0.00
Forfeited.............................................. 0 0.00 (282) 13.12
--------- ----- --------- ------
Outstanding at end of year............................... 66,352 $ 4.49 265,086 $ 9.42
--------- ----- --------- ------
--------- ----- --------- ------
Exercisable at end of year............................... 0 N/A 16,652 $ 3.96
--------- ----- --------- ------
--------- ----- --------- ------
Weighted average market value of
options granted......................................... $ 6.10 $ 14.99
----- ------
----- ------
</TABLE>
F-16
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)
The following table summarizes information about stock options outstanding
at February 1, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------- --------------------------------
NUMBER WEIGHTED NUMBER
OUTSTANDING AT WEIGHTED AVERAGE EXERCISABLE AT WEIGHTED
RANGE OF FEBRUARY 1, AVERAGE REMAINING EXERCISE FEBRUARY 1, AVERAGE
EXERCISE PRICE 1997 CONTRACTUAL LIFE (YEARS) PRICE 1997 EXERCISE PRICE
- ------------------------ --------------- --------------------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$1.89 to $6.10.......... 111,679 9.0 $ 5.14 16,652 $ 3.96
$8.48 to $16.00......... 153,407 5.4 $ 12.53 None N/A
</TABLE>
Compensation costs of $500,000 were accrued in fiscal 1997 related to the
difference in the estimated market value of the stock and the nonqualified
option exercise price, including the related market value of the stock and the
nonqualified option exercise price, including the related tax benefit. As these
options are exercised, the excess of the proceeds and accruals over the par
value will be credited to paid-in capital.
If the Company had recorded compensation costs in accordance with SFAS No.
123 under the fair value based method (using the Black-Scholes option pricing
model), the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
1/28/95 2/3/96 2/1/97
----------- ----------- -----------
<S> <C> <C> <C>
Net income--as reported......................................... $ 2,389 $ 2,443 $ 1,737
Net income--pro forma........................................... N/A 2,420 1,510
Net income per share--as reported............................... .37 .42 .37
Net income per share--pro forma................................. N/A .41 .32
</TABLE>
The weighted average assumptions for determining compensation costs under
the fair value method included (i) a risk-free interest rate based on
zero-coupon governmental issues on each grant date with the maturity equal to
the expected term of the options (5.8% and 6.1% for fiscal 1996 and 1997,
respectively), (ii) an expected forfeiture rate of 2.7%, (iii) an expected stock
volatility of 45%, and (iv) no expected dividend yield. The weighted average
fair value of options granted in fiscal 1996 and fiscal 1997 was $3.53 and
$7.82, respectively.
OTHER PLANS
On September 13, 1996, the Company adopted an Employee Stock Purchase Plan
and Outside Director Stock Plan reserving 75,000 shares and 50,000 shares of the
Company's Common Stock, respectively, for purchase by the employees and
directors at 85% and 100% of the fair value of the Common Stock, respectively.
On January 10, 1997, the Company granted 10,000 options under the Outside
Director Stock Plan at an exercise price of $12.13 (market value at the date of
grant) which vest immediately and expire on the earlier of the tenth anniversary
of the grant or one year from the date on which the director is no longer
eligible. The Employee Stock Purchase Plan became effective on April 1, 1997.
F-17
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 (UNAUDITED)
STOCK OPTION GRANT
On May 5, 1997, the Company granted 52,500 options under the 1996 Option
Plan. The options become exercisable 20% at the end of the following five
successive years and have an exercise price of $15.00 per share, the market
value on the grant date.
SECONDARY OFFERING
The Company is proceeding with the Offering of 200,000 shares of common
stock at an assumed public offering price of $29.50 per share (the last reported
sale price on October 7, 1997). The net proceeds to the Company (after deducting
underwriting discounts and commissions and estimated offering expenses) of
approximately $5,100,000 will be used to fund future growth and for working
capital and general corporate purposes.
F-18
<PAGE>
[Inside Back Cover: A map showing the states in which the Company operates
stores as of September 15, 1997 and the states containing potential expansion
markets with the title "Hibbett Store Locations--109 Stores in 14 States" and
color picture of a Company advertisement on the side of a truck]
<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 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 other than those to which it relates
or 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.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 8
Use of Proceeds................................. 12
Capitalization.................................. 12
Dividend Policy................................. 12
Price Range of Common Stock..................... 13
Selected Consolidated Financial and Operating
Data.......................................... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business........................................ 22
Management...................................... 31
Principal and Selling Stockholders.............. 38
Certain Transactions............................ 41
Shares Eligible for Future Sale................. 43
Description of Capital Stock.................... 43
Underwriting.................................... 47
Legal Matters................................... 48
Experts......................................... 48
Additional Information.......................... 48
Index to Consolidated Financial
Statements.................................... F-1
</TABLE>
1,133,197 SHARES
[LOGO]
COMMON STOCK
---------
P R O S P E C T U S
, 1997
----------
SMITH BARNEY INC.
NATIONSBANC MONTGOMERY SECURITIES, INC.
THE ROBINSON-HUMPHREY
COMPANY
BANCAMERICA ROBERTSON STEPHENS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee................................................ $ 11,008
NASD Filing Fee................................................. 4,133
NASDAQ/National Market filing fee...............................
Transfer Agent's Fees...........................................
Printing and Engraving..........................................
Legal Fees......................................................
Accounting Fees.................................................
Blue Sky Fees...................................................
Miscellaneous...................................................
---------
Total....................................................... $
---------
---------
</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 September 1, 1994, 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.
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
II-1
<PAGE>
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 were exercisable beginning six months after the closing of
the initial public offering and ending nine months after the closing of the
initial public offering. Section 4(2) of the Act was relied upon for exemption
from the registration requirements. In June 1997, Mr. Anderson exercised these
options (partially on a cashless basis) and received 57,206 shares of Common
Stock in exchange for $392,368 in cash and on a cashless basis for 13,614 shares
of Common Stock and received 57,206 shares of Common Stock. Section 3(a)(9) 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 Certificate of Incorporation of the Registrant filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended February 1, 1997, and incorporated herein by reference.
3.2 Bylaws of the Registrant filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended February 1, 1997, and incorporated herein by reference.
4.1** Form of Share Certificate
5.1+ Opinion of Latham & Watkins
10.1.1 Revolving Credit Facility dated as of October 31, 1996 between the Registrant, Hibbett Team Sales,
Inc. and Amsouth Bank of Alabama filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended February 1, 1997, and incorporated herein by reference
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 Amendment No. 2 to the Stockholders Agreement filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended February 1, 1997, and incorporated herein by reference.
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 effective as of October 10, 1996)
10.8** The Registrant's 1996 Amended and Restated Stock Option Plan ("1996 Plan")
10.9** The Registrant's Employee Stock Purchase Plan
10.10** The Registrant's Stock Plan for Outside Directors
10.11.1* Lease Agreement dated as of February 12, 1996 between QRS 12-14 (AL), Inc. and Sports Wholesale, Inc.
(the "Lease Agreement")
10.11.2 Landlord's Waiver and Consent re: Lease Agreement dated February 12, 1996 by QRS 12-14 (AL), Inc.
filed as an exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1
(Registration No. 333-07023), filed with the Securities and Exchange Commission July 16, 1996, and
incorporated herein by reference
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------
<C> <S>
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 Latham & Watkins (included in Exhibit 5.1 to this Registration Statement)
</TABLE>
- ------------------------
* Filed as an exhibit to the Company's Registration Statement on Form S-1,
(Registration No. 333-07023) filed with the Securities and Exchange
Commission June 27, 1996, and incorporated herein by reference.
** Filed as an exhibit to Amendment No. 2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-07023) filed with the Securities
and Exchange Commission September 16, 1996, and incorporated herein by
reference.
+ Filed herewith.
++ Previously filed.
(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
(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 controlling persons of
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 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Birmingham, State of Alabama, on the 20th day of
October, 1997.
HIBBETT SPORTING GOODS, INC.
By /S/ SUSAN H. FITZGIBBON
------------------------------------
Susan H. Fitzgibbon
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 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 20, 1997
- ------------------------------------------ Director
Michael J. Newsome
/s/ SUSAN H. FITZGIBBON Principal Financial Officer, October 20, 1997
- ------------------------------------------ Controller and Principal Accounting
Susan H. Fitzgibbon Officer
* Director October 20, 1997
- ------------------------------------------
Clyde B. Anderson
* Director October 20, 1997
- ------------------------------------------
Thomas A. Saunders, III
* Director October 20, 1997
- ------------------------------------------
F. Barron Fletcher, III
* Director October 20, 1997
- ------------------------------------------
John F. Megrue
* Director October 20, 1997
- ------------------------------------------
Carl Kirkland
* Director October 20, 1997
- ------------------------------------------
H. Ray Compton
*By /s/ SUSAN H. FITZGIBBON
- ------------------------------------------
Susan H. Fitzgibbon
Attorney-in-Fact
</TABLE>
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 consolidated financial statements of HIBBETT SPORTING GOODS, INC. (a
Delaware corporation, formerly an Alabama corporation) AND SUBSIDIARIES,
included in this registration statement and have issued our report dated March
18, 1997. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule II included in Part 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.
/S/ ARTHUR ANDERSEN LLP
- --------------------------------------------------------------------------------
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 18, 1997
S-1
<PAGE>
HIBBETT SPORTING GOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
TWENTY-SIX WEEK PERIOD
FISCAL YEAR ENDED ENDED
------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
JANUARY 28, FEBRUARY 3, FEBRUARY 1, AUGUST 3, AUGUST 2,
1995 1996 1997 1996 1997
----------- ----------- ----------- ---------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance of allowance for doubtful accounts at
beginning of period........................... $ 19,000 $ 61,000 $ 86,000 $ 86,000 $ 134,000
Charged to costs and expenses................... 43,000 62,000 71,000 24,000 30,000
Write-offs net of recoveries.................... (1,000) (37,000) (23,000) (5,000) (16,000)
----------- ----------- ----------- ---------- ----------
Balance of allowance for doubtful accounts at
end of period................................. $ 61,000 $ 86,000 $ 134,000 $ 105,000 $ 148,000
----------- ----------- ----------- ---------- ----------
----------- ----------- ----------- ---------- ----------
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
1+ Form of Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended February 1, 1997, and incorporated herein by reference
3.2 Bylaws of the Registrant filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal
year ended February 1, 1997, and incorporated herein by reference
4.1** Form of Share Certificate
5.1+ Opinion of Latham & Watkins
10.1.1 Revolving Credit Facility dated as of October 31, 1996 between the Registrant, Hibbett Team Sales, Inc.
and Amsouth Bank of Alabama filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended February 1, 1997, and incorporated herein by reference
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 Amendment No. 2 to the Stockholders Agreement filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended February 1, 1997, and incorporated herein by reference
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 effective as of October 10, 1996)
10.8** The Registrant's 1996 Amended and Restated Stock Option Plan ("1996 Plan")
10.9** The Registrant's Employee Stock Purchase Plan
10.10** The Registrant's Stock Plan for Outside Directors
10.11.1* Lease Agreement dated as of February 12, 1996 between QRS 12-14 (AL), Inc. and Sports Wholesale, Inc.
(the "Lease Agreement")
10.11.2 Landlord's Waiver and Consent re: Lease Agreement dated February 12, 1996 by QRS 12-14 (AL), Inc. filed
as an exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No.
333-07023), filed with the Securities and Exchange Commission July 16, 1996, and incorporated herein by
reference
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 Latham & Watkins (included in Exhibit 5.1 to this Registration Statement)
</TABLE>
- ------------------------
* Filed as an exhibit to the Company's Registration Statement on Form S-1,
(Registration No. 333-07023) filed with the Securities and Exchange
Commission June 27, 1996, and incorporated herein by reference.
** Filed as an exhibit to Amendment No. 2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-07023) filed with the Securities
and Exchange Commission September 16, 1996, and incorporated herein by
reference.
+ Filed herewith.
++ Previously filed.
<PAGE>
DRAFT - October 20, 1997
#44366v6
1,133,197 Shares
HIBBETT SPORTING GOODS, INC.
Common Stock
UNDERWRITING AGREEMENT
__________, 1997
SMITH BARNEY INC.
NATIONSBANC MONTGOMERY SECURITIES, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
BANCAMERICA ROBERTSON STEPHENS
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Hibbett Sporting Goods, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell an aggregate of 200,000 shares of its common stock,
$0.01 par value per share, to the several Underwriters named in Schedule II
hereto (the "Underwriters") and the persons named in Part A of Schedule I hereto
(the "Selling Stockholders") propose to sell to the several Underwriters an
aggregate of 933,197 shares of common stock of the Company. The Company and the
Selling Stockholders are hereinafter sometimes referred to as the "Sellers".
The Company's common stock, $0.01 par value, is hereinafter referred to as the
"Common Stock" and the 200,000 shares of Common Stock to be issued and sold to
the Underwriters by the Company and the 933,197 shares of Common Stock to be
sold to the Underwriters by the Selling Stockholders are hereinafter referred to
as the "Firm Shares". The Selling Stockholders listed in Part B of Schedule I
hereto also propose to sell to the Underwriters, upon the terms and conditions
set forth in Section 2 hereof, up to an additional 169,980 shares (the
"Additional Shares") of Common Stock. The Firm Shares and the Additional Shares
are hereinafter collectively referred to as the "Shares".
The Company and the Selling Stockholders wish to confirm as follows their
respective agreements with you (the "Representatives") and the other several
Underwriters on whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.
<PAGE>
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (the "registration
statement"), including a prospectus subject to completion relating to the
Shares. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes effective, or, if the registration statement
became effective prior to the execution of this Agreement, as supplemented or
amended prior to the execution of this Agreement. If it is contemplated, at the
time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared effective before the
offering of the Shares may commence, the term "Registration Statement" as used
in this Agreement means the registration statement as amended by said
post-effective amendment. If an abbreviated registration statement is prepared
and filed with the Commission in accordance with Rule 462(b) under the Act ("an
Abbreviated Registration Statement"), the term "Registration Statement" as used
in this Agreement includes the Abbreviated Registration Statement. The term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the Registration Statement at the time of
the initial filing of the Registration Statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus.
2. AGREEMENTS TO SELL AND PURCHASE. Subject to such adjustments as you
may determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of [$_______] per Share (the "purchase price per share"), the number of
Firm Shares which bears the same proportion to the aggregate number of Firm
Shares to be issued and sold by the Company as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule
-2-
<PAGE>
II hereto (or such number of Firm Shares increased as set forth in Section 12
hereof) bears to the aggregate number of Firm Shares to be sold by the Company
and the Selling Stockholders.
Subject to such adjustments as you may determine in order to avoid
fractional shares, each Selling Stockholder agrees, subject to all the terms and
conditions set forth herein, to sell to each Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Stockholders herein contained and subject to all the terms and conditions set
forth herein, each Underwriter, severally and not jointly, agrees to purchase
from each Selling Stockholder at the purchase price per share that number of
Firm Shares which bears the same proportion to the number of Firm Shares set
forth opposite the name of such Selling Stockholder in Schedule I hereto as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule II hereto (or such number of Firm Shares increased as set forth in
Section 12 hereof) bears to the aggregate number of Firm Shares to be sold by
the Company and the Selling Stockholders.
The Selling Stockholders listed in Part B of Schedule I hereto also agree,
subject to all the terms and conditions set forth herein, to sell to the
Underwriters, and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Selling Stockholders listed in Part B of
Schedule I hereto, at the purchase price per share, pursuant to an option (the
"over-allotment option") which may be exercised at any time and from time to
time prior to 9:00 P.M., New York City time, on the 30th day after the date of
the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday,
on the next business day thereafter when the New York Stock Exchange is open for
trading), up to an aggregate of 169,980 Additional Shares (the maximum number of
Additional Shares which each Selling Stockholder agrees to sell upon the
exercise by the Underwriters of the over-allotment option is set forth opposite
their respective names in Part B of Schedule I). Additional Shares may be
purchased only for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. The number of Additional Shares which the
Underwriters elect to purchase upon any exercise of the over-allotment option
shall be provided by each Selling Stockholder who has agreed to sell Additional
Shares in proportion to the respective maximum numbers of Additional Shares
which each such Selling Stockholder has agreed to sell. Upon any exercise of
the over-allotment option, each Underwriter, severally and not jointly, agrees
to purchase from each Selling Stockholder who has agreed to sell Additional
Shares the number of Additional Shares (subject to such adjustments as you may
determine in order to avoid fractional shares) which bears the same proportion
to the number of Additional Shares to be sold by each Selling Stockholder who
has agreed to sell Additional Shares as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule II hereto (or such number of
Firm Shares
-3-
<PAGE>
increased as set forth in Section 12 hereof) bears to the aggregate number of
Firm Shares to be sold by the Company and the Selling Stockholders.
Certificates in transferable form for the Shares (including any
Additional Shares) which each of the Selling Stockholders agrees to sell
pursuant to this Agreement have been placed in custody with SunTrust Bank,
Atlanta (the "Custodian") for delivery under this Agreement pursuant to a
Custody Agreement and Power of Attorney (the "Custody Agreement") executed by
each of the Selling Stockholders appointing _______________ and
_______________ as agents and attorneys-in-fact (the "Attorneys-in-Fact").
Each Selling Stockholder agrees that (i) the Shares represented by the
certificates held in custody pursuant to the Custody Agreement are subject to
the interests of the Underwriters, the Company and each other Selling
Stockholder, (ii) the arrangements made by the Selling Stockholders for such
custody are, except as specifically provided in the Custody Agreement,
irrevocable, and (iii) the obligations of the Selling Stockholders hereunder
and under the Custody Agreement shall not be terminated by any act of such
Selling Stockholder or by operation of law, whether by the death or
incapacity of any Selling Stockholder or the occurrence of any other event.
If any Selling Stockholder shall die or be incapacitated or if any other
event shall occur before the delivery of the Shares hereunder, certificates
for the Shares of such Selling Stockholder shall be delivered to the
Underwriters by the Attorneys-in-Fact in accordance with the terms and
conditions of this Agreement and the Custody Agreement as if such death or
incapacity or other event had not occurred, regardless of whether or not the
Attorneys-in-Fact or any Underwriter shall have received notice of such
death, incapacity or other event. Each Attorney-in-Fact is authorized, on
behalf of each of the Selling Stockholders, to execute this Agreement and any
other documents necessary or desirable in connection with the sale of the
Shares to be sold hereunder by such Selling Stockholder, to make delivery of
the certificates for such Shares, to receive the proceeds of the sale of such
Shares, to give receipts for such proceeds, to pay therefrom any expenses to
be borne by such Selling Stockholder in connection with the sale and public
offering of such Shares, to distribute the balance thereof to such Selling
Stockholder, and to take such other action as may be necessary or desirable
in connection with the transactions contemplated by this Agreement. Each
Attorney-in-Fact agrees to perform his duties under the Custody Agreement.
3. TERMS OF PUBLIC OFFERING. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
-4-
<PAGE>
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on __________, 1997 (the "Closing Date"). The place of closing
for the Firm Shares and the Closing Date may be varied by agreement among you,
the Company and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
Smith Barney Inc. at such time on such date (the "Option Closing Date"), which
may be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company and the
Attorneys-in-Fact of the Underwriters' determination to purchase a number,
specified in such notice, of Additional Shares. The place of closing for any
Additional Shares and the Option Closing Date for such Shares may be varied by
agreement among you, the Company and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
or any Abbreviated Registration Statement to be declared effective before the
offering of the Shares may commence, the Company will endeavor to cause the
Registration Statement or such post-effective amendment to become effective as
soon as possible and will advise you promptly and, if requested by you, will
confirm such advice in writing, when the Registration Statement or such
post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the
-5-
<PAGE>
Registration Statement, any Prepricing Prospectus or the Prospectus or for
additional information; (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) within the period of
time referred to in paragraph (f) below, of any change in the Company's
condition (financial or other), business, assets, liabilities, net worth or
results of operations, or of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Act or the regulations thereunder to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Act or any other law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
(c) The Company will furnish to you, without charge, five signed
copies of the Registration Statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits
thereto, and will also furnish to you, without charge, such number of conformed
copies of the Registration Statement as originally filed and of each amendment
thereto, but without exhibits, as you may request.
(d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or provided a copy of prior to the filing
thereof or to which you shall object after being so advised or (ii) so long as,
in the opinion of counsel for the Underwriters, a Prospectus is required to be
delivered in connection with sales by any Underwriter or dealer, file any
information, documents or reports pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), without delivering a copy of such
information, documents or reports to you, as Representatives of the
Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.
-6-
<PAGE>
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. If during such
period of time any event shall occur that in the judgment of the Company or in
the opinion of counsel for the Underwriters is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Prospectus to comply with the Act or any other law, the Company will
forthwith prepare and, subject to the provisions of paragraph (d) above, file
with the Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you, as Representatives of
the several Underwriters, agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may reasonably
designate and will file such consents to service of process or other documents
necessary or appropriate in order to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject.
(h) The Company will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of
-7-
<PAGE>
such period, which consolidated earnings statement shall satisfy the provisions
of Section ll(a) of the Act.
(i) During the period of five years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to stockholders or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may reasonably request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 12 hereof or by notice given by you terminating this
Agreement pursuant to Section 12 or Section 13 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company or the Selling Stockholders to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the Representatives for all out-of-pocket expenses (including, without
limitation, reasonable fees and expenses of counsel for the Underwriters)
incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectus under the caption "Use of Proceeds."
(l) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(m) Except as provided in this Agreement, the Company will not sell,
offer to sell, solicit an offer to buy, contract to sell, grant any options or
warrants to purchase or otherwise issue, transfer or dispose of, in a public
sale, public distribution or other public disposition, any Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, for
a period of 180 days after the date of the Prospectus, without the prior written
consent of Smith Barney Inc. The foregoing sentence shall not apply to (x) the
issuance by the Company of shares of Common Stock (i) upon the exercise of any
options outstanding on the date hereof or (ii) upon the exercise of any options
granted pursuant to the Company's employee stock option program, (y) the
issuance by the Company of shares under the Company's employee stock purchase
program or the outside director stock plan or (z) the granting of options to
purchase shares of Common Stock under the Company's employee stock option plan.
(n) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of its
current officers and directors and each of its stockholders designated by you.
-8-
<PAGE>
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the Shares listed,
subject to notice of issuance, on the Nasdaq National Market concurrently with
the effectiveness of the Registration Statement and to maintain the inclusion of
the Shares thereon.
(q) The Company will use its reasonable best efforts to do and
perform all things required or necessary to be done and performed under this
Agreement by it prior to the Closing Date or the Option Closing Date, as the
case may be, and to satisfy all conditions precedent to the delivery of the
Shares.
6. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each of the Selling
Stockholders agrees with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the extent necessary
to cause the Registration Statement or any post-effective amendment thereto to
become effective at the earliest possible time.
(b) Such Selling Stockholder will pay all Federal and other taxes, if
any on the transfer or sale of the Shares being sold by the Selling Stockholder
to the Underwriters.
(c) Such Selling Stockholder will do or perform all things required
to be done or performed by the Selling Stockholder prior to the Closing Date or
the Option Closing Date, as the case may be, to satisfy all conditions precedent
to the delivery of the Shares pursuant to this Agreement.
(d) Such Selling Stockholder has executed or will execute a "lock-up"
letter as provided in Section 5(n) above and will not sell, offer to sell,
solicit an offer to buy, contract to sell or otherwise transfer or dispose of
any Common Stock, except for the sale of Shares to the Underwriters pursuant to
this Agreement, prior to the expiration of 90 days after the date of the
Prospectus, without the prior written consent of Smith Barney Inc.
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Stockholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
-9-
<PAGE>
(f) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 5(f) hereof, of any change in the Company's condition
(financial or other), business, prospects, assets, liabilities, net worth or
results of operations or of any change in information relating to such Selling
Stockholder or the Company or any new information relating to the Company or
relating to any matter stated in the Prospectus or any amendment or supplement
thereto which comes to the attention of such Selling Stockholder that suggests
that any statement made in the Registration Statement or the Prospectus (as then
amended or supplemented) is or may be untrue in any material respect or that the
Registration Statement or Prospectus (as then amended or supplemented) omits or
may omit to state a material fact or a fact necessary to be stated therein in
order to make the statements therein not misleading in any material respect, or
of the necessity to amend or supplement the Prospectus (as then amended or
supplemented) in order to comply with the Act or any other law.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act, and did not or will not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus.
(b) The Registration Statement in the form in which it became or
becomes effective and also in such form as it may be when any post-effective
amendment thereto shall become effective and the Prospectus and any supplement
or amendment thereto when filed with the Commission under Rule 424(b) under the
Act, complied or will comply in all material respects with the provisions of the
Act and did not or will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to any Underwriter furnished to the Company
in writing by or on behalf of any Underwriter through you expressly for use
therein.
(c) All the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or similar rights; the Shares to be issued and sold
by the Company have been duly authorized and, when issued and delivered to the
Underwriters
-10-
<PAGE>
against payment therefor in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable and free of any
preemptive or similar rights; and the capital stock of the Company conforms to
the description thereof in the Registration Statement and the Prospectus.
(d) The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries (as hereinafter defined) taken as
a whole (a "Material Adverse Effect").
(e) All the Company's subsidiaries (collectively, the "Subsidiaries")
are listed in an exhibit to the Registration Statement. Each Subsidiary is a
corporation duly organized, validly existing and in good standing in the
jurisdiction of its incorporation, with full corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus, and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of such Subsidiary; all the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned by the Company directly, or indirectly through one
of the other Subsidiaries, free and clear of any lien, adverse claim, security
interest, equity or other encumbrance.
(f) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or to which
any of their respective properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement that
are not described or filed as required by the Act.
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(g) Neither the Company nor any of the Subsidiaries is in violation
of its certificate or articles of incorporation or by-laws, or other
organizational documents, or of any law, statute, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries, or in default in any
material respect in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, except for such violations and
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect or that are disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto).
(h) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company, nor the consummation
by the Company of the transactions contemplated hereby (A) requires any consent,
approval, authorization or other order of, or registration, declaration, notice
or filing to or with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required for the
registration of the Shares under the Act and the Exchange Act and compliance
with the securities or Blue Sky laws of various jurisdictions, all of which have
been or will be effected in accordance with this Agreement) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
the certificate or articles of incorporation or bylaws, or other organizational
documents, of the Company or any of the Subsidiaries or (B) except as disclosed
in the Registration Statement and the Prospectus (or any amendment or supplement
thereto), conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, any agreement, indenture, lease or other
instrument to which the Company or any of the Subsidiaries is a party or by
which any of them or any of their respective properties may be bound, or
violates or will violate any statute, law, rule, regulation or filing or
judgment, injunction, order or decree applicable to the Company or any of the
Subsidiaries or any of their respective properties, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by which any of them
may be bound or to which any of the property or assets of any of them is
subject, except for such requirements, conflicts, breaches, defaults, violations
and liens specified in clauses (A) or (B) above that, individually or in the
aggregate, would not have a Material Adverse Effect.
(i) The accountants, Arthur Andersen LLP, who have certified or shall
certify the financial statements included in
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the Registration Statement and the Prospectus (or any amendment or supplement
thereto) are independent public accountants as required by the Act.
(j) The financial statements, together with related schedules and
notes, included in the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and cash flows of the Company and the
Subsidiaries on the basis stated in the Registration Statement at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data included in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) are accurately presented and prepared
on a basis consistent with such financial statements and the books and records
of the Company and the Subsidiaries.
(k) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by applicable laws, and
subject to the effect of applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and equitable principles of general
applicability.
(l) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any material change in the
capital stock, or material increase in the short-term debt or long-term debt
(except for debt incurred under the Company's revolving credit agreement), of
the Company or any of the Subsidiaries, or any material adverse change, or any
development involving or which may reasonably be expected to involve, a
prospective material adverse change, in the condition (financial or other),
business, net worth or results of operations of the Company and the Subsidiaries
taken as a whole.
(m) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Prospectus as being
owned by it, free and clear of all liens, claims, security interests or other
encumbrances except such as
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are described in the Registration Statement and the Prospectus or in a document
filed as an exhibit to the Registration Statement and all the property described
in the Prospectus as being held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable leases except
as described in the Registration Statement and the Prospectus (or any amendment
or supplement thereto).
(n) The Company has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Shares,
will not distribute any offering material in connection with the offering and
sale of the Shares other than the Registration Statement, the Prepricing
Prospectus, the Prospectus or other materials, if any, permitted by the Act.
(o) Neither the Company nor any of the Subsidiaries has violated any
applicable existing federal, state or local laws, statutes, rules or
regulations, including, but not limited to, (i) any federal, state or local law
or regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws") or (ii) any provisions of the Employee
Retirement Income Security Act and the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(p) There is (i) no significant unfair labor practice complaint
pending against the Company or any of the Subsidiaries or, to the best knowledge
of the Company, threatened against any of them, before the National Labor
Relations Board or any state or local labor relations board or in any federal or
state court and (ii) no significant strike, labor dispute, slowdown or stoppage
pending against the Company of any of the Subsidiaries or, to the best knowledge
of the Company, threatened against any of them, except for such actions
specified in clause (i) or (ii) above which, singly or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(q) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits"), including, without limitation, under all applicable
Environmental Laws, as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus; the Company and each of
the Subsidiaries has fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set
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forth in the Prospectus; except for such permits which, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(r) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) To the Company's knowledge, neither the Company nor any of the
Subsidiaries nor any employee or agent of the Company or any Subsidiary has made
any payment of funds of the Company or any Subsidiary or received or retained
any funds in violation of any applicable law, rule or regulation, which payment,
receipt or retention of funds is of a character required to be disclosed in the
Prospectus, except for such violations which, singly or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(t) The Company and each of the Subsidiaries have filed all tax
returns required to be filed, which returns are complete and correct in all
material respects, and neither the Company nor any Subsidiary is in default in
the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto, other than those (i) being contested in good
faith and for which adequate reserves have been provided or (ii) which would not
have a Material Adverse Effect.
(u) Except for rights which have been waived, no holder of any
security of the Company has any right to require registration of shares of
Common Stock or any other security of the Company because of the filing of the
Registration Statement or consummation of the transactions contemplated by this
Agreement.
(v) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by them or any of them or necessary
for the conduct of their respective businesses, and the Company is not aware of
any claim to the contrary or any challenge by any other person to the rights of
the Company and the Subsidiaries with respect to the foregoing, except for such
intellectual property which, singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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(w) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed therein by
Item 404 of Regulation S-K of the Commission.
(x) The Company is not now, and after sale of the Shares to be sold
by it hereunder and application of the net proceeds from such sale as described
in the Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
(y) The Company has filed in a timely manner each document or report
required to be filed by it pursuant to the Exchange Act and the rules and
regulations thereunder; each such document or report at the time it was filed
conformed to the requirements of the Exchange Act and the rules and regulations
thereunder; and none of such documents or reports contained an untrue statement
of any material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(z) The Company has complied with all provisions of Florida Statutes,
Section 517.075, relating to issuers doing business with Cuba.
8. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder now has, and on the Closing Date and any
Option Closing Date will have, valid and marketable title to the Shares to be
sold by such Selling Stockholder, free and clear of any lien, claim, security
interest or other encumbrance, including, without limitation, any restriction on
transfer.
(b) Such Selling Stockholder now has, and on the Closing Date and any
Option Closing Date will have, full legal right, power and authorization, and
any approval required by law, to sell, assign, transfer and deliver such Shares
in the manner provided in this Agreement, and upon delivery of and payment for
such Shares hereunder, the several Underwriters will acquire valid and
marketable title to such Shares free and clear of any lien, claim, security
interest, or other encumbrance.
(c) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling Stockholder
and are the valid and binding agreements of such Selling Stockholder enforceable
against such Selling Stockholder in accordance with their terms, except as
rights to indemnity and contribution hereunder may be limited by applicable
laws, and subject to the effect of applicable bankruptcy,
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<PAGE>
insolvency or similar laws affecting creditors' rights generally and equitable
principles of general applicability.
(d) Neither the execution and delivery of this Agreement or the
Custody Agreement by or on behalf of such Selling Stockholder nor the
consummation of the transactions herein or therein contemplated by or on behalf
of such Selling Stockholder requires any consent, approval, authorization or
other order of, or registration, declaration, notice or filing to or with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (except such as may be required under the Act and the Exchange Act
or under state securities or Blue Sky laws governing the purchase and
distribution of the Shares), or conflicts or will conflict with, or constitutes
or will constitute a breach of, or a default under, any agreement, indenture,
lease or other instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is or may be bound or to which any of such
Selling Stockholder's property or assets is subject, or violates or will violate
any applicable statute, law, rule, regulation or filing or judgment, injunction,
order or decree applicable to such Selling Stockholder or to any property or
assets of such Selling Stockholder.
(e) The Registration Statement and the Prospectus, insofar as they
relate to such Selling Stockholder, do not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) Such Selling Stockholder does not have any knowledge or any
reason to believe that the Registration Statement or the Prospectus (or any
amendment or supplement thereto) contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(g) The representations and warranties of such Selling Stockholder in
the Custody Agreement are, and on the Closing Date and any Option Closing Date
will be, true and correct.
(h) Such Selling Stockholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares, except for the lock-up arrangements described
in the Prospectus.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to indemnify
and hold harmless each of you and each other Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of
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the Exchange Act from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Prepricing Prospectus or in the Registration
Statement or the Prospectus or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to such Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through you expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph (a) with
respect to any Prepricing Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Shares by such Underwriter to any person if a copy of the
Prospectus, as then amended or supplemented, shall not have been delivered or
sent to such person within the time required by the Act and the regulations
thereunder, and the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in such Prepricing Prospectus was
corrected in the Prospectus, as then amended or supplemented, provided that the
Company has delivered the Prospectus, as then amended or supplemented, to the
several Underwriters in requisite quantity on a timely basis to permit such
delivery or sending. The foregoing indemnity agreement shall be in addition to
any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing to pay such fees and expenses, (ii) the indemnifying parties have failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and any indemnifying party and such
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying
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party by the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the indemnifying party shall not have the right to assume the defense
of such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, the Company, its directors, its
officers who sign the Registration Statement, and any person who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
each Underwriter, but only with respect to the information furnished in writing
by or on behalf of such Selling Stockholder expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to such Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through you expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph (a) with
respect to any Prepricing Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Shares by such Underwriter to any person if a copy of the
Prospectus, as then amended or supplemented, shall not have been delivered or
sent to such person
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within the time required by the Act and the regulations thereunder, and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such Prepricing Prospectus was corrected in the
Prospectus, as then amended or supplemented, provided that the Company has
delivered the Prospectus, as then amended or supplemented, to the several
Underwriters in requisite quantity on a timely basis to permit such delivery or
sending. The foregoing indemnity agreement shall be in addition to any
liability which the Selling Stockholders may otherwise have. If any action,
suit or proceeding shall be brought against any Underwriter, any such
controlling person of any Underwriter, the Company, any of its directors, any
such officer, or any such controlling person of the Company, based on the
Registration Statement, the Prospectus or any Prepricing Prospectus or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against any Selling Stockholder pursuant to this paragraph (c), such Selling
Stockholder shall have the rights and duties given to the indemnifying parties
by paragraph (b) above (except that if any indemnifying party shall have assumed
the defense thereof such Selling Stockholder shall not be required to do so, but
may employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Selling Stockholder's
expense), and each Underwriter, each such controlling person of any Underwriter,
the Company, its directors, any such officer, and any such controlling person of
the Company shall have the rights and duties given to the Underwriters by
paragraph (b) above. The foregoing indemnity agreement shall be in addition to
any liability which any Selling Stockholder may otherwise have.
(d) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each Selling Stockholder, and any person who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from the Company and the
Selling Stockholders to each Underwriter, but only with respect to information
relating to such Underwriter furnished in writing by or on behalf of such
Underwriter through you expressly for use in the Registration Statement, the
Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto.
If any action, suit or proceeding shall be brought against the Company, any of
its directors, any such officer, any Selling Stockholder, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(d), such Underwriter shall have the rights and duties given to the indemnifying
parties by paragraphs (b) and (c) above (except that if any indemnifying party
shall have assumed the defense thereof such Underwriter shall not be required to
do so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall
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be at such Underwriter's expense), and the Company, its directors, any such
officer, any Selling Stockholder, and any such controlling person shall have the
rights and duties given to the Underwriters by paragraphs (b) and (c) above.
The foregoing indemnity agreement shall be in addition to any liability which
any Underwriter may otherwise have.
(e) If the indemnification provided for in this Section 9 is unavailable
to an indemnified party under paragraphs (a) or (d) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Selling Stockholders on the one hand and the Underwriters on the other hand
from the offering of the Shares, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders on
the one hand and the Underwriters on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus; provided
that, in the event that the Underwriters shall have purchased any Additional
Shares hereunder, any determination of the relative benefits received by the
Company, the Selling Stockholders or the Underwriters from the offering of the
Shares shall include the net proceeds (before deducting expenses) received by
the Company and the Selling Stockholders, and the underwriting discounts and
commissions received by the Underwriters, from the sale of such Additional
Shares, in each case computed on the basis of the respective amounts set forth
in the notes to the table on the cover page of the Prospectus. The relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or by the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
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(f) The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
were determined by a pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (e)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (e)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 9 are several
in proportion to the respective numbers of Firm Shares set forth opposite their
names in Schedule II hereto (or such numbers of Firm Shares increased as set
forth in Section 12 hereof) and not joint.
(g) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers,
the Selling Stockholders or any person controlling the Company, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, or to any Selling Stockholder
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shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 9.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Registration Statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
timely made; no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business, assets,
liabilities, net worth, results of operations of the Company and the
Subsidiaries, taken as a whole, not contemplated by the Prospectus, which in
your opinion, as Representatives of the several Underwriters, would materially
adversely affect the market for the Shares, or (ii) any event or development
relating to or involving the Company or any officer or director of the Company
or any Selling Stockholder which makes any statement made in the Prospectus
untrue or which, in the opinion of the Company and its counsel or the
Underwriters and their counsel, requires the making of any addition to or change
in the Prospectus in order to state a material fact required by the Act or any
other law to be stated therein or necessary in order to make the statements
therein not misleading, if amending or supplementing the Prospectus to reflect
such event or development would, in your opinion, as Representatives of the
several Underwriters, materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of Latham
& Watkins, counsel for the Company and the Selling Stockholders, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated and validly existing in
good standing under the laws of the State of Delaware with all requisite
corporate power and
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authority to own, lease and operate its properties and to conduct its business
as now being conducted, as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto);
(ii) The authorized capital stock of the Company is as set forth under the
caption "Capitalization" in the Prospectus; and the authorized capital stock of
the Company conforms in all material respects as to legal matters to the
description thereof contained in the Prospectus under the caption "Description
of Capital Stock";
(iii) All the shares of capital stock of the Company outstanding prior
to the issuance of the Shares to be issued and sold by the Company hereunder,
have been duly authorized and validly issued, and are fully paid and
nonassessable;
(iv) The Shares to be issued and sold to the Underwriters by the Company
hereunder have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable and free of any preemptive or
similar rights that entitle or will entitle any person to acquire any Shares
upon the issuance thereof by the Company;
(v) The form of certificates for the Shares conforms to the requirements
of the Delaware General Corporation Law;
(vi) The Registration Statement and all post-effective amendments, if any,
have become effective under the Act and, to the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration Statement has been
issued under the Act and no proceedings for that purpose are pending before or,
to the knowledge of such counsel, contemplated by the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
accordance with Rule 424(b);
(vii) The Company has the corporate power and authority to enter into
this Agreement and to issue, sell and deliver the Shares to be sold by it to the
Underwriters as provided herein, and this Agreement has been duly authorized,
executed and delivered by the Company and is a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except (a) as limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors; (b) as limited by
the effect of general principles of equity, whether enforcement is considered in
a proceeding in equity or at law, and the discretion of the court before which
any proceeding therefor may be brought; (c) as limited by the unenforceability
under certain circumstances under
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law or court decisions of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such indemnification
or contribution is contrary to public policy; and (d) to the extent that
enforceability may be limited due to the existence of an untrue statement of a
material fact in the Prospectus or the Registration Statement or omission to
state a material fact therein necessary to make the statements in the Prospectus
or the Registration Statement, respectively, not misleading, it being understood
that we express no view with respect thereto other than as set forth in
paragraph (xii) below;
(viii) The Company is not in violation of its certificate of
incorporation or bylaws;
(ix) Neither the offer, sale or delivery of the Shares, the execution,
delivery or performance of this Agreement, compliance by the Company with the
provisions hereof, nor consummation by the Company of the transactions
contemplated hereby constitutes or will constitute a breach or violation of, or
a default under, the certificate of incorporation or bylaws of the Company or
any agreement, indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of their
respective properties is bound that is an exhibit to the Registration Statement
(except as disclosed in the Registration Statement and the Prospectus, as
amended or supplemented), or will result, under any agreement that is an exhibit
to the Registration Statement, in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of the
Subsidiaries, nor will any such action result in any violation of any provision
of United States federal or New York state law or regulation that, in such
counsel's experience, is normally applicable to general business corporations in
relation to the transactions of the type contemplated hereunder (assuming
compliance with all applicable state securities and Blue Sky laws), or any
judgment, injunction, order or decree known to such counsel, applicable to the
Company, the Subsidiaries or any of their respective properties or assets;
(x) No consent, approval, authorization or other order of, or
registration, notice, declaration or filing to or with, any court, regulatory
body, administrative agency or other governmental body, agency or official under
United States federal or New York state law is required on the part of the
Company for the consummation of the transactions contemplated hereby, except the
registration under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters as contemplated by this Agreement;
(xi) The Registration Statement and the Prospectus and any supplements or
amendments thereto (except for the financial statements and the notes thereto
and the schedules and other financial and statistical data included therein, as
to which
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such counsel need not express any opinion) comply as to form in all material
respects with the requirements for registration on Form S-1 under the Act; in
passing upon the compliance as to form the Registration Statement and
Prospectus, we have assumed that the statements made and incorporated therein
are true and complete;
(xii) The statements in the Registration Statement and Prospectus
under the headings "Management--Stock Option Plans, --Stock Plan for Outside
Directors, --Employee Stock Purchase Plan, --Employment Agreement," "Certain
Transactions--Stockholders Agreement, --Advisory Agreement (except for the first
paragraph), --Noncompetition Agreement," "Description of Capital Stock,"
"Underwriting" and Items 14 and 15 (only as to items 2 and 3) of Part II,
insofar as such statements are descriptions of agreements or other legal
documents referred to therein, fairly present the information called for with
respect to such agreements and legal documents and fairly summarize the matters
referred to therein in all material respects;
(xiii) This Agreement and the Custody Agreement have each been duly
executed and delivered by or on behalf of each of the Selling Stockholders and
are valid and binding agreements of each Selling Stockholder enforceable against
each Selling Stockholder in accordance with their terms, except (a) as limited
by the effect of bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting the rights and
remedies of creditors; (b) as limited by the effect of general principles of
equity, whether enforcement is considered in a proceeding in equity or at law,
and the discretion of the court before which any proceeding therefor may be
brought; (c) as limited by the unenforceability under certain circumstances
under law or court decisions of provisions providing for the indemnification of
or contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy; and (d) to the
extent that enforceability may be limited due to the existence of an untrue
statement of a material fact in the Prospectus or the Registration Statement or
omission to state a material fact therein necessary to make the statements in
the Prospectus or the Registration Statement, respectively, not misleading, it
being understood that we express no view with respect thereto other than as set
forth in paragraph (xii) above;
(xiv) The Company is not and, after giving effect to the
offering and sale of the Shares and application of the net proceeds thereof as
described in the Prospectus, will not be an "investment company" as defined in
the Investment Company Act of 1940, as amended;
(xv) Upon delivery of the Shares pursuant to this Agreement and
payment therefor as contemplated herein, assuming the Underwriters are acquiring
such Shares in good faith without notice of any adverse claim, within the
meaning of the Uniform
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Commercial Code as in effect in the State of New York, the Underwriters will
acquire good and marketable title to the Shares free and clear of any lien,
claim, security interest, or other encumbrance, restriction on transfer or other
defect in title; and
(xvi) Such counsel has participated in conferences with officers
and other representatives of the Company, representatives of the independent
public accountants for the Company, and representatives of the Underwriters, at
which the contents of the Registration Statement and Prospectus and related
matters were discussed and, although they are not passing upon, and do not
assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus (except as
set forth in paragraph (xii) above) and have not made any independent check or
verification thereof, (a)such counsel is of the opinion that the Registration
Statement and the Prospectus and any further amendments and supplements thereto
made by the Company prior to the Closing Date, as of their respective effective
dates or issue dates, as the case may be, comply as to form in all material
respects with the requirements of the Act and the rules and regulations
thereunder and (ii) such counsel has no reason to believe that the Registration
Statement, at the time the Registration Statement became effective, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, as amended or supplemented, as of its date
or as of the Closing Date, contained or contains an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; it being understood that such counsel expresses no belief
with respect to the financial statements, schedules and other financial and
statistical data included in the Registration Statement or the Prospectus.
In rendering their opinion as aforesaid, counsel may rely upon an opinion
or opinions, each dated the Closing Date, of other counsel retained by them or
the Company as to laws of any jurisdiction other than the United States or the
State of New York, provided that (1) each such local counsel is acceptable to
the Representatives, (2) such reliance is expressly authorized by each opinion
so relied upon and a copy of each such opinion is delivered to the
Representatives and is, in form and substance satisfactory to them and their
counsel, and (3) counsel shall state in their opinion that they believe that
they and the Underwriters are justified in relying thereon.
(d) You shall have received on the Closing Date, an opinion of
_______________, special counsel for the Company, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, to the
effect that:
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(i) The Company is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a Material Adverse Effect;
(ii) Each of the Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power and authority to own
their respective properties and to conduct their respective businesses as now
being conducted, as described in the Registration Statement and the Prospectus
(and any amendment or supplement thereto); and all the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned by the Company directly,
free and clear of any perfected security interest;
(iii) The issued and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the Prospectus;
(iv) The statements in the Registration Statement and
Prospectus under Item 15 (only as to item1) of Part II, insofar as they are
descriptions of contracts, agreements or other legal documents referred to
therein, fairly present the information called for with respect to such
contracts, agreements and other legal documents and fairly summarize the matters
referred to therein in all material respects;
(v) None of the Subsidiaries is in violation of its
respective certificate or articles of incorporation or bylaws, or other
organizational documents, or to the best knowledge of such counsel after
reasonable inquiry, is in default in the performance of any material obligation,
agreement or condition contained in any bond, debenture, note or other evidence
of indebtedness, except as may be disclosed in the Prospectus; and
(vi) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance of this Agreement, compliance by any of the
Subsidiaries with the provisions hereof nor consummation by any of the
Subsidiaries of the transactions contemplated hereby constitutes or will
constitute a breach or violation of, or a default under, the certificate or
articles of incorporation or bylaws, or other organizational documents, of such
Subsidiary.
(e) You shall have received on the Closing Date an opinion of Akin,
Gump, Strauss, Hauer & Feld, L.L.P., counsel for the Underwriters, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, with respect to the matters referred to in clauses (iv), (vi),
(vii) and (xvi) of the
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foregoing paragraph (c) and such other related matters as you may request.
(f) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Arthur Andersen LLP, independent certified public accountants,
substantially in the forms heretofore approved by you.
(g)(i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be threatened by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth or contemplated in the Registration Statement
or the Prospectus (or any amendment or supplement thereto); (iii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any Material Adverse
Effect; (iv) the Company and the Subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 10(g) and in Section
10(h) hereof.
(h) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(i) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on and as of
the date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the Closing Date
and signed by or on behalf of the Selling Stockholders to the effect set forth
in this Section 10(i) and in Section 10(j) hereof.
(j) The Selling Stockholders shall not have failed at or prior to the
Closing Date to have performed or complied with
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any of their agreements herein contained and required to be performed or
complied with by them hereunder at or prior to the Closing Date.
(k) The Shares shall have been listed or approved for listing upon
notice of issuance on the Nasdaq National Market.
(l) On or prior to the Closing Date, the Underwriters shall have
received the executed agreements referred to in Section 5(n) herein.
(m) At or prior to the Closing Date, all consents required to effect
the offering, if any, have been obtained and the Company shall have delivered to
the Underwriters evidence satisfactory to the Underwriters that such consents
have been obtained, except for such consents that will not be obtained as
disclosed in the Registration Statement and the Prospectus, as amended or
supplemented.
(n) The Sellers shall have furnished or caused to be furnished to you
such further reasonable and customary certificates and documents as you shall
have requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
Any certificate or document signed by any executive officer, the Chairman
of the Board of Directors or the Secretary of the Company or any
Attorney-in-Fact or any Selling Stockholder and delivered to you, as
Representatives of the Underwriters, or to counsel for the Underwriters, shall
be deemed a representation and warranty by the Company, the Selling Stockholders
or the particular Selling Stockholder, as the case may be, to each Underwriter
as to the statements made therein as of the date of such certificate or
document.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the satisfaction on and as of any Option Closing Date
of the conditions set forth in this Section 10, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (n) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c) and (e)
shall be revised to reflect the sale of Additional Shares.
11. EXPENSES. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the Registration Statement (including, without
limitation, financial statements and exhibits thereto), each Prepricing
Prospectus, the Prospectus, and each amendment or
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supplement to any of them; (ii) the printing (or reproduction) and delivery
(including, without limitation, postage, air freight charges and charges for
counting and packaging) of such copies of the Registration Statement, each
Prepricing Prospectus, the Prospectus, and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Shares; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Shares, including, without
limitation, any stamp taxes in connection with the issuance and sale of the
Shares; (iv) the printing (or reproduction) and delivery of this Agreement, the
preliminary and final Blue Sky Memoranda, if any, and all other agreements or
documents printed (or reproduced) and delivered in connection with the offering
of the Shares; (v) the registration of the Shares sold by the Company under the
Exchange Act and the listing of the Shares sold by the Company on the Nasdaq
National Market; (vi) the registration or qualification of the Shares for offer
and sale under the securities or Blue Sky laws of the several states as provided
in Section 5(g) hereof (including, without limitation, the reasonable fees,
expenses and disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.; (viii) the transportation and other expenses incurred
by or on behalf of Company representatives in connection with presentations to
prospective purchasers of the Shares; and (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company and the Selling Stockholders. It is
understood, however, that except as provided in this Section 9, Section 5(j) or
Section 7, the Underwriters will pay all of their costs and expenses, including
fees and disbursements of their counsel, stock transfer taxes payable on resale
of any of the Shares by them and any advertising expenses connected with any
offers they may make.
12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the Registration Statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company and the Selling Stockholders.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to
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purchase hereunder on the Closing Date, and the aggregate number of Shares which
such defaulting Underwriter or Underwriters are obligated but fail or refuse to
purchase is not more than one-tenth of the aggregate number of Shares which the
Underwriters are obligated to purchase on the Closing Date, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the number of
Firm Shares set forth opposite its name in Schedule II hereto bears to the
aggregate number of Firm Shares set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify in
accordance with Section 20 of the Master Agreement Among Underwriters of Smith
Barney Inc., to purchase the Shares which such defaulting Underwriter or
Underwriters are obligated, but fail or refuse, to purchase. If any one or more
of the Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date and the aggregate number of Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date and arrangements satisfactory to you and the Company for the
purchase of such Shares by one or more non-defaulting Underwriters or other
party or parties approved by you and the Company and Selling Stockholders are
not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Stockholders. In any such case which does not result in
termination of this Agreement, either you or the Company and Selling
Stockholders shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule II hereto who, with your approval and the approval of the Company and
Selling Stockholders, purchases Shares which a defaulting Underwriter is
obligated, but fails or refuses, to purchase.
Any notice under this Section 12 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
13. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or any Selling Stockholder, by notice to the Company
and the Selling Stockhkolders, if prior to the Closing Date or any Option
Closing Date (if different from the Closing Date and then only as to the
Additional Shares), as the case may be, (i) trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial
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banking activities in New York shall have been declared by either federal or
state authorities, or (iii) there shall have occurred any outbreak or escalation
of hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in your judgment,
impracticable or inadvisable to commence or continue the offering of the Shares
at the offering price to the public set forth on the cover page of the
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Company and the
Selling Stockholders by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
14. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
cover page, and the statements in the first, third and sixth paragraphs under
the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 7(b) and 9 hereof.
15. MISCELLANEOUS. Except as otherwise provided in Sections 5, 12 and 13
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 451 Industrial Lane, Birmingham, AL 35211, Attention: Ms. Susan H.
Fitzgibbon, Chief Financial Officer; or (ii) if to the Selling Stockholders, at
[__________________], Attention: [__________________], or (iii) if to you, as
Representatives of the several Underwriters, care of Smith Barney Inc., 388
Greenwich Street, New York, New York 10013, Attention: Manager, Investment
Banking Division.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, its directors and officers, the Selling Stockholders,
and the other controlling persons referred to in Section 9 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from any Underwriter of any of the
Shares in his status as such purchaser.
16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed
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in counterparts, this Agreement shall not become effective unless at least one
counterpart hereof shall have been executed and delivered on behalf of each
party hereto.
[The next page is the signature page]
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Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
HIBBETT SPORTING GOODS, INC.
By ........................
Michael J. Newsome
President
Each of the Selling Stockholders
named in Schedule I hereto
By ........................
[Name]
Attorney-in-Fact
By ........................
[Name]
Attorney-in-Fact
By ........................
[Name]
Attorney-in-Fact
By ........................
[Name]
Attorney-in-Fact
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Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule II
hereto.
SMITH BARNEY INC.
NATIONSBANC MONTGOMERY SECURITIES, INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
BANCAMERICA ROBERTSON STEPHENS
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By ..........................
Name:_____________________
Title:____________________
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[LETTERHEAD OF LATHAM & WATKINS]
October 20, 1997
Hibbett Sporting Goods, Inc.
451 Industrial Lane
Birmingham, Alabama 35211
Re: Registration Statement on Form S-1
Hibbett Sporting Goods, Inc.
File No. 333-36913
----------------------------------
Ladies and Gentlemen:
In connection with the registration of up to 1,303,177 shares of
Common Stock, par value $0.01 per share (the "Common Stock"), of Hibbett
Sporting Goods, Inc., a Delaware corporation (the "Company"), under the
Securities Act of 1933, as amended (the "Act"), on Form S-1 filed with the
Securities and Exchange Commission (the "Commission") on October 1, 1997
(File No. 333-36913)(the "Registration Statement") of which 200,000 shares of
the Common Stock are to be offered by the Company (together with any
additional shares of Common Stock to be offered by the Company and registered
pursuant to Rule 462(b) of the Act, the "Company Common Stock") and up to
1,103,177 shares of Common Stock are to be offered by certain selling
stockholders of the Company (together with any additional shares of Common
Stock to be offered by such selling stockholders and registered pursuant to
Rule 462(b) of the Act, the "Selling Stockholders Common Stock"), including
169,980 shares of Common Stock that may be so offered pursuant to an
over-allotment option granted to the underwriters, you have requested our
opinion with respect to the matters set forth below.
In our capacity as your counsel in connection with such registration,
we are familiar with the proceedings taken and proposed to be taken by the
Company in connection with the authorization, issuance and sale of the
Company Common Stock and the Selling Stockholders
<PAGE>
Hibbett Sporting Goods, Inc.
October 20, 1997
Page 2
Common Stock, and for the purposes of this opinion, have assumed such
proceedings will be timely completed in the manner presently proposed. In
addition, we have made such legal and factual examinations and inquiries,
including an examination of originals or copies certified or otherwise
identified to our satisfaction of such documents, corporate records and
instruments, as we have deemed necessary or appropriate for purposes of this
opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject transaction only
of the internal laws of the State of New York and the General Corporation Law
of the State of Delaware, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any
matters of municipal law or the laws of any other local agencies within the
state.
Subject to the foregoing, it is our opinion, as of the date hereof,
that (i) the Company Common Stock has been duly authorized, and, upon
issuance, delivery and payment therefor in the manner contemplated by the
Registration Statement, will be validly issued, fully paid and nonassessable
and (ii) the Selling Stockholders Common Stock has been duly authorized and
is validly issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the Registration
Statement and any registration statement for the same offering covered by the
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Act and to the reference to our firm contained under the
heading "Legal Maters."
Very truly yours,
/s/ LATHAM & WATKINS
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LATHAM & WATKINS
