<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
February 1, 1997 000-20969
HIBBETT SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-1074067
(State of other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
451 Industrial Lane
Birmingham, Alabama 35211
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(205)942-4292
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class CUSIP Number Which Registered
Common Stock, $.01 Par Value 428565-10-5 NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ___.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant (assuming for purposes of this calculation that all executive
officers and directors are "affiliates") was $82,895,427 at September 15,1997,
based on the closing sale price of $29.00 for the Common Stock on such date on
the Nasdaq National Market.
The number of shares outstanding of the Registrant's Common Stock, as of
September 15, 1997 was 6,192,330.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Hibbett Sporting Goods, Inc. Proxy Statement for its 1997
Annual Meeting of Stockholders
are incorporated by reference into Part III hereof.
<PAGE>
The undersigned registrant hereby amends the following items of its
Annual Report on Form 10-K for the fiscal year ended February 1, 1997 as set
forth in the pages attached hereto:
PART I
Item 1. Business
Item 2. Properties
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART V
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 15th day of September, 1997.
HIBBETT SPORTING GOODS, INC.
By: /s/ Michael J. Newsome
------------------------
Michael J. Newsome
President
(Principal Executive Officer)
By: /s/ Susan H. Fitzgibbon
-------------------------
Susan H. Fitzgibbon
Vice President and Chief
Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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ITEM 1. BUSINESS
General
Hibbett Sporting Goods, Inc. ("Hibbett" or the "Company") is a rapidly-
growing operator of full-line sporting goods stores in small to mid-sized
markets in the southeastern United States. Hibbett's stores offer a broad
assortment of quality athletic equipment, footwear and apparel at competitive
prices with superior customer service. The Company's merchandise assortment
features a core selection of brand name merchandise emphasizing team and
individual sports complemented by a selection of localized apparel and
accessories designed to appeal to a wide range of customers within each market.
The Company believes that its stores are among the primary retail distribution
alternatives for brand name vendors that seek to reach Hibbett's target markets.
The Company operates 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 predominantly in enclosed malls.
Although competitors in some markets may carry product lines and national brands
similar to Hibbett, the Company believes that its Hibbett Sports stores are
typically the primary, full-line sporting goods retailers in their markets due
to the extensive selection of traditional team and individual sports merchandise
offered and a high level of customer service.
BUSINESS STRATEGY
The Company targets markets with county populations that range from 30,000 to
250,000. By targeting these smaller markets, the Company believes that it is
able to achieve significant strategic advantages, including numerous expansion
opportunities, comparatively low operating costs and a more limited competitive
environment than generally faced in larger markets. In addition, the Company
establishes greater customer and vendor recognition as the leading full-line
sporting goods retailer in these local communities.
Management believes that its ability to merchandise to local sporting or
community interests differentiates Hibbett from its national competitors. This
strong regional focus also enables the Company to achieve significant cost
benefits including lower corporate expenses, reduced distribution costs and
increased economies of scale from marketing activities. Additionally, Hibbett
also utilizes a number of sophisticated information systems to maintain tight
controls over operating costs.
The Company strives to hire enthusiastic sales personnel with an interest in
sports. The Company's extensive training program focuses on product knowledge
and selling skills and is conducted through the use of in-store clinics, videos,
self study courses, and interactive group discussions.
STORE CONCEPTS
Hibbett Sports
The Company's primary retail format is Hibbett Sports, a 5,000 square foot
store located predominantly in enclosed malls. The Company tailors its Hibbett
Sports concept to the size, demographics and competitive conditions of each
market. 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 strip centers.
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.
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Sports & Co.
The Company opened the first of its four Sports & Co. superstores in the
spring of 1995 in Huntsville, Alabama. Sports & Co. superstores average 25,000
square feet and offer a larger assortment of athletic footwear, apparel and
equipment than Hibbett Sports stores. Athletic equipment and apparel represent
a higher percentage of the overall merchandise mix at Sports & Co. superstores
than they do at Hibbett Sports stores. Sports & Co. superstores are designed to
project the same exciting and entertaining in-store atmosphere as Hibbett Sports
stores but on a larger scale. For example, Sports & Co. superstores offer
customer participation areas, such as putting greens and basketball hoop shoots,
and feature periodic special events including appearances by well-known
athletes.
Sports Addition
The Company's nine Sports Addition stores are small, mall-based stores,
averaging 1,500 square feet with approximately 90% of merchandise consisting of
athletic footwear and the remainder consisting of caps and a limited assortment
of apparel. Sports 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.
Team Sales
Hibbett Team Sales, Inc. ("Team Sales"), a wholly-owned subsidiary of the
Company, is a leading supplier of customized athletic apparel, equipment and
footwear to school, athletic and youth programs in Alabama. Team Sales sells its
merchandise directly to educational institutions and youth associations. The
operations of Team Sales are independent of the operations of the Company's
stores, and its warehousing and distribution are managed separately out of its
own warehouse.
EXPANSION STRATEGY
Hibbett targets markets ranging in population from 30,000 to 250,000. By
targeting smaller markets, the Company believes that it is able to achieve
significant strategic advantages, including numerous expansion opportunities,
comparatively low operating costs and a more limited competitive environment
than generally faced in larger markets. In addition, the Company establishes
greater customer and vendor recognition as the leading full-line sporting goods
retailer in the local community.
The Company has recently accelerated its rate of new store openings to take
advantage of the growth opportunities in its target markets. The Company has
identified over 500 potential markets for future Hibbett Sports stores within
the states in which it operates and in contiguous states. Hibbett's clustered
expansion program, which calls for opening new stores within a two-hour driving
radius of another Company location, allows it to take advantage of efficiencies
in distribution, marketing and regional management. In January 1996 the Company
moved its operations to its newly constructed distribution center which has
significant expansion potential to support the Company's growth for the
foreseeable future.
In evaluating potential markets, the Company considers population, economic
conditions, local competitive dynamics and availability of suitable real estate.
Although approximately 90% of Hibbett Sports stores are located in enclosed
malls, the stores also operate profitably in strip center locations. As the
Company continues to expand, it will open new stores in mall and strip center
locations.
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MERCHANDISING
The Company's merchandising strategy is to provide a broad assortment of
quality athletic equipment, footwear and apparel at competitive prices. The
Company's stores offer a core selection of brand name merchandise with an
emphasis on team and individual sports. This merchandise mix is complemented by
a selection of localized apparel and accessories designed to appeal to a wide
range of customers within each market. The Company's leading product category is
athletic footwear, followed by apparel and sporting equipment, ranked according
to sales.
The Company emphasizes quality brand name merchandise. The Company believes
that the breadth and depth of its brand name merchandise selection generally
exceeds the merchandise selection carried by local independent competitors.
Many of these branded products are highly technical and require considerable
sales assistance. The Company coordinates with its vendors to educate the sales
staff at the store level on new products and trends.
Although the core merchandise assortment tends to be similar for each Hibbett
Sports store, important local or regional differences frequently exist.
Accordingly, the Company's stores regularly offer products that reflect
preferences for particular sporting activities in each community and local
interest in college and professional sports teams. The Company's knowledge of
these interests, combined with its access to leading vendors, enables Hibbett
Sports stores to react quickly to emerging trends or special events, such as
college or professional championships.
The Company's merchandise staff analyzes current sporting goods trends by
maintaining close relationships with the Company's vendors, monitoring sales at
competing stores, communicating with customers, store managers and personnel and
reviewing industry trade publications. The merchandise staff works closely with
store personnel to meet the requirements of individual stores for appropriate
merchandise in sufficient quantities.
VENDOR RELATIONSHIPS
The sporting goods retail business is very brand name driven. Accordingly, the
Company maintains relationships with a number of well-known sporting goods
vendors to satisfy customer demand. The Company believes that its stores are
among the primary retail distribution alternatives for brand name vendors that
seek to reach Hibbett's target markets. As a result, the Company is able to
attract considerable vendor interest and establish long-term partnerships with
vendors. As its vendors expand their product lines and grow in popularity, the
Company expands its sales and promotions of these products within its stores. In
addition, as the Company continues to increase its store base and enter new
markets, the vendors have increased their brand presence within these regions.
The Company also places significant emphasis on and works with its vendors to
establish the most favorable pricing and to receive cooperative marketing funds.
Management believes the Company maintains excellent working relationships with
vendors. During fiscal 1997, the Company's largest vendor, Nike, represented
approximately 40% of its total purchases.
The loss of key vendor support could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
believes that it has long-standing and strong relationships with its vendors and
that it has adequate sources of brand name merchandise on competitive terms;
however, there can be no assurance that the Company will be able to acquire such
merchandise at competitive prices or on competitive terms in the future. In
this regard, certain merchandise that is high profile and in high demand may be
allocated by vendors based upon the vendors' internal criteria which are beyond
the Company's control.
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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 the
Company's total advertising spending. Other media such as local radio,
television and outdoor billboards are used by the Company to reinforce Hibbett
name recognition and brand awareness in the community. In addition, direct mail
to customers on an in-house mailing list has been used by the Company to
reinforce already established buying patterns and to increase customer loyalty.
DISTRIBUTION
The Company maintains a single 130,000 square foot distribution center in
Birmingham, Alabama for all 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. For key products, the Company maintains backstock at the distribution
center that is allocated and distributed to stores through an automatic
replenishment program based on items sold during the prior week. Merchandise is
typically delivered to stores weekly via Company-operated vehicles.
COMPETITION
The business in which the Company is engaged is highly competitive and many of
the items sold by the Company are sold by local sporting goods stores,
department and discount stores, athletic footwear and other specialty athletic
stores, traditional shoe stores and national and regional full-line sporting
goods stores. The marketplace for sporting goods remains highly fragmented as
many different retailers compete for market share by utilizing a variety of
store formats and merchandising strategies. In recent years, the growth of
large format retailers has resulted in significant consolidation in large
metropolitan markets. However, the Company believes that the competitive
environment for sporting goods remains different in small to mid-sized markets
where retail demand may not support larger format stores. In smaller markets
such as those targeted by the Company's Hibbett Sports format, national chains
compete by focusing on a specialty category like athletic footwear in the case
of Foot Locker and Foot Action. Accordingly, many of the stores with which the
Company competes are units of national chains that have substantially greater
financial and other resources than the Company. Hibbett Sports format stores
compete with national chains that focus on athletic footwear, local sporting
goods stores, department and discount stores and traditional shoe stores.
Although its Hibbett Sports format may face competition from a variety of
competitors, the Company believes that its Hibbett Sports format is able to
compete effectively by distinguishing itself as a full-line sporting goods store
with an emphasis on team and individual sports merchandise complemented by a
selection of localized apparel and accessories. The larger markets targeted by
Sports & Co. superstores are also highly competitive. The Company's Sports &
Co. superstores compete with sporting goods superstores, athletic footwear
superstores and mass merchandisers. Competitors of Sports & Co. superstores may
carry similar product lines and national brands and a broader assortment. The
Company believes the principal competitive factors in its markets are service,
breadth of merchandise offered, availability of brand names, availability of
local merchandise and price. The Company believes it competes favorably with
respect to these factors in the small to mid-sized markets in the Southeast.
However, there can be no assurance that the Company will continue to be able to
compete successfully against existing or future competitors.
5
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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.
Item 2. 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 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.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION
The directors, nominees for directors and executive officers of the Company
and their ages as of February 1, 1997, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------------------------------- ----------------- ------------------------------------------
<S> <C> <C>
Nominees for election to serve until annual meeting in 2000 (Class I)
- ---------------------------------------------------------------------
F. Barron Fletcher, III 29 Director
John F. Megrue, Jr. 38 Chairman of the Board; Director
Directors elected or appointed to serve until annual meeting in 1998(Class II)
- ------------------------------------------------------------------------------
Carl Kirkland 56 Director
Michael J. Newsome 57 President; Director
Thomas A. Saunders, III 60 Director
Directors elected or appointed to serve until annual meeting in 1999 (Class III)
- --------------------------------------------------------------------------------
Clyde B. Anderson 36 Director
H. Ray Compton 54 Director
Executive Officers Who Are Not Also Directors or Nominees for Director
- ----------------------------------------------------------------------
Susan H. Fitzgibbon 33 Vice President and
Chief Financial Officer
Joy A. McCord 42 Vice President of Merchandising
Cathy E. Pryor 33 Vice President of Store Operations
</TABLE>
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.
H. Ray Compton has been a director of the Company since January of 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.
Susan H. Fitzgibbon has been Vice President and 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 served six years at Arthur Andersen LLP.
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.
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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.
Joy A. McCord has been with the Company since 1986 and has been the Vice
President of Merchandising at the Company since 1995. Prior to 1995, Ms. McCord
held positions as sporting goods buyer and general merchandise manager.
John F. Megrue, Jr. has been a Director and Chairman of the Board of the
Company since 1995. Mr. Megrue has been a partner of SKM Partners, L.P., which
serves as the general partner of Saunders Karp & Megrue, L.P., a private equity
investment firm, and each of the Funds, since 1992. From 1989 to 1992, Mr.
Megrue served as a Vice President and Principal at Patricof & Co., a private
equity investment firm, and prior thereto he served as a Vice President at C.M.
Diker Associates, a private equity investment firm. Mr. Megrue is also a Vice
Chairman and director of Dollar Tree Stores, Inc.
Michael J. Newsome has been the President of the Company since 1981. Since
joining the Company as an outside salesman over 30 years ago, Mr. Newsome has
held numerous positions with the Company, including 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.
Cathy E. Pryor has been with the Company since 1988 and has been the Vice
President of Store Operations at the Company since 1995. Prior to 1995, Ms.
Pryor held positions as a district manager and Director of Store Operations.
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 Thomas Jefferson Memorial Foundation, the Cold Spring Harbor
Laboratory and a director of Dollar Tree Stores, Inc.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of the Company's common stock as of September 15, 1997, by (i) each
director, (ii) the President, and (iii) each other executive officer whose total
annual salary and bonus earned during the fiscal year ended February 1, 1997
exceeded $100,000 (the "Named Executive Officers"), and (iv) all directors and
executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE Percent of
NAME OF DIRECTOR/OFFICER of Beneficial Ownership(1) CLASS(1)
- ------------------------ ---------------------------- -------------------
<S> <C> <C>
Clyde B. Anderson(2).......................... 322,132 5.2%
H. Ray Compton(3)............................. 7,950 *
Susan H. Fitzgibbon(4)........................ 5,613 *
F. Barron Fletcher, III....................... 800 *
Carl Kirkland(5).............................. 5,000 *
Joy A. McCord(6).............................. 7,246 *
John F. Megrue, Jr.(7)(10).................... 2,892,721 46.7%
Michael J. Newsome(8)......................... 135,902 2.2%
Cathy E. Pryor(9)............................. 13,726 *
Thomas A. Saunders, III(10)................... 2,886,721 46.6%
All Directors and Executive
Officers as a group........................... 3,391,090 54.8%
</TABLE>
________________________________
*Less than one percent
(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.
Any such security is deemed to be outstanding for purposes of calculating
the ownership percentage of such person, but is not deemed to be
outstanding for purposes of calculating the ownership percentage of any
other person.
(2) Includes 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. Excludes an aggregate of
2,886,721 shares owned by The SK Equity Fund, L.P. and SK Investment Fund,
L.P. and an aggregate of 481,789 shares owned by the Anderson Stockholders
(as defined) 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, the aggregate number of shares owned by all
parties to the Stockholders Agreement. See "Certain Relationships and
Related 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.
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(3) Includes 5,000 shares subject to options and 950 shares held in various
trusts.
(4) 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.
(5) Includes 5,000 shares subject to options.
(6) 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.
(7) Includes 2,000 shares held as custodian for Kyle G. Megrue and 2,000 shares
held as custodian for Christopher Megrue.
(8) 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.
(9) 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.
(10) Includes 2,855,484 shares owned by The SK Equity Fund, L.P. and 31,237
shares owned by SK Investment Fund, L.P. SKM Partners, L.P. is the general
partner of each of The SK Equity Fund, L.P. and SK Investment Fund, L.P.
Messrs. Karp, Megrue and Saunders are general partners of SKM Partners,
L.P., and, therefore, may be deemed to have beneficial ownership of the
shares shown above as being owned by The SK Equity Fund, L.P. and SK
Investment Fund, L.P. Messrs. Karp, Megrue and Saunders disclaim beneficial
ownership of such shares, except to the extent that any of them has a
limited partnership interest in SK Investment Fund, L.P. Excludes an
aggregate of 803,921 shares 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, the aggregate number of shares owned by all parties to
the Stockholders Agreement. See "Certain Relationships and Related
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.
THE BOARD OF DIRECTORS
COMPOSITION OF THE BOARD
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 of directors,
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designated Class I, Class II and Class III. Messrs. Fletcher and Megrue are
currently serving as Class I directors, Messrs. Newsome, Saunders and Kirkland
are currently serving as Class II directors, and Messrs. Anderson and Compton
are currently serving as Class III directors. The Class I directors will
continue to serve until the annual stockholder meeting in 2000, while the Class
II directors will continue to serve until the annual stockholder meeting in
1998, and the Class III directors will continue to serve until the annual
stockholder meeting in 1999. Currently, a vacancy exists in Class III which may
be filled by a majority of the directors pursuant to the Company's Certificate
of Incorporation and Bylaws.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information concerning the beneficial
ownership of the Company's common stock as of September 15, 1997 by each person
(or group within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934 (the "Exchange Act")) known by the Company to own beneficially more than
five percent of the Company's common stock:
<TABLE>
<CAPTION>
Amount and Nature of PERCENT OF
NAME AND ADDRESS OF 5% BENEFICIAL OWNERS Beneficial Ownership(1) Class(1)
- ------------------------------------------------ ---------------------------- -------------------
<S> <C> <C>
The SK Equity Fund, L.P. (2)
SK Investment Fund, L.P. (2)
Allan W. Karp (2)
Thomas A. Saunders, III (2)
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830............................. 2,886,721 46.6%
John F. Megrue, Jr. (2) (3)
Two Greenwich Plaza, Suite 100
Greenwich, CT 06830............................. 2,892,721 46.7%
Clyde B. Anderson (4) (5)
402 Industrial Lane
Birmingham, Alabama 35211....................... 322,132 5.2%
Provident Investment Counsel, Inc. (6)
300 North Lake Avenue
Pasadena, CA 91101-4022......................... 632,499 10.2%
</TABLE>
__________________________
(1) As used in this table "beneficial ownership" means the sole or shared power
to vote or direct the voting or to dispose or direct the disposition of any
security. A person is deemed as of any date to have "beneficial ownership"
of any security that such person has a right to acquire within 60 days.
Any such security is deemed to be outstanding for purposes of calculating
the ownership percentage of such person, but is not deemed to be
outstanding for purposes of calculating the ownership percentage of any
other person.
(2) Includes 2,855,484 shares owned by The SK Equity Fund, L.P. and 31,237
shares owned by SK Investment Fund, L.P. SKM Partners, L.P. is the general
partner of each of The SK Equity Fund, L.P. and SK Investment Fund, L.P.
Messrs. Karp, Megrue and Saunders are general partners of SKM Partners,
L.P., and, therefore, may be deemed to have beneficial ownership of the
shares shown above as being owned by The SK Equity Fund, L.P. and SK
Investment Fund, L.P. Messrs. Karp, Megrue and Saunders disclaim
beneficial ownership of such shares, except to the extent that any of them
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<PAGE>
has a limited partnership interest in SK Investment Fund, L.P. Excludes an
aggregate of 803,921 shares 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 sole 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, the aggregate number of shares owned by all parties to
the Stockholders Agreement. See "Certain Relationships and Related
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 party disclaims beneficial ownership of
any shares owned by the others.
(3) Includes 2,000 shares held as custodian for Kyle G. Megrue and 2,000 shares
held as custodian for Christopher Megrue.
(4) Excludes an aggregate of 2,886,721 shares owned by The SK Equity Fund, L.P.
and SK Investment Fund, L.P. and 481,789 shares 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, the aggregate number of shares owned by all
parties to the Stockholders Agreement. See "Certain Relationships and
Related 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.
(5) Includes 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.
(6) 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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.
ADVISORY AGREEMENTS
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 would provide advisory services
to the Company. In consideration of these services, Mr. Anderson received a fee
of $25,000 in fiscal 1998.
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<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 (defined below), for $850,000.
The Company has entered into a sublease agreement ("Sublease Agreement") with
Books-A-Million, Inc. ("Books-A-Million"), a book retailer in the southeastern
United States controlled by the Anderson Stockholders, pursuant to which the
Company 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, the Company will make annual lease
payments to Books-A-Million of approximately $190,000.
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 SK Equity Fund, L.P. (the "Equity Fund") and SK
Investment Fund, L.P. (the "Investment Fund" and, together with the "Equity
Fund", the "Funds"), Mr. Newsome and the Company entered into a stockholders
agreement dated as of November 1, 1995, as amended (the "Stockholders
Agreement"). Except for provisions relating to indemnification and contribution,
the Stockholders Agreement will terminate when the number of shares of common
stock held by the Anderson Stockholders falls below 323,689. As of September
15, 1997, the Anderson Stockholders held 803,921 shares of common stock.
The Stockholders Agreement contains provisions which require all parties
thereto to vote their shares in favor of a certain composition of the Board of
Directors of the Company. Under Rule 13d promulgated under the Exchange Act,
each party to the Stockholders Agreement may be deemed to have shared voting
power (and, therefore, beneficial ownership) over all shares owned by the other
parties to the Stockholders Agreement by virtue of this provision.
The Stockholders Agreement contains certain "tag along" and "drag-along"
provisions which permit and, in certain circumstances, require the parties
thereto to participate in sales of their shares to third parties. Under Rule
13d promulgated under the Exchange Act, the Funds may be deemed to have shared
dispositive power (and, therefore, beneficial ownership) over all shares owned
by the Anderson Stockholders and Mr. Newsome by virtue of the "drag-along"
provisions.
The Stockholders Agreement also contains registration rights pursuant to which
the Funds and the Anderson Stockholders, under certain circumstances, may
require the Company to register a proposed transaction involving their shares
under the Securities Act of 1933, as amended. The Stockholders Agreement also
grants the Funds, the Anderson Stockholders and Mr. Newsome "piggy back"
13
<PAGE>
registration rights, subject to certain limitations, if the Company proposes to
register a transaction involving its common stock. 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.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Exhibit #
- ---------
23.1 Consent of Arthur Andersen LLP
14
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K/A, into Hibbett Sporting Goods, Inc.'s
previously filed Registration Statements File Nos. 333-21299, 333-21301, 333-
21303, 333-21305 and 333-28515.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
September 22, 1997
