-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N4a8zatzsNIPhSq1pjllf+G3HHW2qJ5GdwfFkaeew/YBv/mV0eOpZbjCEmM4RK6d YJTJz63TgS4b1Avq3hv1jA== 0000931763-98-003153.txt : 19981214 0000931763-98-003153.hdr.sgml : 19981214 ACCESSION NUMBER: 0000931763-98-003153 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIBBETT SPORTING GOODS INC CENTRAL INDEX KEY: 0001017480 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 631074067 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20969 FILM NUMBER: 98768232 BUSINESS ADDRESS: STREET 1: 451 INDUSTRIAL LANE CITY: BIRMINGHAM STATE: AL ZIP: 35211 BUSINESS PHONE: 2059424292 MAIL ADDRESS: STREET 1: 451 INDUSTRIAL LANE CITY: BIRNINGHAM STATE: AL ZIP: 35211 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) X - ----- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended: October 31, 1998 ---------------- - OR - - ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transaction period from _________ to ________ COMMISSION FILE NUMBER 000-20969 HIBBETT SPORTING GOODS, INC. (Exact name of registrant as specified in its charter) DELAWARE 63-1074067 --------- ---------- (State or other jurisdiction of (IRS Employee Identification No.) incorporation or organization) 451 INDUSTRIAL LANE, BIRMINGHAM, ALABAMA 35211 ---------------------------------------- ----- (Address of principal executive offices) (Zip code) (205)-942-4292 -------------- (Registrant's telephone number including area code) NONE ---- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------ Indicate the number of shares outstanding of each of the issuer's common stock, as of the latest practicable date: Shares of common stock, par value $.01 per share, outstanding as of December 1, 1998 were 6,412,800 shares. HIBBETT SPORTING GOODS, INC. INDEX PART I. FINANCIAL INFORMATION
PAGE NO. -------- Item 1. Financial Statements Condensed Consolidated Balance Sheets at October 31, 1998 and January 31, 1998 2 Condensed Consolidated Statements of Operations for the Thirteen Week and Thirty-Nine Week Periods Ended October 31, 1998 and November 1, 1997 3 Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Week Periods Ended October 31, 1998 and November 1, 1997 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to Vote of Security-Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars In Thousands)
October 31, 1998 January 31, 1998 ---------------- ---------------- (Unaudited) Assets Current Assets: Cash and cash equivalents $ 1,356 $ 4,498 Accounts receivable, net 1,857 1,839 Inventories 52,426 33,267 Prepaid expenses and other 822 650 Deferred income taxes 750 606 -------- ------- Total current assets 57,211 40,860 -------- ------- Property and equipment, net 15,231 12,115 --------- ------- Noncurrent Assets: Deferred income taxes 397 364 Other, net 214 27 --------- ------- Total noncurrent assets 611 391 --------- ------- Total Assets $ 73,053 $ 53,366 ========= ======== Liabilities and Stockholders' Investment Current Liabilities: Accounts payable $ 16,674 $ 10,951 Accrued income taxes 1,365 860 Accrued expenses: Payroll-related 2,047 1,813 Other 1,999 1,587 --------- -------- Total current liabilities 22,085 15,211 --------- -------- Long-Term Debt 7,778 - --------- -------- Stockholders' Investment: Preferred stock, $.01 par value 1,000,000 shares authorized, no shares outstanding - - Common stock, $.01 par value, 12,000,000 shares authorized, 6,407,630 shares issued and outstanding at October 31, 1998 and 6,393,977 shares issued and outstanding at January 31, 1998 64 64 Paid-in capital 53,767 53,681 Retained earnings (deficit) (10,641) (15,590) --------- -------- Total stockholders' investment 43,190 38,155 --------- -------- Total Liabilities and Stockholders' Investment $ 73,053 $ 53,366 ========= ======== See notes to condensed consolidated financial statements.
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars In Thousands, Except Per Share Amounts)
Thirteen Weeks Ended Thirty-Nine Weeks Ended ---------------------------------- ---------------------------------- October 31, 1998 November 1, 1997 October 31, 1998 November 1, 1997 ----------------- ---------------- ---------------- ---------------- (Unaudited) (Unaudited) Net sales $35,988 $27,797 $101,833 $ 80,355 Cost of goods sold, (Including warehouse, distribution and store occupancy costs) 25,075 19,306 71,140 55,987 ----------- --------- --------- --------- Gross profit 10,913 8,491 30,693 24,368 Store operating, selling, and administrative expenses 7,232 5,722 20,452 16,634 Depreciation and amortization 807 576 2,218 1,649 ----------- --------- --------- --------- Operating income 2,874 2,193 8,023 6,085 Interest expense (income), net 59 6 9 (5) ----------- --------- --------- --------- Income before provision for income taxes 2,815 2,187 8,014 6,090 Provision for income taxes 1,076 837 3,065 2,330 ----------- --------- --------- --------- Net income $ 1,739 $ 1,350 $ 4,949 $ 3,760 =========== ========= ========= ========= Earnings per common share: Basic: Net income $ 0.27 $ 0.22 $ 0.77 $ 0.61 =========== ========= ========= ========= Diluted: Net income $ 0.27 $ 0.21 $ 0.75 $ 0.60 =========== ========= ========= ========= Weighted average shares outstanding: Basic 6,406,771 6,214,637 6,401,412 6,172,057 =========== ========= ========= ========= Diluted 6,534,748 6,366,420 6,561,372 6,310,304 =========== ========= ========= ========= See notes to condensed consolidated financial statements. 3
HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars In Thousands)
Thirty-Nine Weeks Ended ----------------------------------- October 31, 1998 November 1, 1997 ----------------------------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,949 $ 3,760 --------- --------- Adjustments to reconcile net income to net cash (used in) operating activities: Depreciation and amortization 2,218 1,649 Deferred income taxes (177) (177) Loss on disposal of assets 19 16 Change in assets and liabilities (12,690) (6,949) ---------- --------- Total adjustments (10,630) (5,461) ---------- --------- Net cash (used in) operating activities (5,681) (1,701) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (5,339) (3,268) Proceeds from sale of property 14 14 --------- --------- Net cash (used in) investing activities (5,325) (3,254) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of stock - 4,766 Proceeds from options exercised and purchase of shares under employee stock purchase plan 86 418 Revolving loan borrowings and repayments, net 7,778 - --------- --------- Net cash provided by financing activities 7,864 5,184 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,142) 229 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,498 2,269 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,356 $ 2,498 ========= =========
See notes to condensed consolidated financial statements. 4 HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Hibbett Sporting Goods, Inc. and its wholly-owned subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended January 31, 1998. In the opinion of management, the condensed consolidated financial statements included herein contain all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position as of October 31, 1998 and November 1, 1997, and the results of its operations and cash flows for the periods presented. The Company has experienced and expects to continue to experience seasonal fluctuations in its net sales and operating income. Therefore, the results of the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year. 2. EARNINGS PER SHARE The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, effective January 31, 1998, and restated earnings per share ("EPS") for all periods presented in the consolidated statements of operations. A reconciliation of the weighted average shares for basic and diluted EPS is as follows:
THIRTEEN WEEK PERIOD ENDED THIRTY-NINE WEEK PERIOD ENDED --------------------------------------- --------------------------------------- OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1, 1998 1997 1998 1997 ----------------- ----------------- ------------------- ----------------- Weighted average shares outstanding: Weighted average shares, excluding the effect of stock options 6,406,771 6,214,637 6,401,412 6,172,057 Effect of stock options 127,977 151,783 159,960 138,247 ---------- ---------- ---------- ---------- Weighted average shares, including the effect of stock options 6,534,748 6,366,420 6,561,372 6,310,304 ========== ========== ========== ==========
3. CONTINGENCIES The Company is a party to various legal proceedings incidental to its business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect the financial position or results of operations of the Company. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Hibbett Sporting Goods, Inc. ("Hibbett" or the "Company") is a rapidly-growing operator of full-line sporting goods stores in small to mid-sized markets in the southeastern United States. Hibbett's stores offer a broad assortment of high quality athletic equipment, footwear, and apparel at competitive prices with superior customer service. The Company's merchandise assortment features a core selection of brand name merchandise emphasizing team and individual sports complemented by a selection of localized apparel and accessories designed to appeal to a wide range of customers within each market. The Company believes that its stores are among the primary retail distribution alternatives for brand name vendors that seek to reach Hibbett's target markets. The Company operates 150 Hibbett Sports stores as well as eleven smaller- format Sports Addition athletic shoe stores and four larger-format Sports & Co. superstores. Hibbett's primary retail format and growth vehicle is Hibbett Sports, a 5,000 square foot store located primarily in enclosed malls as well as dominant strip centers. Although competitors in some markets may carry product lines and national brands similar to Hibbett, the Company believes that its Hibbett Sports stores are typically the primary, full-line sporting goods retailers in their markets due to, among other factors, the extensive selection of traditional team and individual sports merchandise offered and a high level of customer service. The Company operates on a 52 or 53 week fiscal year ending on the Saturday nearest to January 31 of each year. Hibbett is incorporated under the laws of the state of Delaware. RESULTS OF OPERATIONS The following table sets forth statement of operations items expressed as a percentage of net sales for the periods indicated.
THIRTEEN WEEK THIRTY-NINE WEEK PERIOD ENDED PERIOD ENDED -------------------------- ------------------------ October 31, November 1, October 31, November 1, 1998 1997 1998 1997 ------------ ----------- ----------- ----------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold, including warehouse, distribution and store occupancy costs 69.7 69.5 69.9 69.7 ----- ----- ----- ----- Gross profit 30.3 30.5 30.1 30.3 Store operating, selling, and administrative expenses 20.1 20.6 20.1 20.7 Depreciation and amortization 2.2 2.0 2.1 2.0 ----- ----- ----- ----- Operating income 8.0 7.9 7.9 7.6 Interest expense (income), net 0.2 --- --- --- ----- ----- ----- ----- Income before provision for income taxes 7.8 7.9 7.9 7.6 Provision for income taxes 3.0 3.0 3.0 2.9 ----- ----- ----- ----- Net income 4.8% 4.9% 4.9% 4.7% ===== ===== ===== =====
6 THIRTEEN WEEKS ENDED OCTOBER 31, 1998 COMPARED TO THIRTEEN WEEKS ENDED NOVEMBER 1, 1997 Net sales. Net sales increased $8.2 million, or 29.5%, to $36.0 million for the thirteen weeks ended October 31, 1998, from $27.8 million for the comparable period in the prior year. This increase is attributed to opening a net of forty-nine Hibbett Sports stores and three Sports Additions store in the last 52 week period ended October 31, 1998, and a 2.5% increase in comparable store net sales. The increase in comparable net sales was due primarily to increased equipment and apparel sales. New stores and stores not in the comparable store net sales calculation accounted for $7.6 million of the increase in net sales and increases in comparable store net sales contributed $559,000. Comparable store net sales data for a period reflect stores open throughout that period and the corresponding period of the prior fiscal year. Comparable store net sales do not include sales by the Company's four larger format Sports & Co. superstores or the Company's wholly-owned subsidiary, Hibbett Team Sales, Inc. During the thirteen weeks ended October 31, 1998, the Company opened twelve Hibbett Sports stores and closed one Hibbett Sports store. Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy and operating costs for the distribution center. Gross profit was $10.9 million, or 30.3% of net sales, in the thirteen weeks ended October 31, 1998, as compared to $8.5 million, or 30.5% of net sales, in the same period of the prior fiscal year. The decrease in gross profit as a percentage of net sales in the thirteen weeks ended October 31, 1998 was due to higher store occupancy costs as a percentage of net sales as a result of the increased number of new stores in the store base. Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $7.2 million, or 20.1% of net sales, for the thirteen weeks ended October 31, 1998, as compared to $5.7 million, or 20.6% of net sales, for the comparable period a year ago. The decrease in store operating, selling and administrative expenses as a percentage of net sales in the thirteen weeks ended October 31, 1998 is primarily attributable to improved leveraging of administrative costs over higher sales. Depreciation and amortization. Depreciation and amortization as a percentage of net sales increased slightly to 2.2% in the thirteen weeks ended October 31, 1998 from 2.0% in the thirteen weeks ended November 1, 1997 due to the increased number of new stores in the store base. Interest expense (income), net. Net interest expense for the thirteen weeks ended October 31, 1998 was $59,000 compared to net interest expense of $6,000 in the prior year period. The increase is attributable to higher levels of borrowing under the Company's Revolving Credit Facility to fund new store openings in the current year period. THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998 COMPARED TO THIRTY-NINE WEEKS ENDED NOVEMBER 1, 1997 Net sales. Net sales increased $21.5 million, or 26.7%, to $101.8 million for the thirty-nine weeks ended October 31, 1998, from $80.4 million for the comparable period in the prior year. This increase is attributed to opening a net of forty-nine Hibbett Sports stores and three Sports Additions store in the last 52 week period ended October 31, 1998, and a 3.4% increase in comparable store net sales. The increase in comparable net sales was due primarily to increased equipment and footwear sales. During the thirty-nine weeks ended October 31, 1998, the Company opened a net of forty-three Hibbett Sports stores and two Sports Additions stores. New stores and stores not in the comparable store net sales calculation accounted for $19.5 million of the increase in net sales and increases in comparable store net sales contributed $2.0 million. Comparable store net sales data for a period reflect stores open throughout that period and the corresponding period of the prior fiscal year. Comparable store net sales do not include sales by the Company's four larger format Sports & Co. superstores or the Company's wholly-owned subsidiary, Hibbett Team Sales, Inc. Gross profit. Cost of goods sold includes the cost of inventory, occupancy costs for stores and occupancy and operating costs for the distribution center. Gross profit was $30.7 million, or 30.1% of net sales, in the thirty-nine weeks ended October 31, 1998, as compared to $24.4 million, or 30.3% of net sales, in the same period of the prior fiscal year. The decrease in gross profit as a percentage of net sales in the thirty-nine weeks ended October 31, 1998 was due primarily to higher store occupancy costs as a percentage of net sales as a result of the increased number of new stores in the store base. 7 Store operating, selling and administrative expenses. Store operating, selling and administrative expenses were $20.5 million, or 20.1% of net sales, for the thirty-nine weeks ended October 31, 1998, as compared to $16.6 million, or 20.7% of net sales, for the comparable period a year ago. The decrease in store operating, selling and administrative expenses as a percentage of net sales in the thirty-nine weeks ended October 31, 1998 is primarily attributable to improved leveraging of administrative costs over higher sales. Depreciation and amortization. Depreciation and amortization as a percentage of net sales increased slightly to 2.1% in the thirty-nine weeks ended October 31, 1998 from 2.0% in the thirty-nine weeks ended November 1, 1997. Interest expense (income), net. Net interest expense for the thirty-nine weeks ended October 31, 1998 was $9,000 compared to net interest income of $5,000 in the prior year period. The increase is attributable to higher levels of borrowing on the Company's revolving credit facility in the current year period. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements relate primarily to new store openings and working capital requirements. The Company's working capital needs are somewhat seasonal in nature and typically reach their peak near the end of the third and the beginning of the fourth quarter of its fiscal year. Historically, the Company has funded its cash requirements primarily through cash flows from operations and borrowings under its revolving credit facility. Net cash provided by (used in) operating activities has historically been driven by net income levels combined with fluctuations in inventory and accounts payable balances. The Company has continued to increase inventory levels in the thirty-nine weeks ended October 31, 1998 as the number of new stores has increased. The Company has financed this increase through increased net income and accounts payable balances as well as borrowings under a Revolving Credit Facility. Net cash used in operating activities was $5.7 million for the thirty- nine week period ending October 31, 1998 as compared to net cash used in operating activities of $1.7 million for the thirty-nine week period ending November 1, 1997. With respect to cash flows from investing activities, capital expenditures were $5.3 million in the thirty-nine week period ended October 31, 1998 compared to $3.3 million for the prior year period. Capital expenditures in the thirty- nine weeks ended October 31, 1998 primarily related to the opening of forty- seven new stores, construction costs incurred on stores not yet open, and distribution center-related expenditures. The increase in capital expenditures in the current year period resulted from additional new store activity. Net cash provided by financing activities was $7.9 million in the thirty-nine week period ended October 31, 1998 compared with $5.2 million for the prior year period. The financing activities in the current year period were primarily the result of borrowings under the Revolving Credit Facility. These borrowings were used to fund new store openings and working capital requirements. In the prior year period, the net cash provided by financing activities was the result of net proceeds from a secondary public stock offering and proceeds from the exercise of stock options. The Company estimates capital expenditures in fiscal 1999 to be approximately $6.5 million which includes resources budgeted to (i) fund the opening of approximately 50 Hibbett Sports stores, (ii) remodel selected existing stores and (iii) fund headquarters and distribution center-related capital expenditures. From October 1996 until November 5, 1998, the Company maintained an unsecured $20 million Revolving Credit Facility (the "Facility"). As of October 31, 1998, there was $7.8 million outstanding under the Facility. In November 1998, the Company established a new unsecured revolving credit facility which will expire November 5, 2001 and allows borrowings up to $25 million. The Company also established an unsecured working capital line of credit for $5 million which is subject to annual renewal. Based on its current operating and store opening plans, the Company believes that it can fund its cash needs for the foreseeable future through borrowings under the new facility and cash generated from operations. 8 NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board ("FASB"), issued SFAS No. 130, Reporting Comprehensive Income, which establishes standards for reporting and display of "comprehensive income" which is the total of net income and all other non-owner changes in stockholders' equity and its components. This standard was adopted on February 1, 1998 and did not have a significant impact on the Company's financial reporting. In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131, which supersedes SFAS Nos. 14, 18, 24 and 30, establishes new standards for segment reporting, using the "management approach," in which reportable segments are based on the same criteria on which management disaggregates a business for making operating decisions and assessing performance. The Company will adopt the standard in fiscal 1999. The new rules are not expected to have a significant impact on the Company's financial reporting. In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about Pensions and Other Post-retirement Benefits. SFAS No. 132, which supersedes SFAS Nos. 87, 88, and 106, standardizes the disclosure requirements for pensions and other post-retirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures that are no longer as useful as they were when SFAS Nos. 87, 88, and 106, were issued. The Company does not offer pensions or other post-retirement benefits. Therefore, the standard will not have an impact on the Company's financial reporting. The American Institute of Certified Public Accountants ("AICPA"), has issued Statement of Position ("SOP"), 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. This statement requires capitalization of external direct costs of materials and services, payroll and payroll related costs for employees directly associated, and interest cost during development of computer software for internal use. Planning and preliminary costs should be amortized on a straight-line basis unless another systematic and rational basis is more representative of the software's use. This statement is not expected to have a material effect on the Company's financial reporting. The AICPA has issued SOP 98-5, Reporting on the Costs of Start-up Activities. This statement provides guidance on the financial reporting of start-up costs and organization costs, and requires these costs to be expensed as incurred. The new rules which are effective the fiscal year beginning after December 15, 1998, are not expected to have a significant impact on the Company's financial reporting. YEAR 2000 COMPLIANCE During fiscal 1999, the Company has continued to evaluate its management information systems to identify and address Year 2000 issues. In connection therewith, the Company has classified its Year 2000 emphasis into five areas: 1. Information systems that are critical to daily operations (i.e. receiving and processing of merchandise, executing sales at store level, and processing payroll and other financial accounting functions) 2. Information systems that are important but not critical to daily operations (tracking supply inventories, electronically sending purchase orders, etc.) 3. Customized, internally developed programs or interfaces with the above mentioned systems (radio frequency system in the warehouse, sales audit system, etc.) 4. Non information technology items (phone system, security system, warehouse conveyors, heating and air systems, etc.) 5. Third party (vendor) compliance 9 The Company has classified its Year 2000 implementation program into four areas: 1. Evaluation and Initial Assessment 2. Remediation/Reprogramming 3. Testing 4. Contingency Planning The following table outlines the Company's current status regarding the first two areas of its Year 2000 implementation program:
Percent Complete -------------------------------------------------- Evaluation & Remediation & Classification/ Program Assessment Reprogramming - ------------------------------------------- -------------------- --------------------- 1. Critical Systems: ----------------- Merchandising & Distribution 95% 90% Financial & Payroll 100% 100% Point of Sale/Store Registers 95% 45% Mainframe Processing 100% 100% 2. Important but not critical systems 85% 50% 3. Custom developed programs & interfaces 45% 45% 4. Non Information Technology items 50% 20% 5. Third Party Compliance 50% 20%
The Company has plans in place to complete the evaluation and remediation of all systems by January 31, 1999, and expects to complete Year 2000 testing of all systems by the middle of calendar year 1999. The Company plans to continue to rely primarily on internal resources in order to complete these steps. The Company's financial, merchandising, and distribution systems are third party vendor software programs which have been recently upgraded and are certified as Year 2000 compliant by the software vendors. These upgrades were previously planned and were not accelerated due to Year 2000 issues. The Company's point of sale system operates the cash registers in the stores. The registers run on a personal computer system using a third party software. The software has been upgraded in order to accept credit cards with expiration dates beyond December 31, 1999, and all other significant date sensitive applications except for layaway transactions which are not material to the Company. The point of sale operating system and networking system is in the process of being upgraded to be Year 2000 compliant. The Company has not deferred any significant information technology projects in order to address the Year 2000 issue. Based on present information, the Company believes that its current plans as outlined above will substantially mitigate the risk of a material disruption in the Company's operations due to internal Year 2000 factors. However, possible consequences of the Company not being Year 2000 compliant include, but are not limited to, loss of revenues, loss of communication capability with stores, inability to process or quantify merchandise, and inability to engage in other operational and financial activities. At the present time, the Company has not established a contingency plan for possible Year 2000 issues. The Company expects to consider contingency plans based on the results of its Year 2000 testing and its assessment of related risks. Additionally, the Company is in the process of communicating with third parties in order to assess their Year 2000 readiness and the extent to which the Company may be vulnerable to any third parties' failure to remediate their Year 2000 10 issues. Many of these parties have stated their ability to supply the Company will not be affected by the Year 2000 issue. Management believes that the Company's largest vendor, Nike, has made significant progress toward their Year 2000 compliance and does not expect any material disruption therefrom. However, the Company cannot assure timely compliance of third parties, including any other material vendors, and may be adversely affected by failure of a significant third party to become Year 2000 compliant. Approximately $60,000 has been expended to date related to Year 2000 compliance. The Company currently expects that the total costs of Year 2000 compliance for the Company's current systems will not exceed $175,000, which includes the lease or purchase of a system on which to do Year 2000 testing. These costs are not expected to have a significant impact on the Company's financial position or results of operations. The costs associated with Year 2000 compliance are based on management's current views with respect to future events and may be updated as additional information becomes available. Please refer to the Special Note Regarding Forward Looking Statements. SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS The statements contained in this report that are not purely historical or which might be considered an opinion or projection concerning the Company or its business, whether express or implied, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include statements regarding the Company's expectations, intentions, plans or strategies regarding the future, including statements related to the Year 2000 issue. All forward-looking statements included in this document are based upon information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. It is important to note that the Company's actual results could differ materially from those described or implied in such forward-looking statements because of, among other factors, the ability of the Company to execute its expansion plans, a shift in demand for the merchandise offered by the Company, the Company's ability to obtain brand name merchandise at competitive prices, the effect of regional or national economic conditions and the effect of competitive pressures from other retailers. In addition, the reader should consider the risk factors described from time to time in the Company's other documents and reports, including the factors described under "Risk Factors" in the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on October 1, 1997, and any amendments thereto. QUARTERLY FLUCTUATIONS The Company has historically experienced and expects to continue to experience seasonal fluctuations in its net sales and operating income. The Company's net sales and operating income are typically higher in the fourth quarter due to sales increases during the holiday selling season. However, the seasonal fluctuations are mitigated by the strong product demand in the spring, summer and back-to-school sales periods. The Company's quarterly results of operations may also fluctuate significantly as a result of a variety of factors, including the timing of new store openings, the amount and timing of net sales contributed by new stores, the level of pre-opening expenses associated with new stores, the relative proportion of new stores to mature stores, merchandise mix, the relative proportion of stores represented by each of the Company's three store concepts and demand for apparel and accessories driven by local interest in sporting events. PART II OTHER INFORMATION ITEM 1: Legal Proceedings The Company is a party to various legal proceedings incidental to its business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect the financial position or results of operations of the Company. ITEM 2: Changes in Securities None 11 ITEM 3: Defaults Upon Senior Securities None ITEM 4: Submission of Matters to Vote of Security-Holders None ITEM 5: Other Information None ITEM 6: Exhibits and Reports on Form 8-K (A) Exhibits Exhibit # Description ---------- ------------ 27 Financial Data Schedule (for SEC use only) (B) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants has duly caused this report to be signed on its behalf by the undersigned duly authorized. HIBBETT SPORTING GOODS, INC. Date: December 10, 1998 By: /s/ Susan H. Fitzgibbon ------------------------- ------------------------------- Susan H. Fitzgibbon Vice President and Chief Financial Officer 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary information extracted from the financial statements of Hibbett Sporting Goods, Inc. for the interim period ended October 31, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS JAN-30-1999 FEB-01-1998 OCT-31-1998 1,356 0 2,071 214 52,426 57,211 27,697 12,466 73,053 22,085 0 0 0 64 43,126 73,053 101,833 101,833 71,140 71,140 22,670 30 9 8,014 3,065 4,949 0 0 0 4,949 0.77 0.75 The earnings per share calculations have been prepared in accordance with SFAS No. 128, and basic and diluted earnings per share have been entered in place of primary and fully diluted, respectively.
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