<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X
- ----- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: October 31, 1998
----------------
- OR -
- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transaction period from _________ to ________
COMMISSION FILE NUMBER 000-20969
HIBBETT SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-1074067
--------- ----------
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
451 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211
---------------------------------------- -----
(Address of principal executive offices) (Zip code)
(205)-942-4292
--------------
(Registrant's telephone number including area code)
NONE
----
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- ------
Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practicable date: Shares of common stock, par value $.01 per
share, outstanding as of December 1, 1998 were 6,412,800 shares.
<PAGE>
HIBBETT SPORTING GOODS, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets at
October 31, 1998 and January 31, 1998 2
Condensed Consolidated Statements of Operations for the Thirteen Week
and Thirty-Nine Week Periods Ended October 31, 1998 and November 1, 1997 3
Condensed Consolidated Statements of Cash Flows for the
Thirty-Nine Week Periods Ended October 31, 1998 and November 1, 1997 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to Vote of Security-Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<TABLE>
<CAPTION>
October 31, 1998 January 31, 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,356 $ 4,498
Accounts receivable, net 1,857 1,839
Inventories 52,426 33,267
Prepaid expenses and other 822 650
Deferred income taxes 750 606
-------- -------
Total current assets 57,211 40,860
-------- -------
Property and equipment, net 15,231 12,115
--------- -------
Noncurrent Assets:
Deferred income taxes 397 364
Other, net 214 27
--------- -------
Total noncurrent assets 611 391
--------- -------
Total Assets $ 73,053 $ 53,366
========= ========
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $ 16,674 $ 10,951
Accrued income taxes 1,365 860
Accrued expenses:
Payroll-related 2,047 1,813
Other 1,999 1,587
--------- --------
Total current liabilities 22,085 15,211
--------- --------
Long-Term Debt 7,778 -
--------- --------
Stockholders' Investment:
Preferred stock, $.01 par value 1,000,000 shares
authorized, no shares outstanding - -
Common stock, $.01 par value, 12,000,000 shares
authorized, 6,407,630 shares issued and
outstanding at October 31, 1998 and 6,393,977
shares issued and outstanding at January 31, 1998 64 64
Paid-in capital 53,767 53,681
Retained earnings (deficit) (10,641) (15,590)
--------- --------
Total stockholders' investment 43,190 38,155
--------- --------
Total Liabilities and Stockholders' Investment $ 73,053 $ 53,366
========= ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------------------- ----------------------------------
October 31, 1998 November 1, 1997 October 31, 1998 November 1, 1997
----------------- ---------------- ---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $35,988 $27,797 $101,833 $ 80,355
Cost of goods sold,
(Including warehouse, distribution
and store occupancy costs) 25,075 19,306 71,140 55,987
----------- --------- --------- ---------
Gross profit 10,913 8,491 30,693 24,368
Store operating, selling, and
administrative expenses 7,232 5,722 20,452 16,634
Depreciation and amortization 807 576 2,218 1,649
----------- --------- --------- ---------
Operating income 2,874 2,193 8,023 6,085
Interest expense (income), net 59 6 9 (5)
----------- --------- --------- ---------
Income before provision for income taxes 2,815 2,187 8,014 6,090
Provision for income taxes 1,076 837 3,065 2,330
----------- --------- --------- ---------
Net income $ 1,739 $ 1,350 $ 4,949 $ 3,760
=========== ========= ========= =========
Earnings per common share:
Basic:
Net income $ 0.27 $ 0.22 $ 0.77 $ 0.61
=========== ========= ========= =========
Diluted:
Net income $ 0.27 $ 0.21 $ 0.75 $ 0.60
=========== ========= ========= =========
Weighted average shares outstanding:
Basic 6,406,771 6,214,637 6,401,412 6,172,057
=========== ========= ========= =========
Diluted 6,534,748 6,366,420 6,561,372 6,310,304
=========== ========= ========= =========
See notes to condensed consolidated financial statements.
3
</TABLE>
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-----------------------------------
October 31, 1998 November 1, 1997
-----------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,949 $ 3,760
--------- ---------
Adjustments to reconcile net income to net
cash (used in) operating activities:
Depreciation and amortization 2,218 1,649
Deferred income taxes (177) (177)
Loss on disposal of assets 19 16
Change in assets and liabilities (12,690) (6,949)
---------- ---------
Total adjustments (10,630) (5,461)
---------- ---------
Net cash (used in) operating activities (5,681) (1,701)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,339) (3,268)
Proceeds from sale of property 14 14
--------- ---------
Net cash (used in) investing activities (5,325) (3,254)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of stock - 4,766
Proceeds from options exercised and purchase
of shares under employee stock purchase plan 86 418
Revolving loan borrowings and repayments, net 7,778 -
--------- ---------
Net cash provided by financing activities 7,864 5,184
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,142) 229
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,498 2,269
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,356 $ 2,498
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Hibbett Sporting Goods, Inc. and its wholly-owned subsidiaries (the "Company")
have been prepared in accordance with generally accepted accounting principles
for interim financial information and are presented in accordance with the
requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the fiscal year ended January 31,
1998. In the opinion of management, the condensed consolidated financial
statements included herein contain all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation of the
Company's financial position as of October 31, 1998 and November 1, 1997,
and the results of its operations and cash flows for the periods presented.
The Company has experienced and expects to continue to experience seasonal
fluctuations in its net sales and operating income. Therefore, the results of
the interim periods presented herein are not necessarily indicative of the
results to be expected for any other interim period or the full year.
2. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, Earnings per Share, effective January 31, 1998, and restated earnings
per share ("EPS") for all periods presented in the consolidated statements of
operations. A reconciliation of the weighted average shares for basic and
diluted EPS is as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEK PERIOD ENDED THIRTY-NINE WEEK PERIOD ENDED
--------------------------------------- ---------------------------------------
OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1,
1998 1997 1998 1997
----------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding:
Weighted average shares, excluding the
effect of stock options 6,406,771 6,214,637 6,401,412 6,172,057
Effect of stock options 127,977 151,783 159,960 138,247
---------- ---------- ---------- ----------
Weighted average shares, including the
effect of stock options 6,534,748 6,366,420 6,561,372 6,310,304
========== ========== ========== ==========
</TABLE>
3. CONTINGENCIES
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.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
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 high
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 150 Hibbett Sports stores as well as eleven 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 its
Hibbett Sports stores are typically the primary, full-line sporting goods
retailers in their markets due to, among other factors, the extensive selection
of traditional team and individual sports merchandise offered and a high level
of customer service.
The Company operates on a 52 or 53 week fiscal year ending on the Saturday
nearest to January 31 of each year. Hibbett is incorporated under the laws of
the state of Delaware.
RESULTS OF OPERATIONS
The following table sets forth statement of operations items expressed as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
THIRTEEN WEEK THIRTY-NINE WEEK
PERIOD ENDED PERIOD ENDED
-------------------------- ------------------------
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution and store occupancy costs 69.7 69.5 69.9 69.7
----- ----- ----- -----
Gross profit 30.3 30.5 30.1 30.3
Store operating, selling, and administrative
expenses 20.1 20.6 20.1 20.7
Depreciation and amortization 2.2 2.0 2.1 2.0
----- ----- ----- -----
Operating income 8.0 7.9 7.9 7.6
Interest expense (income), net 0.2 --- --- ---
----- ----- ----- -----
Income before provision for income taxes 7.8 7.9 7.9 7.6
Provision for income taxes 3.0 3.0 3.0 2.9
----- ----- ----- -----
Net income 4.8% 4.9% 4.9% 4.7%
===== ===== ===== =====
</TABLE>
6
<PAGE>
THIRTEEN WEEKS ENDED OCTOBER 31, 1998 COMPARED TO THIRTEEN WEEKS ENDED
NOVEMBER 1, 1997
Net sales. Net sales increased $8.2 million, or 29.5%, to $36.0 million for
the thirteen weeks ended October 31, 1998, from $27.8 million for the comparable
period in the prior year. This increase is attributed to opening a net of
forty-nine Hibbett Sports stores and three Sports Additions store in the last 52
week period ended October 31, 1998, and a 2.5% increase in comparable store net
sales. The increase in comparable net sales was due primarily to increased
equipment and apparel sales. New stores and stores not in the comparable store
net sales calculation accounted for $7.6 million of the increase in net sales
and increases in comparable store net sales contributed $559,000. Comparable
store net sales data for a period reflect stores open throughout that period and
the corresponding period of the prior fiscal year. Comparable store net sales do
not include sales by the Company's four larger format Sports & Co. superstores
or the Company's wholly-owned subsidiary, Hibbett Team Sales, Inc. During the
thirteen weeks ended October 31, 1998, the Company opened twelve Hibbett Sports
stores and closed one Hibbett Sports store.
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 $10.9 million, or 30.3% of net sales, in the thirteen weeks
ended October 31, 1998, as compared to $8.5 million, or 30.5% of net sales, in
the same period of the prior fiscal year. The decrease in gross profit as a
percentage of net sales in the thirteen weeks ended October 31, 1998 was due to
higher store occupancy costs as a percentage of net sales as a result of the
increased number of new stores in the store base.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $7.2 million, or 20.1% of net sales,
for the thirteen weeks ended October 31, 1998, as compared to $5.7 million, or
20.6% of net sales, for the comparable period a year ago. The decrease in store
operating, selling and administrative expenses as a percentage of net sales in
the thirteen weeks ended October 31, 1998 is primarily attributable to improved
leveraging of administrative costs over higher sales.
Depreciation and amortization. Depreciation and amortization as a percentage
of net sales increased slightly to 2.2% in the thirteen weeks ended October 31,
1998 from 2.0% in the thirteen weeks ended November 1, 1997 due to the increased
number of new stores in the store base.
Interest expense (income), net. Net interest expense for the thirteen weeks
ended October 31, 1998 was $59,000 compared to net interest expense of $6,000 in
the prior year period. The increase is attributable to higher levels of
borrowing under the Company's Revolving Credit Facility to fund new store
openings in the current year period.
THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998 COMPARED TO THIRTY-NINE WEEKS ENDED
NOVEMBER 1, 1997
Net sales. Net sales increased $21.5 million, or 26.7%, to $101.8 million
for the thirty-nine weeks ended October 31, 1998, from $80.4 million for the
comparable period in the prior year. This increase is attributed to opening a
net of forty-nine Hibbett Sports stores and three Sports Additions store in the
last 52 week period ended October 31, 1998, and a 3.4% increase in comparable
store net sales. The increase in comparable net sales was due primarily to
increased equipment and footwear sales. During the thirty-nine weeks ended
October 31, 1998, the Company opened a net of forty-three Hibbett Sports stores
and two Sports Additions stores. New stores and stores not in the comparable
store net sales calculation accounted for $19.5 million of the increase in net
sales and increases in comparable store net sales contributed $2.0 million.
Comparable store net sales data for a period reflect stores open throughout that
period and the corresponding period of the prior fiscal year. Comparable store
net sales do not include sales by the Company's four larger format Sports & Co.
superstores or the Company's wholly-owned subsidiary, Hibbett Team Sales, Inc.
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 $30.7 million, or 30.1% of net sales, in the thirty-nine weeks
ended October 31, 1998, as compared to $24.4 million, or 30.3% of net sales, in
the same period of the prior fiscal year. The decrease in gross profit as a
percentage of net sales in the thirty-nine weeks ended October 31, 1998 was due
primarily to higher store occupancy costs as a percentage of net sales as a
result of the increased number of new stores in the store base.
7
<PAGE>
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $20.5 million, or 20.1% of net sales,
for the thirty-nine weeks ended October 31, 1998, as compared to $16.6 million,
or 20.7% of net sales, for the comparable period a year ago. The decrease in
store operating, selling and administrative expenses as a percentage of net
sales in the thirty-nine weeks ended October 31, 1998 is primarily attributable
to improved leveraging of administrative costs over higher sales.
Depreciation and amortization. Depreciation and amortization as a percentage
of net sales increased slightly to 2.1% in the thirty-nine weeks ended
October 31, 1998 from 2.0% in the thirty-nine weeks ended November 1, 1997.
Interest expense (income), net. Net interest expense for the thirty-nine
weeks ended October 31, 1998 was $9,000 compared to net interest income of
$5,000 in the prior year period. The increase is attributable to higher levels
of borrowing on the Company's revolving credit facility in the current year
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 flows from
operations and borrowings under its revolving credit facility.
Net cash provided by (used in) operating activities has historically been
driven by net income levels combined with fluctuations in inventory and accounts
payable balances. The Company has continued to increase inventory levels in the
thirty-nine weeks ended October 31, 1998 as the number of new stores has
increased. The Company has financed this increase through increased net income
and accounts payable balances as well as borrowings under a Revolving Credit
Facility. Net cash used in operating activities was $5.7 million for the thirty-
nine week period ending October 31, 1998 as compared to net cash used in
operating activities of $1.7 million for the thirty-nine week period ending
November 1, 1997.
With respect to cash flows from investing activities, capital expenditures
were $5.3 million in the thirty-nine week period ended October 31, 1998 compared
to $3.3 million for the prior year period. Capital expenditures in the thirty-
nine weeks ended October 31, 1998 primarily related to the opening of forty-
seven new stores, construction costs incurred on stores not yet open, and
distribution center-related expenditures. The increase in capital expenditures
in the current year period resulted from additional new store activity.
Net cash provided by financing activities was $7.9 million in the thirty-nine
week period ended October 31, 1998 compared with $5.2 million for the prior year
period. The financing activities in the current year period were primarily the
result of borrowings under the Revolving Credit Facility. These borrowings were
used to fund new store openings and working capital requirements. In the prior
year period, the net cash provided by financing activities was the result of net
proceeds from a secondary public stock offering and proceeds from the exercise
of stock options.
The Company estimates capital expenditures in fiscal 1999 to be approximately
$6.5 million which includes resources budgeted to (i) fund the opening of
approximately 50 Hibbett Sports stores, (ii) remodel selected existing stores
and (iii) fund headquarters and distribution center-related capital
expenditures.
From October 1996 until November 5, 1998, the Company maintained an unsecured
$20 million Revolving Credit Facility (the "Facility"). As of October 31, 1998,
there was $7.8 million outstanding under the Facility. In November 1998, the
Company established a new unsecured revolving credit facility which will expire
November 5, 2001 and allows borrowings up to $25 million. The Company also
established an unsecured working capital line of credit for $5 million which is
subject to annual renewal. Based on its current operating and store opening
plans, the Company believes that it can fund its cash needs for the foreseeable
future through borrowings under the new facility and cash generated from
operations.
8
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("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.
This standard was adopted on February 1, 1998 and did not have a significant
impact on the Company's financial reporting.
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 will adopt the standard in
fiscal 1999. The new rules are not expected to have a significant impact on the
Company's financial reporting.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Post-retirement Benefits. SFAS No. 132, which supersedes
SFAS Nos. 87, 88, and 106, standardizes the disclosure requirements for pensions
and other post-retirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer as useful as they were when SFAS Nos. 87, 88, and
106, were issued. The Company does not offer pensions or other post-retirement
benefits. Therefore, the standard will not have an impact on the Company's
financial reporting.
The American Institute of Certified Public Accountants ("AICPA"), has issued
Statement of Position ("SOP"), 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of external direct costs of materials and services, payroll and
payroll related costs for employees directly associated, and interest cost
during development of computer software for internal use. Planning and
preliminary costs should be amortized on a straight-line basis unless another
systematic and rational basis is more representative of the software's use.
This statement is not expected to have a material effect on the Company's
financial reporting.
The AICPA has issued SOP 98-5, Reporting on the Costs of Start-up Activities.
This statement provides guidance on the financial reporting of start-up costs
and organization costs, and requires these costs to be expensed as incurred.
The new rules which are effective the fiscal year beginning after December 15,
1998, are not expected to have a significant impact on the Company's financial
reporting.
YEAR 2000 COMPLIANCE
During fiscal 1999, the Company has continued to evaluate its management
information systems to identify and address Year 2000 issues. In connection
therewith, the Company has classified its Year 2000 emphasis into five areas:
1. Information systems that are critical to daily operations (i.e.
receiving and processing of merchandise, executing sales at store
level, and processing payroll and other financial accounting functions)
2. Information systems that are important but not critical to daily
operations (tracking supply inventories, electronically sending
purchase orders, etc.)
3. Customized, internally developed programs or interfaces with the above
mentioned systems (radio frequency system in the warehouse, sales audit
system, etc.)
4. Non information technology items (phone system, security system,
warehouse conveyors, heating and air systems, etc.)
5. Third party (vendor) compliance
9
<PAGE>
The Company has classified its Year 2000 implementation program into four areas:
1. Evaluation and Initial Assessment
2. Remediation/Reprogramming
3. Testing
4. Contingency Planning
The following table outlines the Company's current status regarding the first
two areas of its Year 2000 implementation program:
<TABLE>
<CAPTION>
Percent Complete
--------------------------------------------------
Evaluation & Remediation &
Classification/ Program Assessment Reprogramming
- ------------------------------------------- -------------------- ---------------------
<S> <C> <C>
1. Critical Systems:
-----------------
Merchandising & Distribution 95% 90%
Financial & Payroll 100% 100%
Point of Sale/Store Registers 95% 45%
Mainframe Processing 100% 100%
2. Important but not critical systems 85% 50%
3. Custom developed programs & interfaces 45% 45%
4. Non Information Technology items 50% 20%
5. Third Party Compliance 50% 20%
</TABLE>
The Company has plans in place to complete the evaluation and remediation of
all systems by January 31, 1999, and expects to complete Year 2000 testing of
all systems by the middle of calendar year 1999. The Company plans to continue
to rely primarily on internal resources in order to complete these steps.
The Company's financial, merchandising, and distribution systems are third
party vendor software programs which have been recently upgraded and are
certified as Year 2000 compliant by the software vendors. These upgrades were
previously planned and were not accelerated due to Year 2000 issues.
The Company's point of sale system operates the cash registers in the stores.
The registers run on a personal computer system using a third party software.
The software has been upgraded in order to accept credit cards with expiration
dates beyond December 31, 1999, and all other significant date sensitive
applications except for layaway transactions which are not material to the
Company. The point of sale operating system and networking system is in the
process of being upgraded to be Year 2000 compliant.
The Company has not deferred any significant information technology projects
in order to address the Year 2000 issue.
Based on present information, the Company believes that its current plans as
outlined above will substantially mitigate the risk of a material disruption in
the Company's operations due to internal Year 2000 factors. However, possible
consequences of the Company not being Year 2000 compliant include, but are not
limited to, loss of revenues, loss of communication capability with stores,
inability to process or quantify merchandise, and inability to engage in other
operational and financial activities.
At the present time, the Company has not established a contingency plan for
possible Year 2000 issues. The Company expects to consider contingency plans
based on the results of its Year 2000 testing and its assessment of related
risks.
Additionally, the Company is in the process of communicating with third
parties in order to assess their Year 2000 readiness and the extent to which the
Company may be vulnerable to any third parties' failure to remediate their Year
2000
10
<PAGE>
issues. Many of these parties have stated their ability to supply the
Company will not be affected by the Year 2000 issue. Management believes that
the Company's largest vendor, Nike, has made significant progress toward their
Year 2000 compliance and does not expect any material disruption therefrom.
However, the Company cannot assure timely compliance of third parties, including
any other material vendors, and may be adversely affected by failure of a
significant third party to become Year 2000 compliant.
Approximately $60,000 has been expended to date related to Year 2000
compliance. The Company currently expects that the total costs of Year 2000
compliance for the Company's current systems will not exceed $175,000, which
includes the lease or purchase of a system on which to do Year 2000 testing.
These costs are not expected to have a significant impact on the Company's
financial position or results of operations.
The costs associated with Year 2000 compliance are based on management's
current views with respect to future events and may be updated as additional
information becomes available. Please refer to the Special Note Regarding
Forward Looking Statements.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
The statements contained in this report that are not purely historical or
which might be considered an opinion or projection concerning the Company or its
business, whether express or implied, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements may include statements regarding the Company's expectations,
intentions, plans or strategies regarding the future, including statements
related to the Year 2000 issue. All forward-looking statements included in this
document are based upon information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those described or implied in such forward-looking
statements because of, among other factors, the ability of the Company to
execute its expansion plans, a shift in demand for the merchandise offered by
the Company, the Company's ability to obtain brand name merchandise at
competitive prices, the effect of regional or national economic conditions and
the effect of competitive pressures from other retailers. In addition, the
reader should consider the risk factors described from time to time in the
Company's other documents and reports, including the factors described under
"Risk Factors" in the Company's Registration Statement on Form S-1, filed with
the Securities and Exchange Commission on October 1, 1997, and any amendments
thereto.
QUARTERLY FLUCTUATIONS
The Company has historically experienced and expects to continue to experience
seasonal fluctuations in its net sales and operating income. The Company's net
sales and operating income are typically higher in the fourth quarter due to
sales increases during the holiday selling season. However, the seasonal
fluctuations are mitigated by the strong product demand in the spring, summer
and back-to-school sales periods. The Company's quarterly results of operations
may also fluctuate significantly as a result of a variety of factors, including
the timing of new store openings, the amount and timing of net sales contributed
by new stores, the level of pre-opening expenses associated with new stores, the
relative proportion of new stores to mature stores, merchandise mix, the
relative proportion of stores represented by each of the Company's three store
concepts and demand for apparel and accessories driven by local interest in
sporting events.
PART II OTHER INFORMATION
ITEM 1: 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 financial position or results of
operations of the Company.
ITEM 2: Changes in Securities
None
11
<PAGE>
ITEM 3: Defaults Upon Senior Securities
None
ITEM 4: Submission of Matters to Vote of Security-Holders
None
ITEM 5: Other Information
None
ITEM 6: Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit # Description
---------- ------------
27 Financial Data Schedule (for SEC use only)
(B) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
HIBBETT SPORTING GOODS, INC.
Date: December 10, 1998 By: /s/ Susan H. Fitzgibbon
------------------------- -------------------------------
Susan H. Fitzgibbon
Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the financial
statements of Hibbett Sporting Goods, Inc. for the interim period ended October
31, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 1,356
<SECURITIES> 0
<RECEIVABLES> 2,071
<ALLOWANCES> 214
<INVENTORY> 52,426
<CURRENT-ASSETS> 57,211
<PP&E> 27,697
<DEPRECIATION> 12,466
<TOTAL-ASSETS> 73,053
<CURRENT-LIABILITIES> 22,085
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 43,126
<TOTAL-LIABILITY-AND-EQUITY> 73,053
<SALES> 101,833
<TOTAL-REVENUES> 101,833
<CGS> 71,140
<TOTAL-COSTS> 71,140
<OTHER-EXPENSES> 22,670
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 8,014
<INCOME-TAX> 3,065
<INCOME-CONTINUING> 4,949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,949
<EPS-PRIMARY> 0.77<F1>
<EPS-DILUTED> 0.75<F1>
<FN>
<F1>The earnings per share calculations have been prepared in accordance with
SFAS No. 128, and basic and diluted earnings per share have been entered in
place of primary and fully diluted, respectively.
</FN>
</TABLE>
