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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended Commission file number
January 29, 2000 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:
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<S> <C> <C>
Name of Each Exchange on
Title of Each Class CUSIP Number Which Registered
Common Stock, $.01 Par Value 428565-10-5 NASDAQ Stock Market
</TABLE>
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 $84,605,567 at April 5, 2000, based
on the closing sale price of $22.75 for the Common Stock on such date on the
Nasdaq National Market.
The number of shares outstanding of the Registrant's Common Stock, as of
April 5, 2000 was 6,435,552.
DOCUMENTS INCORPORATED BY REFERENCE
Items 6, 7, 7A and 8 of Part II are incorporated by reference from the Company's
2000 Annual Report to Stockholders. Items 10, 11, 12 and 13 of Part III are
incorporated by reference from the Company's definitive Proxy Statement for the
2000 Annual Meeting of Stockholders, to be held June 13, 2000. Registrant's
definitive Proxy Statement will be filed with the Securities and Exchange
Commission on or before April 28, 2000.
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HIBBETT SPORTING GOODS, INC.
INDEX
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PART I
<S> <C> <C>
Item 1. Business 2
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Consolidated Financial and Operating Data 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 7
Item 8. Consolidated Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 7
PART III
Item 10. Directors and Executive Officers of Registrant 8
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners
and Management 8
Item 13. Certain Relationships and Related Transactions 8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 8
</TABLE>
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PART I
Item 1. Business
General
Hibbett Sporting Goods, Inc. ("we" or "Hibbett") is a rapidly-growing
operator of full-line sporting goods stores in small to mid-sized markets
predominantly in the southeastern United States. Our stores offer a broad
assortment of quality athletic equipment, footwear and apparel at competitive
prices with superior customer service. Our merchandise assortment features a
broad selection of brand name merchandise emphasizing team and individual sports
complemented by localized apparel and accessories designed to appeal to a wide
range of customers within each market. We believe that our stores are among the
primary retail distribution alternatives for brand name vendors that seek to
reach our target markets.
As of January 29, 2000, we operated 206 Hibbett Sports stores as well as
thirteen smaller-format Sports Additions athletic shoe stores and four larger-
format Sports & Co. superstores in 19 states. Over the past two years, we have
increased our store base by approximately 86%. Our primary retail format and
growth vehicle is Hibbett Sports, a 5,000 square foot store located in enclosed
malls and dominant strip centers. Although competitors in some markets may carry
similar product lines and national brands, we believe that the 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
We target markets with county populations that range from 30,000 to
250,000. By targeting these smaller markets, we believe that we 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, we establish greater
customer and vendor recognition as the leading full-line sporting goods retailer
in these local communities.
Our management team believes that our ability to merchandise to local
sporting or community interests differentiates Hibbett from its national
competitors. This strong regional focus also enables us to achieve significant
cost benefits including lower corporate expenses, reduced distribution costs and
increased economies of scale from marketing activities. Additionally, we also
use sophisticated information systems to maintain tight controls over operating
costs.
We strive to hire enthusiastic sales personnel with an interest in sports.
Our 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
Our primary retail format is Hibbett Sports, a 5,000 square foot store
located in enclosed malls and dominant strip centers. We tailor our Hibbett
Sports stores to the size, demographics and competitive conditions of each
market. Ninety-six Hibbett Sports stores are located in enclosed malls, the
majority of which are the only enclosed malls in the county, and the remaining
110 are located in dominant 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, we believe
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, we strive to
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quickly respond to major sports events of local interest such as the recent
Tennessee Titans AFC championship.
Sports Additions
Our thirteen Sports Additions stores are small, mall-based stores,
averaging 1,500 square feet with approximately 90% of merchandise consisting of
athletic footwear and the remainder consisting of caps and a limited assortment
of apparel. Sports Additions stores offer a broader assortment of athletic
footwear, with a greater emphasis on fashion than the athletic footwear
assortment offered by Hibbett Sports stores. All but one Sports Additions store
are currently located in malls in which Hibbett Sports stores are also present.
Sports & Co.
We opened four Sports & Co. superstores between March 1995 and September
1996. 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.
Team Sales
Hibbett Team Sales, Inc. ("Team Sales"), a wholly-owned subsidiary of
Hibbett, 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 our retail stores,
and its warehousing and distribution operate out of its own warehouse. Team
Sales does not meet the materiality reporting requirements of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
131, Disclosures About Segments of an Enterprise and Related Information.
Expansion Strategy
In fiscal 1994, we began to accelerate our rate of new store openings to
take advantage of the growth opportunities in our target markets. We have
identified approximately 700 potential markets for future Hibbett Sports stores
within the states in which we operate and in certain contiguous states. Our
clustered expansion program, which calls for opening new stores within a two-
hour driving distance of an existing Hibbett location, allows us to take
advantage of efficiencies in distribution, marketing and regional management.
During the last half of fiscal 2000, we expanded our distribution center to
accommodate our recent growth and continued expansion. The newly expanded
facility can support the Company's growth for the foreseeable future.
In evaluating potential markets, we consider population, economic
conditions, local competitive dynamics and availability of suitable real estate.
Hibbett Sports stores effectively operate in both enclosed mall and dominant
strip center locations.
Our continued growth largely depends upon our ability to open new stores in
a timely manner and to operate them profitably. Additionally, successful
expansion is subject to various contingencies, many of which are beyond our
control. These contingencies include, among others:
(i) Our ability to identify and secure suitable store sites on a timely basis
with advantageous terms and to complete any necessary construction or
refurbishment of these sites, and
(ii) Our ability to hire, train and retain qualified managers and other
personnel, and
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(iii) The successful integration of new stores into existing operations.
Although we believe that we have personnel and other resources required to
implement our store expansion goals, we cannot guarantee that we will be able to
successfully implement these plans within the expected time frame. We also
cannot guarantee that our new stores will achieve the same results as our old
stores. If we were unable to execute our expansion plans or effectively manage
our growth, it would be detrimental to our business, financial condition, and
results of operations.
Merchandising
Our merchandising strategy is to provide a broad assortment of quality
athletic equipment, footwear and apparel at competitive prices in a full service
environment. Our stores offer a broad 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. Our leading product category is athletic
footwear, followed by apparel and sporting equipment, ranked according to sales.
Our stores emphasize quality brand name merchandise. We believe that the
breadth and depth of our 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.
We coordinate with our 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, our stores regularly offer products that reflect preferences for
particular sporting activities in each community and local interest in college
and professional sports teams. Our knowledge of these interests, combined with
access to leading vendors, enables Hibbett Sports stores to react quickly to
emerging trends or special events, such as college or professional
championships.
Our merchandise staff analyzes current sporting goods trends by maintaining
close relationships with 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.
Our success depends in part on our ability to anticipate and respond to
changing merchandise trends and consumer demand in a timely manner. Accordingly,
the following scenarios could be detrimental to our business, financial
condition, and results of operations:
(i) If we are unable to identify and respond to emerging trends
(ii) If we miscalculate either the market for the merchandise in our stores or
our customers' purchasing habits, we may be faced with a significant
amount of unsold inventory
(iii) If consumer demand dramatically shifts away from athletic footwear and
apparel
Vendor Relationships
The sporting goods retail business is very brand name driven. Accordingly,
we maintain relationships with a number of well known sporting goods vendors to
satisfy customer demand. We believe that our stores are among the primary retail
distribution alternatives for brand name vendors that seek to reach Hibbett's
target markets. As a result, we are able to attract considerable vendor interest
and establish long-term partnerships with vendors. As our vendors expand their
product lines and grow in popularity, we expand sales and promotions of these
products within our stores. In addition, as we continue to increase our store
base and enter new markets, the vendors have increased their brand presence
within these regions.
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We also emphasize and work with our vendors to establish the most favorable
pricing and to receive cooperative marketing funds. Our management believes that
Hibbett maintains excellent working relationships with vendors. During fiscal
2000, our largest vendor, Nike, represented approximately 30% of our total
purchases.
The loss of key vendor support could be detrimental to our business,
financial condition and results of operations. We believe that we have long-
standing and strong relationships with our vendors and that we have adequate
sources of brand name merchandise on competitive terms; however, we cannot
guarantee that we 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 our control.
Advertising and Promotion
We target special advertising opportunities in our markets to increase the
effectiveness of our advertising budget. In particular, we prefer advertising in
local media as a way to further differentiate Hibbett from national chain
competitors. Substantially all of our 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 our promotional program and accounted for the majority of our
total advertising costs in fiscal 2000. Other media such as local radio,
television and outdoor billboards are used to reinforce Hibbett's name
recognition and brand awareness in the community. We also use direct mail to
customers on an in-house mailing list to reinforce already established buying
patterns and to increase customer loyalty.
Distribution
We maintain a single 220,000 square foot distribution center in Birmingham,
Alabama which services our existing stores. The distribution process is
centrally managed from our corporate headquarters which are located in the same
building as the distribution center. In January 1996 we moved our operations to
this newly constructed 130,000 square foot distribution center. To support our
continued expansion, we added approximately 90,000 square feet to the facility
in fiscal 2000. We believe strong distribution support for our stores is a
critical element of our expansion strategy and is central to our ability to
maintain a low cost operating structure. As we continue to expand our store
base, we intend to open new stores in locations that can be supplied from our
existing distribution center.
We receive substantially all of our merchandise at our distribution center.
For key products, we maintain 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 we are engaged is highly competitive. Many of the
items that we offer in our stores are also 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, there has been
significant consolidation of large format retailers in large metropolitan
markets. However, we believe 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
Hibbett, national chains compete by focusing on a specialty category like
athletic footwear in the case of Foot Locker and Foot Action. Many of the stores
with which we compete are units of these national chains that have substantially
greater financial and other resources than we do.
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Hibbett Sports format stores compete with national chains that focus on
athletic footwear, local sporting goods stores, department and discount stores,
traditional shoe stores and mass merchandisers. Although our Hibbett Sports
format may face competition from a variety of competitors, we believe that our
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. Our 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, but we believe the principal competitive factors in
its markets are service, breadth of merchandise offered availability of brand
names, availability of local merchandise and price. We believe we compete
favorably with respect to these factors in the small to mid-sized markets
predominantly in the Southeast. However, we cannot guarantee that we will
continue to be able to compete successfully against existing or future
competitors. Expansion into markets served by our competitors, entry of new
competitors or expansion of existing competitors into our markets, could be
detrimental to our business, financial condition and results of operations.
Employees
As of January 29, 2000, we employed approximately 798 full-time and
approximately 1,148 part-time employees, none of whom are represented by a labor
union. The number of part-time employees fluctuates depending on seasonal needs.
We cannot guarantee that our employees will not, in the future, elect to be
represented by a union. We consider our relationship with our employees to be
good and have not experienced significant interruptions of operations due to
labor disagreements.
Item 2. Properties
We currently lease all of our existing 223 store locations and expect that
our policy of leasing rather than owning will continue as we expand. Our leases
typically provide for a short initial lease term with options on the part of
Hibbett to extend. We believe that this lease strategy enhances our flexibility
to pursue various expansion opportunities resulting from changing market
conditions and to periodically re-evaluate store locations. Our 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, we believe that we 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, we have not
experienced any significant difficulty in either renewing leases for existing
locations or securing leases for suitable locations for new stores. Our leases
may contain certain provisions with which we may not be in compliance. Based
primarily on our belief that we maintain good relations with our landlords, that
most of our leases are at market rents and that we have historically been able
to secure leases for suitable locations, we believe that these provisions will
not be detrimental to our business or financial condition.
Our offices and the distribution center are leased under a long term
operating lease. Team Sales owns its warehousing and distribution center located
in Birmingham, Alabama.
Item 3. Legal Proceedings
Hibbett is a party to various legal proceedings incidental to our business.
In the opinion of management, after consultation with legal counsel, the
ultimate liability, if any, with respect to those proceedings is not presently
expected to materially affect the business, financial position or results of
operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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PART II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded on the NASDAQ National Market (NASDAQ)
under the symbol HIBB. The following table sets forth, for the periods indicated
the high and low closing sales prices of shares of the Common Stock as reported
by NASDAQ.
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Fiscal 2000: High Low
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First Quarter (January 31 to May 1) $ 28 1/8 $17 9/16
Second Quarter (May 2 to July 31) $29 11/16 $ 20 1/4
Third Quarter (August 1 to October 30) $ 20 1/4 $ 15 5/8
Fourth Quarter (October 31 to January 29) $ 19 9/32 $ 12 3/4
Fiscal 1999
First Quarter (February 1 to May 2) $ 35 5/8 $ 23
Second Quarter (May 3 to August 1) $ 40 1/4 $ 32 5/8
Third Quarter (August 2 to October 31) $ 31 3/4 $ 20
Fourth Quarter (November 1 to January 30) $ 36 1/16 $ 16 1/2
</TABLE>
On April 5, 2000, the last reported sale price for the Company's Common
Stock as quoted by NASDAQ was $22.75 per share. As of April 5, 2000, the Company
had approximately 54 registered shareholders.
We have never declared or paid any dividends on our common stock. We
currently intend to retain our future earnings to finance the growth and
development of our business, and therefore we do not anticipate declaring or
paying cash dividends on our common stock for the foreseeable future. Any future
decision to declare or pay dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of
operations, capital requirements, and such other factors as the Board of
Directors deems relevant.
Item 6. Selected Consolidated Financial and Operating Data
The information required is incorporated by reference from page 11 of the
Company's 2000 Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required is incorporated by reference from pages 12 to 18
of the Company's 2000 Annual Report to Stockholders.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
The information required is incorporated by reference from page 16 of the
Company's 2000 Annual Report to Stockholders.
Item 8. Consolidated Financial Statements and Supplementary Data
The information required is incorporated by reference from pages 19 to 30
of the Company's 2000 Annual Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of Registrant
The information required is incorporated by reference from the sections
entitled "Directors and Executive Officers", "The Board of Directors", and
"Certain Relationships and Related Transactions" in the Proxy Statement for the
Annual Meeting of Stockholders to be held June 13, 2000 (the "Proxy Statement"),
which is to be filed with the Securities and Exchange Commission.
Item 11. Executive Compensation
The information required is incorporated by reference from the section
entitled "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required is incorporated by reference from the sections
entitled "Security Ownership of Certain Beneficial Owners" and "Directors and
Executive Officers" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required is incorporated by reference from the section
entitled "Certain Relationships and Related Transactions" in the Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report:
1. Financial Statements:
The following Financial Statements and Supplementary Data of the
Registrant and Independent Auditors' Report on such Financial
Statements are incorporated by reference from the Company's 2000 Annual
Report to Stockholders, in Part II, Item 8:
Consolidated Balance Sheets as of January 29, 2000 and January 30, 1999
Consolidated Statements of Operations for the fiscal years ended
January 29, 2000, January 30, 1999 and January 31,1998
Consolidated Statements of Stockholders' Investment for the fiscal
years ended January 29, 2000, January 30, 1999 and January 31, 1998
Consolidated Statements of Cash Flows for the fiscal years ended
January 29, 2000, January 30, 1999 and January 31, 1998
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
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2. Financial Statement Schedules:
The following consolidated financial statement schedule of Hibbett
Sporting Goods, Inc. is attached hereto:
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are not applicable, and
therefore have been omitted.
3. Exhibits.
The Exhibits listed on the accompanying Exhibits Index are filed as
part of, or incorporated by reference into, this report.
EXHIBITS INDEX
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Exhibit #
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3.1 (a) Certificate of Incorporation of the Company
3.2 (a) Bylaws of the Company
10.1(e) Credit Agreement dated as of November 5, 1998 between the
Company, Hibbett Team Sales, Inc., Sports Wholesale, Inc.,
AmSouth Bank, NationsBank, N.A. and BankBoston, N.A.
10.2(e) Credit Agreement dated as of November 5, 1998 between the
Company, Hibbett Team Sales, Inc., Sports Wholesale, Inc. and
AmSouth Bank
10.3 (b) Advisory Agreement dated November 1, 1995 between the Company
and Saunders, Karp & Co., L.P.
10.4 (b) Non-competition Agreement dated November 1, 1995 among Charles
C. Anderson, Joel R. Anderson, Clyde B. Anderson, the Company,
The SK Equity Fund, L.P. and SK Investment Fund, L.P.
10.5 (d) The Company's Stock Option Plan (as amended effective as of
October 10, 1996)
10.6 (d) The Company's Amended and Restated 1996 Stock Option Plan
("1996 Plan")
10.7 (d) The Company's Employee Stock Purchase Plan
10.8 (d) The Company's Stock Plan for Outside Directors
10.9.1 (b) Lease Agreement dated as of February 12, 1996 between QRS 12-
14 (AL), Inc. and Sports Wholesale, Inc. (the "Lease
Agreement")
10.9.2 + First Amendment to Lease Agreement dated December 30, 1999
between QRS 11-41 (AL), Inc. and Sports Wholesale, Inc.
10.9.3 (c) Landlord's Waiver and Consent re: Lease Agreement dated
February 12, 1996 by QRS 12-14 (AL), Inc.
</TABLE>
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<TABLE>
<S> <C>
10.10 (d) Letter from the Company to Clyde B. Anderson dated September
13, 1996 re: Consulting Agreement
13.1 + Fiscal 2000 Annual Report
21 (b) List of Company's Subsidiaries
23.1 + Consent of Arthur Andersen LLP
27 + Financial Data Schedule
(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended January 30, 1999, and
incorporated herein by reference.
</TABLE>
+ Filed heretowith
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the three months ended
January 29, 2000.
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HIBBETT SPORTING GOODS, INC.
By: /s/ Michael J. Newsome
-----------------------------------
Michael J. Newsome
President
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------------- ------------------------------------- --------------
<S> <C> <C>
/s/ Michael J. Newsome Principal Executive Officer and April 28, 2000
- ---------------------------------------------- --------------
Michael J. Newsome Director
/s/ Susan H. Fitzgibbon Principal Financial Officer and April 28, 2000
- ----------------------------------------------------- --------------
Susan H. Fitzgibbon Principal Accounting Officer
/s/ Clyde B. Anderson Director April 28, 2000
- ----------------------------------------------------- --------------
Clyde B. Anderson
/s/ H. Ray Compton Director April 28, 2000
- ----------------------------------------------------- --------------
H. Ray Compton
/s/ F. Barron Fletcher, III Director April 28, 2000
- ----------------------------------------------------- --------------
F. Barron Fletcher, III
/s/ Carl Kirkland Director April 28, 2000
- ----------------------------------------------------- --------------
Carl Kirkland
/s/ John F. Megrue Director April 28, 2000
- ----------------------------------------------------- --------------
John F. Megrue
/s/ Thomas A. Saunders, III Director April 28, 2000
- ----------------------------------------------------- --------------
Thomas A. Saunders, III
</TABLE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
Schedules and Exhibits
to
Annual Report
on
Form 10-K
for the Fiscal Year Ended
January 29, 2000
--------------------------
HIBBETT SPORTING GOODS, INC.
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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) AND SUBSIDIARIES, included in this Form 10-K and have issued our
report thereon dated March 10, 2000. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. Schedule
II included in Item 14 of the Form 10-K is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 10, 2000
13
<PAGE>
HIBBETT SPORTING GOODS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 29, 2000, JANUARY 30, 1999, AND JANUARY 31, 1998
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
------------------ --------------- -----------------
<S> <C> <C> <C>
Balance of allowance for doubtful accounts
at beginning of period $224,000 $184,000 $134,000
Charged to costs and expenses 73,900 85,400 110,000
Write-offs, net of recoveries (18,900) (45,400) (60,000)
-------- -------- ---------
Balance of allowance for doubtful accounts
at end of period $279,000 $224,000 $184,000
======== ======== =========
</TABLE>
<PAGE>
Exhibit 10.9.2
- --------------
FIRST AMENDMENT TO LEASE AGREEMENT
----------------------------------
This FIRST AMENDMENT TO LEASE AGREEMENT is made as of the this 30th
day of December, 1999, by and between QRS 11 (AL), INC., an Alabama corporation,
having a mailing address c/o W. P. Carey & Co., Inc., 50 Rockefeller Plaza,
Second Floor, New York, New York 10020 ("Landlord") and SPORTS WHOLESALE, INC.,
--------
an Alabama corporation having a mailing address at 451 Industrial Lane,
Birmingham, Alabama ("Tenant"),.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a certain Lease Agreement
dated as of February 12, 1996 (the "Lease"); and
-----
WHEREAS, Landlord and Tenant desire to amend the Lease as hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant
agree as follows:
1. Paragraph 2, Certain Definitions, is hereby amended in the
-------------------
following respects:
(a) The definition of "Addition" is hereby added as follows:
"Addition" shall mean the 87,510 square foot addition to the Improvements.
(b) The definition of "Acquisition Cost" is hereby deleted and
the following is inserted in lieu thereof:
(c) "Acquisition Cost" shall mean $7,023,784.36.
(d) The definition of "Improvements" is hereby deleted in its
entirety, and the following is inserted in lieu thereof:
"Improvements" shall mean the improvements as defined in
paragraph 1 and shall include, without limitation, the Addition.
2. Paragraph 5, Term, is hereby amended by deleting subparagraph (a)
----
in its entirety and inserting the following in lieu thereof:
"(a) Subject to the provisions hereof, Tenant shall have and
hold the leased premises for an initial term (such term, as extended or renewed
in accordance with the provisions hereof, being called the "Term") commencing on
----
February 12, 1996 (the "Commencement Date") and ending on the last day of the
-----------------
one hundred eightieth (180th) calendar month following December 30, 1999 (the
"Expiration Date")."
---------------
<PAGE>
3. Exhibit D, Basic Rent Payments, is hereby amended as follows:
-------------------
(a) Paragraph 1, Basic Rent, is hereby restated as follows:
----------
"Subject to the adjustments provided in paragraphs 2, 3 and
4 below, Basic Rent payable in respect of the Term shall be
$740,972.15 per annum, payable quarterly in advance on each Basic Rent
Payment Date, in equal installments of $185,243.04 each."
(b) The first sentence of Paragraph 3, Effective Dates of CPI
----------------------
Adjustments, is hereby restated as follows: "The first adjustment of Basic Rent
- -----------
shall occur on March 1, 2001 (the "First Full Basic Rent Payment Date").
----------------------------------
4. Except as specifically amended hereby, the terms and the
conditions of the Lease shall remain in full force and effect and binding upon
the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to Lease Agreement as of the date first written above.
QRS 11-41 (AL), INC.
By: /s/ Tim Burdette
------------------------------
Title: Senior Vice President
----------------------------
SPORTS WHOLESALE, INC.
By: /s/ Susan H. Fitzgibbon
--------------------------------
Title: Vice President and Chief
-----------------------------
Financial Officer
-----------------
<PAGE>
EXHIBIT 13.1
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
January 29, January 30, January 31, February 1, February 3,
2000 1999 1998 1997 1996
------------- ------------- ------------- ------------- -------------
(52 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
- ----------------------
Net sales $ 174,312 $ 143,350 $ 113,563 $ 86,401 $ 67,077
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 121,962 100,409 78,714 60,017 46,642
------------- ------------- ------------- ------------- -------------
Gross profit 52,350 42,941 34,849 26,384 20,435
Store operating, selling, and administrative
expenses 34,142 28,720 22,947 17,339(1) 13,471
Depreciation and amortization 3,762 3,056 2,286 1,821 1,322
------------- ------------- ------------- ------------- -------------
Operating income 14,446 11,165 9,616 7,224 5,642
Interest expense, net 422 141 8(3) 2,642 1,685
------------- ------------- ------------- ------------- -------------
Income before provision for income
taxes and extraordinary item 14,024 11,024 9,608 4,582 3,957
Provision for income taxes 5,364 4,234 3,675 1,752 1,514
------------- ------------- ------------- ------------- -------------
Income before extraordinary item 8,660 6,790 5,933 2,830 2,443
Extraordinary item, net - - - (1,093)(3) -
------------- ------------- ------------- ------------- -------------
Net income $ 8,660 $ 6,790 $ 5,933 $ 1,737 $ 2,443
============= ============= ============= ============= =============
Earnings per common share:
Basic:
Income before extraordinary item $ 1.35 $ 1.06 $ 0.95 $ 0.62 $ 0.42
Extraordinary item, net - - - (0.24)(3) -
------------- ------------- ------------- ------------- -------------
Net income $ 1.35 $ 1.06 $ 0.95 $ 0.38 $ 0.42
============= ============= ============= ============= =============
Diluted:
Income before extraordinary item $ 1.33 $ 1.04 $ 0.93 $ 0.61 $ 0.42
Extraordinary item, net - - - (0.24)(3) -
------------- ------------- ------------- ------------- -------------
Net income 1.33 $ 1.04 $ 0.93 $ 0.37 $ 0.42
============= ============= ============= ============= =============
Weighted average shares outstanding:
Basic 6,427,745 6,403,922 6,227,415 4,552,118 5,820,763
Diluted 6,529,980 6,557,273 6,362,755 4,671,268 5,838,267
Selected Operating Data:
- ------------------------
Number of stores open at end of period:
Hibbett Sports 206 156 107 77 56
Sports & Co. 4 4 4 4 3
Sports Additions 13 11 9 8 8
------------- ------------- ------------- ------------- -------------
Total 223 171 120 89 67
============= ============= ============= ============= =============
Balance Sheet Data:
- -------------------
Working capital $ 37,831 $ 29,127 $ 25,649 $ 16,280 $ 10,907
Total assets 83,278 68,552 53,366 40,358 36,702
Total debt 4,391 - - -(3) 31,912(2)
Stockholders' investment (deficit) 54,201 45,260 38,155 26,512(3) (8,093)(2)
</TABLE>
<PAGE>
Footnotes (dollars in thousands):
(1) Includes a $513 pre-tax gain on the sale of the Company's former
headquarters and distribution facility and a one-time pre-tax compensation
expense of $462 related to stock options issued on August 1, 1996.
(2) 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.
(3) During the third quarter of fiscal 1997 ended November 2, 1996, the Company
completed its initial public offering with net proceeds of $32,868. In
connection therewith, a substantial portion of the Company's long-term debt
was repaid resulting in an extraordinary loss of $1,093 (net of applicable
tax benefit of $677).
18
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Hibbett Sporting Goods, Inc. ("we" or "Hibbett") is a rapidly-growing
operator of full-line sporting goods stores in small to mid-sized markets
predominantly in the southeastern United States. Our stores offer a broad
assortment of quality athletic equipment, footwear and apparel at competitive
prices with superior customer service. Our merchandise assortment features a
broad 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. Our management team
believes that our stores are among the primary retail distribution alternatives
for brand name vendors that seek to reach our target markets.
As of January 29, 2000, we operated 206 Hibbett Sports stores as well as
thirteen smaller-format Sports Additions athletic shoe stores and four larger-
format Sports & Co. superstores in 19 states. Our primary retail format and
growth vehicle is Hibbett Sports a 5,000 square foot store located in enclosed
malls and dominant strip centers. We target markets with county populations that
range from 30,000 to 250,000. By targeting smaller markets, we believe that we
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, we establish
greater customer and vendor recognition as the leading full-line sporting goods
retailer in these local communities. Although competitors in some markets may
carry similar product lines and national brands, we believe that the 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.
In fiscal 1994, we began to accelerate our rate of new store-openings to
take advantage of the growth opportunities in our target markets. Since fiscal
1994, we have grown our store base from 49 to 223 stores. Our expansion strategy
is to continue to open Hibbett Sports stores in our target markets. We plan to
open approximately 60 Hibbett Sports stores in fiscal 2001.
In October 1997, we completed a secondary public offering of 1,133,197
shares of common stock at the offering price of $27.75 per share. Of the
1,133,197 shares of common stock offered, 933,197 shares were offered by certain
selling shareholders and 200,000 shares were offered by Hibbett. Our net
proceeds of approximately $4.8 million were used to reduce borrowings under the
revolving credit facility and for working capital and general corporate
purposes.
Hibbett operates on a 52 or 53 week fiscal year ending on the Saturday
nearest to January 31 of each year. The consolidated statements of operations
for the fiscal years ended January 29, 2000, January 30, 1999 and January 31,
1998, include 52 weeks of operations. Hibbett is incorporated under the laws of
the State of Delaware.
19
<PAGE>
Results of Operations
The following table sets forth consolidated statements of operations
expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 70.0 70.0 69.3
------ ------ ------
Gross profit 30.0 30.0 30.7
Store operating, selling, and administrative expenses 19.6 20.0 20.2
Depreciation and amortization 2.1 2.1 2.0
------ ------ ------
Operating income 8.3 7.9 8.5
Interest expense, net 0.2 0.1 0.0
------ ------ ------
Income before provision for income taxes 8.1 7.8 8.5
Provision for income taxes 3.1 3.0 3.3
------ ------ ------
Net income 5.0% 4.8% 5.2%
====== ====== ======
</TABLE>
Fiscal 2000 Compared to Fiscal 1999
Net sales. Net sales increased $31.0 million, or 21.6%, to $174.3 million
for the 52 weeks ended January 29, 2000, from $143.4 million for the 52 weeks
ended January 30, 1999. The increase is attributable to the opening of 50
Hibbett Sports stores, two Sports Additions stores, and a 2.8% increase in
comparable store net sales. The increase in comparable store net sales was due
primarily to increased equipment sales, particularly baseball and softball
equipment due to the growing popularity of these sports and our emphasis
thereon. New stores and stores not in the comparable store net sales calculation
accounted for $28.0 million of the increase in net sales, and increases in
comparable store net sales contributed $3.0 million. During fiscal 2000, we also
closed one Hibbett Sports store and reopened one that had been temporarily
closed. Comparable store net sales data for the period reflect sales for our
traditional format stores open throughout the period and the corresponding
period of the prior fiscal year.
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 $52.4 million, or 30.0% of net sales, in the 52 weeks ended
January 29, 2000, as compared to $42.9 million, or 30.0% of net sales, in the
prior fiscal year. Increased product margins were offset by higher store
occupancy costs as a percentage of net sales as a result of the increased number
of new stores in the store base. Higher product margins resulted from lower
markdowns on winter apparel as compared to the previous year when apparel
margins were negatively impacted by unusual weather patterns.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $34.1 million, or 19.6% of net sales,
in fiscal 2000 as compared to $28.7 million, or 20.0% of net sales, in fiscal
1999. The decrease in store operating, selling and administrative expenses as a
percentage of net sales in fiscal 2000 is attributable to improved leveraging of
administrative costs over increased sales.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales was 2.1% in the 52 weeks ended January 29, 2000 and
January 30, 1999.
Interest expense, net. Net interest expense for the 52 weeks ended January
29, 2000 was $422,000 compared to $141,000 in the prior year period. The
increase is attributable to higher levels of
20
<PAGE>
borrowing on the Company's revolving credit facilities in the current fiscal
year to fund the distribution center expansion and new store openings.
Fiscal 1999 Compared to Fiscal 1998
Net sales. Net sales increased $29.8 million, or 26.2%, to $143.4 million
for the 52 weeks ended January 30, 1999, from $113.6 million for the 52 weeks
ended January 31, 1998. The increase is attributable to the opening of 51
Hibbett Sports stores, two Sports Additions stores, and a 2.7% increase in
comparable store net sales. The increase in comparable store net sales was due
primarily to increased equipment sales as well as increased apparel and
accessory sales. New stores and stores not in the comparable store net sales
calculation accounted for $27.5 million of the increase in net sales and
increases in comparable store net sales contributed $2.3 million. During fiscal
1999, we also closed two Hibbett Sports stores.
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 $42.9 million, or 30.0% of net sales, in the 52 weeks ended
January 30, 1999, as compared to $34.9 million, or 30.7% of net sales, in the
prior fiscal year. The decrease in gross profit as a percentage of net sales was
primarily the result of lower apparel product margins in the fourth quarter and
higher store occupancy costs as a percentage of net sales as a result of the
increased number of new stores in the store base. Lower apparel product margins
were primarily the result of higher markdowns on winter apparel due to unusual
weather patterns during the fourth quarter.
Store operating, selling and administrative expenses. Store operating,
selling and administrative expenses were $28.7 million, or 20.0% of net sales,
in fiscal 1999 as compared to $23.0 million, or 20.2% of net sales, in fiscal
1998. The decrease in store operating, selling and administrative expenses as a
percentage of net sales in fiscal 1999 is primarily attributable to improved
leveraging of administrative costs over increased sales.
Depreciation and amortization. Depreciation and amortization as a
percentage of net sales increased slightly to 2.1% in the 52 weeks ended January
30, 1999 from 2.0% in the prior year due to the increase in the number of new
stores in the store base.
Interest expense, net. Net interest expense for the 52 weeks ended January
30, 1999 was $141,000 compared to $8,000 in the prior year period. The increase
is attributable to higher levels of borrowing on the Company's revolving credit
facility in the current fiscal year to fund new store openings.
Liquidity and Capital Resources
Our capital requirements relate primarily to new store openings and working
capital requirements. Our working capital requirements are somewhat seasonal in
nature and typically reach their peak near the end of the third and the
beginning of the fourth quarter of our fiscal year. Historically, we have funded
our cash requirements primarily through cash flow from operations and borrowings
under our revolving credit facilities.
Net cash provided by operating activities has historically been driven by
net income levels combined with fluctuations in inventory and accounts payable
balances. Net income has increased in each of the last three fiscal years. In
addition, we have continued to increase our inventory levels throughout these
periods as the number of stores has increased. These inventory increases were
primarily financed with cash from operations in each of the last three fiscal
years. These activities resulted in cash flows provided by operating activities
of $3.6 million, $2.6 million, and $1.5 million in fiscal 2000, fiscal 1999, and
fiscal 1998, respectively.
With respect to cash flows from investing activities, capital expenditures
for fiscal 2000 were $10.6 million compared with $6.3 million in fiscal 1999 and
$4.6 million in fiscal 1998. Capital expenditures in fiscal 2000 resulted
primarily from the opening of 50 new Hibbett Sports stores and two Sports
Additions stores,
21
<PAGE>
the expansion of the distribution center, certain store remodels, and office and
distribution center expenditures. The increase in capital expenditures in fiscal
2000 primarily resulted from $2.3 million in construction costs and $1.4 million
in equipment purchased in connection with the expansion of the distribution
center. Hibbett incurred the construction costs related to the distribution
center expansion. In December 1999, the existing distribution center's operating
lease was amended to include the expansion, and Hibbett was reimbursed by the
landlord for construction related costs in a sale-leaseback transaction. Our
management team believes that the newly expanded facility can support the
Company's growth for the foreseeable future.
The Company estimates capital expenditures in fiscal 2001 to be
approximately $8.0 million which will fund the opening of approximately 60
Hibbett Sports stores, remodel selected existing stores, and fund headquarters
and distribution center related capital expenditures.
Net cash provided by financing activities was $4.6 million, $127,000, and
$5.2 million in fiscal 2000, fiscal 1999, and fiscal 1998, respectively. Cash
flows from financing activities have historically represented the Company's
financing of its long-term growth. The increase of revolving loan borrowings and
repayments in fiscal 2000 was used to finance new store openings, related
working capital requirements and the warehouse expansion and related equipment.
Fiscal 1998 financing activities consisted primarily of proceeds from our
secondary public stock offering in October 1997 of $4.8 million. The proceeds
were used to reduce borrowings under the revolving credit facility and for
working capital and general corporate purposes.
Hibbett maintains an unsecured revolving credit facility which will expire
November 5, 2002 and allows borrowings up to $25 million. We also maintain an
unsecured working capital line of credit for $7 million which is subject to
annual renewal. As of January 29, 2000, we had $4.4 million outstanding under
these facilities. Based on our current operating and store opening plans,
management believes that we can adequately fund our cash needs for the
foreseeable future through borrowings under the credit facility, the working
line of credit and cash generated from operations.
Recent Accounting Pronouncements
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. Capitalized software
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 was
adopted on January 31, 1999 with no material effect on the Company's financial
statements.
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. This statement was adopted on January 31, 1999 with no material
effect on the Company's financial statements.
Dividend Policy
Hibbett has never declared or paid any dividends on its common stock. We
currently intend to retain our future earnings to finance the growth and
development of our business, and therefore we do not anticipate declaring or
paying cash dividends on our common stock for the foreseeable future. Any future
decision to declare or pay dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of
operations, capital requirements and other factors, as the Board of Directors
deems relevant.
22
<PAGE>
Year 2000 Compliance
We completed our Year 2000 implementation program, including testing of all
systems, by late 1999. We relied primarily on internal resources in completing
these steps. Hibbett has not experienced any significant operational or
functional interruption to its business as a result of the turn of the
millennium.
Our financial, merchandising, distribution and point of sale systems are
third party vendor software programs which were recently upgraded and certified
as Year 2000 compliant by the software vendors. These upgrades were previously
planned and were not accelerated due to Year 2000 issues. We did not defer any
significant information technology projects in order to address the Year 2000
issue.
Based on present information, our management believes that our Year 2000
plans have and will substantially mitigate the risk of a material disruption in
our operations due to internal Year 2000 factors. However, possible
consequences of a change in the current status, including noncompliance by third
parties with whom Hibbett does or may do business with, 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. The Company cannot assure timely
compliance of third parties and may be adversely affected by noncompliance of a
significant third party.
As previously reported, approximately $185,000 was expended related to Year
2000 compliance. These costs did not have a significant impact on Hibbett'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.
Market Risk
The Company's financial condition, results of operations and cash flows are
subject to market risk from interest rate fluctuations on its revolving credit
facility and working capital line of credit, each of which bears interest at
rates that vary with LIBOR, prime or quoted cost of funds rates. The average
amount of borrowings outstanding under these agreements during fiscal 2000 was
$5,391,090, the maximum amount outstanding was $14,155,468 and the weighted
average interest rate was 6.48%. A 10% increase or decrease in market interest
rates would not have a material impact on the Company's financial condition,
results of operations or cash flows.
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.
23
<PAGE>
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.
<PAGE>
The following tables set forth certain unaudited financial data for the quarters
indicated:
Unaudited Quarterly Financial Data
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended January 29, 2000
----------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $42,804 $39,342 $42,223 $49,943
Gross profit 12,992 11,485 12,806 15,067
Operating income 3,717 2,755 3,518 4,456
Net income $ 2,263 $ 1,638 $ 2,121 $ 2,638
======== ======== ======== ========
Basic earnings per common share $ 0.35 $ 0.26 $ 0.33 $ 0.41
======== ======== ======== ========
Diluted earnings per common share $ 0.35 $ 0.25 $ 0.33 $ 0.40
======== ======== ======== ========
Fiscal Year Ended January 30, 1999
----------------------------------------------
First Second Third Fourth
(13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks)
---------- ---------- ---------- ----------
Net sales $33,321 $32,524 $35,988 $41,517
Gross profit 10,163 9,617 10,913 12,248
Operating income 2,964 2,185 2,874 3,142
Net income $ 1,858 $ 1,352 $ 1,739 $ 1,841
======== ======== ======== ========
Basic earnings per common share $ 0.29 $ 0.21 $ 0.27 $ 0.29
======== ======== ======== ========
Diluted earnings per common share $ 0.28 $ 0.21 $ 0.27 $ 0.28
======== ======== ======== ========
</TABLE>
In the opinion of our management, this unaudited information has been prepared
on the same basis as the audited information presented elsewhere herein and
includes all 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.
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<TABLE>
<CAPTION>
January 29, January 30,
2000 1999
----------- -----------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 860 $ 945
Accounts receivable, net 2,123 2,144
Inventories 58,066 47,694
Prepaid expenses and other 736 802
Refundable income taxes 14 96
Deferred income taxes 718 738
------- -------
Total current assets 62,517 52,419
------- -------
Property and Equipment:
Land 24 24
Buildings 216 216
Equipment 13,202 9,465
Furniture and fixtures 8,752 7,018
Leasehold improvements 14,373 11,762
Construction in progress 156 194
------- -------
36,723 28,679
Less accumulated depreciation & amortization 16,766 13,273
------- -------
Total property and equipment 19,957 15,406
------- -------
Noncurrent Assets:
Deferred income taxes 610 505
Other, net 194 222
------- -------
Total noncurrent assets 804 727
------- -------
Total Assets $83,278 $68,552
======= =======
Liabilities and Stockholders' Investment
Current Liabilities:
Accounts payable $19,047 $16,233
Accrued income taxes 546 2,477
Accrued expenses:
Payroll-related 3,044 2,638
Other 2,049 1,944
------- -------
Total current liabilities 24,686 23,292
------- -------
Long-Term Debt 4,391 -
------- -------
Commitments and Contingencies
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, 6,435,552 and 6,413,780 shares issued
and outstanding at January 29, 2000 and
January 30, 1999, respectively 64 64
Paid-in capital 54,277 53,996
Retained earnings (deficit) (140) (8,800)
------- -------
Total stockholders' investment 54,201 45,260
------- -------
Total Liabilities and Stockholders' Investment $83,278 $68,552
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
--------------- ----------------- ------------------
<S> <C> <C> <C>
Net sales $ 174,312 $ 143,350 $ 113,563
Cost of goods sold, including warehouse,
distribution, and store occupancy costs 121,962 100,409 78,714
--------------- ----------------- ------------------
Gross profit 52,350 42,941 34,849
Store operating, selling, and administrative
expenses 34,142 28,720 22,947
Depreciation and amortization 3,762 3,056 2,286
--------------- ----------------- ------------------
Operating income 14,446 11,165 9,616
Interest expense, net 422 141 8
--------------- ----------------- ------------------
Income before provision for income taxes 14,024 11,024 9,608
Provision for income taxes 5,364 4,234 3,675
--------------- ----------------- ------------------
Net income $ 8,660 $ 6,790 $ 5,933
=============== ================= ==================
Basic earnings per share $ 1.35 $ 1.06 $ 0.95
=============== ================= ==================
Diluted earnings per share $ 1.33 $ 1.04 $ 0.93
=============== ================= ==================
Weighted average shares outstanding:
Basic 6,427,745 6 ,403,922 6, 227,415
=============== ================= ==================
Diluted 6,529,980 6 ,557,273 6, 362,755
=============== ================= ==================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(Dollars In Thousands)
<TABLE>
<CAPTION>
Common Stock Retained
-------------------------
Number of Paid-In Earnings
Shares Amount Capital (Deficit)
------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, February 1, 1997 6,134,261 $ 61 $ 47,974 $ (21,523)
Net income - - - 5,933
Secondary public offering of common stock,
net of offering costs of $449 200,000 2 4,815 -
Issuance of shares from the employee stock
purchase plan and the exercise of stock options 59,716 1 892 -
------------- --------- ----------- -------------
BALANCE, January 31, 1998 6,393,977 64 53,681 (15,590)
Net income - - - 6,790
Issuance of shares from the employee stock
purchase plan and the exercise of stock options 19,803 - 315 -
------------- --------- ----------- -------------
BALANCE, January 30, 1999 6,413,780 64 53,996 (8,800)
Net income - - - 8,660
Issuance of shares from the employee stock
purchase plan and the exercise of stock options 21,772 - 281 -
------------- --------- ----------- -------------
BALANCE, January 29, 2000 6,435,552 $ 64 $ 54,277 $ (140)
============= ========= =========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
-------------- --------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,660 $ 6,790 $ 5,933
--------- --------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,762 3,056 2,286
Deferred income taxes (85) (273) (23)
Loss on disposal of assets 25 20 31
(Increase) decrease in assets:
Accounts receivable, net 21 (305) 258
Inventories (10,372) (14,427) (8,746)
Prepaid expenses and other 66 (199) (120)
Refundable income taxes 82 (49) 81
Other noncurrent assets (6) (237) (12)
Increase (decrease) in liabilities:
Accounts payable 2,814 5,282 570
Accrued income taxes (1,844) 1,805 424
Accrued expenses 511 1,182 833
--------- --------- --------
Total adjustments (5,026) (4,145) (4,418)
--------- --------- --------
Net cash provided by operating activities 3,634 2,645 1,515
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,619) (6,340) (4,548)
Proceeds from sale of property 2,315 15 14
--------- --------- --------
Net cash (used in) investing activities (8,304) (6,325) (4,534)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares in
public offering - - 4,817
Revolving loan borrowings and repayments, net 4,391 - -
Proceeds from options exercised and purchase of shares
under the employee stock purchase plan 194 127 431
--------- --------- --------
Net cash provided by financing activities 4,585 127 5,248
--------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (85) (3,553) 2,229
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 945 4,498 2,269
--------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 860 $ 945 $ 4,498
========= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 401 $ 235 $ 43
========= ========= ========
Income taxes, net of refunds $ 6,942 $ 2,596 $ 3,153
========= ========= ========
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING
ACTIVITIES:
Noncash recognition of paid-in capital related to exercise
of stock options $ 87 $ 188 $ 462
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<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 consolidated statements of operations for fiscal years
ended January 29, 2000, January 30, 1999 and January 31, 1998, include 52 weeks
of operations. 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.
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 2000, the company's largest
vendor, Nike, represented approximately 30% of its purchases.
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 their 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
their 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.
29
<PAGE>
Maintenance and repairs are charged to expense as incurred. Costs of
renewals and improvements 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 as incurred.
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 considers 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.
Advertising Costs
Costs incurred for producing and communicating advertising are expensed
when incurred.
Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock are exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in earnings. Diluted EPS has been computed based on the weighted average number
of shares outstanding, including the effect of outstanding stock options, if
dilutive, in each respective year.
A reconciliation of the weighted average shares for basic and diluted EPS
is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------
January 29, 2000 January 30, 1999 January 31, 1998
--------------------- --------------------- ----------------------
<S> <C> <C> <C>
Weighted average shares outstanding:
Basic 6,427,745 6,403,922 6,227,415
Dilutive effect of stock options 102,235 153,351 135,340
--------------------- --------------------- ----------------------
Diluted 6,529,980 6,557,273 6,362,755
===================== ===================== ======================
</TABLE>
For the 52 week period ended January 29, 2000, 94,600 anti-dilutive options
were appropriately excluded from the computation.
Accounting for the Impairment of Long-Lived Assets
The Company continually evaluates whether events and circumstances have
occurred that indicate the remaining balance of long-lived assets and
intangibles may be impaired and not recoverable. The Company's policy is to
recognize any impairment loss on long-lived assets as a charge to current
30
<PAGE>
income when certain events or changes in circumstances indicate that the
carrying value of the assets may not be recoverable.
Prior Year Reclassification
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. STOCKHOLDERS' INVESTMENT TRANSACTIONS
In October 1997, the Company and certain shareholders completed a secondary
public offering of 200,000 primary shares and 933,197 secondary shares at a
price of $27.75 per share. The Company's net proceeds of $4,817,000 were used to
reduce borrowings under the revolving credit facility and for working capital
and general corporate purposes.
3. LONG-TERM DEBT
The Company maintains an unsecured revolving credit facility which will
expire November 5, 2002 and allows borrowings up to $25 million. The Company
also maintains an unsecured working capital line of credit for $7 million which
is subject to annual renewal (collectively, the "Debt Agreements"). As of
January 29, 2000, the Company had $4,391,000 outstanding under these facilities.
The average amount of borrowings outstanding under the Debt Agreements during
fiscal 2000 was $5,391,090, the maximum outstanding was $14,155,468, and the
weighted average interest rate was 6.48%. The average amount of borrowings
outstanding under the applicable loan agreements during fiscal 1999 was
$4,550,992, the maximum amount outstanding was $11,024,717, and the weighted
average interest rate was 6.49%. The average amount of borrowings outstanding
under the prior facility during fiscal 1998 was $1,652,450, the maximum amount
outstanding was $4,394,250, and the weighted average interest rate was 6.93%.
The Company's Debt Agreements contain certain restrictive covenants common
to such agreements. The Company was in compliance with respect to all of its
covenants at January 29, 2000.
4. LEASES
The Company leases the premises for its retail sporting goods stores under
operating leases which expire in various years through the year 2009. 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. In December 1999, the related
operating lease was amended to include the fiscal 2000 expansion of these
facilities. The amended lease rate is $741,000 per year and will expire in
December 2014.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of January 29, 2000 are as follows:
Fiscal Year Ending
------------------
2001 $11,649,000
2002 10,951,000
2003 9,941,000
2004 7,960,000
2005 5,735,000
Thereafter 11,994,000
-----------
$58,230,000
===========
31
<PAGE>
Rental expense for all operating leases consisted of the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
-----------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $10,145,000 $8,049,500 $5,645,000
Contingent rentals 833,000 790,000 822,500
----------- ---------- ----------
$10,978,000 $8,839,500 $6,467,500
=========== ========== ==========
</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 2000, 1999,
and 1998 was $ 436,000, $397,000, and $303,000, respectively.
6. RELATED-PARTY TRANSACTIONS
The Company's majority stockholder provides financial advisory services to
the Company. Such services include, but are not necessarily limited to, advice
and assistance concerning any and all aspects of the operation, planning, and
financing of the Company. Management fee expense under this arrangement was
$200,000 in fiscal 2000, fiscal 1999 and fiscal 1998.
The Company maintains a sublease for one store with an entity that is
controlled by a minority stockholder which expires in June 2008. Minimum lease
payments were $190,800 in fiscal 2000, fiscal 1999 and fiscal 1998. Future
minimum lease payments under this noncancelable sublease aggregate $1,605,900.
7. INCOME TAXES
A summary of the components of the provision for income taxes is as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current $4,648,000 $3,878,000 $3,211,000
Deferred (95,000) (190,000) (19,000)
--------------- ---------------- -----------------
4,553,000 3,688,000 3,192,000
--------------- ---------------- -----------------
State:
Current 801,000 629,000 487,000
Deferred 10,000 (83,000) (4,000)
--------------- ---------------- -----------------
811,000 546,000 483,000
--------------- ---------------- -----------------
Provision for income taxes $5,364,000 $4,234,000 $3,675,000
=============== ================ =================
</TABLE>
32
<PAGE>
The provision for income taxes differs from the amounts computed by
applying federal statutory rates due to the following:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
-------------------------------------------------
<S> <C> <C> <C>
Tax provision computed at the federal
statutory rate (34%) $4,768,000 $3,748,000 $3,267,000
Effect of state income taxes, net of benefits 592,000 439,000 393,000
Other 4,000 47,000 15,000
---------- ---------- ----------
$5,364,000 $4,234,000 $3,675,000
========== ========== ==========
</TABLE>
Temporary differences which create deferred tax assets are detailed below:
<TABLE>
<CAPTION>
January 29, 2000 January 30, 1999
-----------------------------------------------------------------
Current Noncurrent Current Noncurrent
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation $ --- $ 610,000 $ --- $ 505,000
Inventory 105,000 --- 269,000 ---
Accruals 653,000 --- 570,000 ---
Other (40,000) --- (101,000) ---
--------- --------- --------- ---------
Deferred tax asset $ 718,000 $ 610,000 $ 738,000 $ 505,000
========= ========= ========= =========
</TABLE>
The Company has not recorded a valuation allowance for deferred tax assets
as realization is considered more likely than not.
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. As of January 29, 2000,
52,468 of these options were outstanding.
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 538,566
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 January 29, 2000, a total
of 173,110 shares of the Company's authorized and unissued common stock were
reserved for future grants under the 1996 Option Plan, and options for 346,142
shares were outstanding at that date.
33
<PAGE>
On August 1, 1996, the Company entered into an agreement with a minority
shareholder and granted options 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 option plans is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------------------------
January 29, 2000 January 30, 1999 January 31, 1998
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 302,571 $15.46 244,088 $10.83 265,086 $ 9.42
Granted 118,650 18.09 77,000 27.71 52,500 15.00
Exercised (16,619) 6.92 (16,579) 3.73 (70,820) 8.48
Forfeited (5,992) 19.33 (1,938) 20.25 (2,678) 14.15
---------------------- ---------------------- ----------------------
Outstanding at end of year 398,610 $16.54 302,571 $15.46 244,088 $10.83
====================== ====================== ----------------------
Exercisable at end of year 134,710 $12.78 93,749 $ 9.75 58,503 $ 7.62
====================== ====================== ======================
Weighted average fair value
of options granted $10.70 $16.51 $ 7.77
========== ========== ==========
</TABLE>
The following table summarizes information about stock options outstanding at
January 29, 2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------- --------------------------------------
Weighted
Average
Number Remaining Weighted Number Weighted
Range of Outstanding at Contractual Average Exercisable at Average
Exercise Prices January 29, 2000 Life (Years) Exercise Price January 29, 2000 Exercise Price
- ------------------- ------------------ -------------- ---------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
$1.89 to $6.10 81,403 5.9 $ 5.51 55,298 $ 5.23
$15.00 to $17.75 227,607 7.9 $16.45 64,012 $15.71
$20.25 to $28.00 89,600 8.4 $26.79 15,400 $27.71
</TABLE>
Compensation costs of $50,000 were accrued in fiscal 2000, 1999, and 1998,
related to the difference in the estimated 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 is credited to paid-in capital. Additionally, the tax benefit associated
with 1) the exercise of nonqualified stock options and 2) disqualifying
dispositions of shares acquired in the Company's option plans, is also credited
to paid-in capital and amounted to $87,000 in fiscal 2000 and $188,000 in fiscal
1999.
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:
34
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------
January 29, January 30, January 31,
2000 1999 1998
-------------------------------------------
<S> <C> <C> <C>
Net income--as reported $8,660 $6,790 $5,933
Net income--pro forma 8,293 6,499 5,778
Diluted earnings per share--as reported 1.33 1.04 .93
Diluted earnings per share--pro forma 1.27 .99 .91
</TABLE>
The weighted average assumptions for determining compensation costs
under the fair value method include (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 (5.2%, 5.5% and 6.5% for fiscal 2000, 1999 and
1998, respectively), (ii) an expected forfeiture rate of 7.0%, (iii) an expected
stock volatility of 65%, and (iv) no expected dividend yield.
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 28, 2000, January 29, 1999 and January 30, 1998, the Company granted
7,500, 7,500 and 5,000 options, respectively, at exercise prices of $18.31,
$17.75 and $22.56 (market value at the date of grant) respectively, under the
Outside Director Stock Plan. These options 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, and as of January 29, 2000, 10,887 shares have been
issued.
9. COMMITMENTS AND 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.
35
<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) AND SUBSIDIARIES as of January 29,
2000 and January 30, 1999, and the related consolidated statements of
operations, stockholders' investment, and cash flows for each of the three
fiscal years in the period ended January 29, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hibbett Sporting Goods, Inc.
and subsidiaries as of January 29, 2000 and January 30, 1999, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 29, 2000, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 10, 2000
36
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into Hibbett Sporting Goods, Inc.'s
previously filed Registration Statements File Nos. 333-21299, 333-21301, 333-
21303, and 333-21305.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
April 19, 2000
37
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the financial
statements of Hibbett Sporting Goods, Inc. for the year to date period ended
January 29, 2000 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> JAN-29-2000
<CASH> 860
<SECURITIES> 0
<RECEIVABLES> 2,402
<ALLOWANCES> 279
<INVENTORY> 58,066
<CURRENT-ASSETS> 62,517
<PP&E> 36,723
<DEPRECIATION> 16,766
<TOTAL-ASSETS> 83,278
<CURRENT-LIABILITIES> 24,686
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 54,137
<TOTAL-LIABILITY-AND-EQUITY> 83,278
<SALES> 174,312
<TOTAL-REVENUES> 174,312
<CGS> 121,962
<TOTAL-COSTS> 121,962
<OTHER-EXPENSES> 37,904
<LOSS-PROVISION> 74
<INTEREST-EXPENSE> 422
<INCOME-PRETAX> 14,024
<INCOME-TAX> 5,364
<INCOME-CONTINUING> 8,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,660
<EPS-BASIC> 1.35
<EPS-DILUTED> 1.33
</TABLE>
