-----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, WRPLrhg5D8Gxq3PTpBX/9fkU5WZKB5aKtG7TGONRItEHUJAKKpvvi99Jxc420H7p GBKtt2k4CvfuTGnIjDSkiA== 0000931763-00-001079.txt : 20000501 0000931763-00-001079.hdr.sgml : 20000501 ACCESSION NUMBER: 0000931763-00-001079 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000129 FILED AS OF DATE: 20000428 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-K SEC ACT: SEC FILE NUMBER: 000-20969 FILM NUMBER: 611208 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-K 1 ANNUAL REPORT, 01/29/2000 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------- 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: Name of Each Exchange on Title of Each Class CUSIP Number Which Registered Common Stock, $.01 Par Value 428565-10-5 NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ---- Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___. The aggregate market value of the voting stock held by non-affiliates of the Registrant (assuming for purposes of this calculation that all executive officers and directors are "affiliates") was $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. HIBBETT SPORTING GOODS, INC. INDEX PART I 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
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 2 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 3 (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. 4 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. 5 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. 6 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.
Fiscal 2000: High Low ----------------- --------------- 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
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. 7 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 8 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
Exhibit # - --------- 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.
9 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.
+ 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 10 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.
Signature Title Date - ---------------------------------------------- ------------------------------------- -------------- /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
11 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. ================================================================================ 12 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 HIBBETT SPORTING GOODS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JANUARY 29, 2000, JANUARY 30, 1999, AND JANUARY 31, 1998
Fiscal Year Ended -------------------------------------------------------------- January 29, January 30, January 31, 2000 1999 1998 ------------------ --------------- ----------------- 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 ======== ======== =========
EX-10.9.2 2 FIRST AMENDMENT TO LEASE AGREEMENT 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")." --------------- 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 ----------------- EX-13.1 3 FISCAL 2000 ANNUAL REPORT EXHIBIT 13.1 HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA (Dollars In Thousands, Except Per Share Amounts)
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) 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)
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 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 Results of Operations The following table sets forth consolidated statements of operations expressed as a percentage of net sales for the periods indicated:
Fiscal Year Ended ---------------------------------------------------- January 29, January 30, January 31, 2000 1999 1998 ---- ---- ---- 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% ====== ====== ======
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 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 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 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 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. 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)
Fiscal Year Ended January 29, 2000 ---------------------------------------------- First Second Third Fourth (13 Weeks) (13 Weeks) (13 Weeks) (13 Weeks) ---------- ---------- ---------- ---------- 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 ======== ======== ======== ========
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. HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars In Thousands)
January 29, January 30, 2000 1999 ----------- ----------- 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 ======= =======
The accompanying notes are an integral part of these consolidated balance sheets. HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars In Thousands, Except Per Share Amounts)
Fiscal Year Ended ----------------------------------------------------- January 29, January 30, January 31, 2000 1999 1998 --------------- ----------------- ------------------ 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 =============== ================= ==================
The accompanying notes are an integral part of these consolidated statements. HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT (Dollars In Thousands)
Common Stock Retained ------------------------- Number of Paid-In Earnings Shares Amount Capital (Deficit) ------------- --------- ----------- ------------- 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) ============= ========= =========== =============
The accompanying notes are an integral part of these consolidated statements. HIBBETT SPORTING GOODS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars In Thousands)
Fiscal Year Ended -------------------------------------------------- January 29, January 30, January 31, 2000 1999 1998 -------------- --------------- -------------- 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 ========= ========= ========
The accompanying notes are an integral part of these consolidated statements. 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 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:
Fiscal Year Ended ------------------------------------------------------------------------- January 29, 2000 January 30, 1999 January 31, 1998 --------------------- --------------------- ---------------------- 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 ===================== ===================== ======================
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 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 Rental expense for all operating leases consisted of the following:
Fiscal Year Ended ----------------------------------------------------- January 29, January 30, January 31, 2000 1999 1998 ----------------------------------------------------- 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 =========== ========== ==========
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:
Fiscal Year Ended ------------------------------------------------------ January 29, January 30, January 31, 2000 1999 1998 ------------------------------------------------------ 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 =============== ================ =================
32 The provision for income taxes differs from the amounts computed by applying federal statutory rates due to the following:
Fiscal Year Ended ------------------------------------------------- January 29, January 30, January 31, 2000 1999 1998 ------------------------------------------------- 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 ========== ========== ==========
Temporary differences which create deferred tax assets are detailed below:
January 29, 2000 January 30, 1999 ----------------------------------------------------------------- Current Noncurrent Current Noncurrent ----------------------------------------------------------------- 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 ========= ========= ========= =========
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 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:
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 ---------------------- ---------------------- ---------------------- 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 ========== ========== ==========
The following table summarizes information about stock options outstanding at January 29, 2000:
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 - ------------------- ------------------ -------------- ---------------- ------------------ ---------------- $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
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
Fiscal Year Ended ------------------------------------------- January 29, January 30, January 31, 2000 1999 1998 ------------------------------------------- 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
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 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 EX-23.1 4 CONSENT OF ARTHUR ANDERSEN LLP 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 EX-27 5 FINANCIAL DATA SCHEDULE
5 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. 1,000 YEAR JAN-29-2000 JAN-31-1999 JAN-29-2000 860 0 2,402 279 58,066 62,517 36,723 16,766 83,278 24,686 0 0 0 64 54,137 83,278 174,312 174,312 121,962 121,962 37,904 74 422 14,024 5,364 8,660 0 0 0 8,660 1.35 1.33
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