FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
COMMISSION FILE NUMBER 0-5648
OSHMAN'S SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-1031691
State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2302 MAXWELL LANE, HOUSTON, TEXAS
77023
(Address of principal executive offices)
(Zip Code)
(713) 928-3171
(Registrant's telephone number, including area code)
NO CHANGE
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock, $1.00 par value 5,804,774
<PAGE>
PART I -- FINANCIAL INFORMATION
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 30, 1994 AND JANUARY 29, 1994
(IN THOUSANDS)
JUL 30 JAN 29
1994 1994
ASSETS -------- --------
(UNAUDITED)
CURRENT ASSETS
CASH AND EQUIVALENTS ............................... $ 235 $ 44
ACCOUNTS RECEIVABLE, LESS ALLOWANCE OF
$247 JUL 94, $242 JAN 94 ......................... 4,055 3,492
MERCHANDISE INVENTORIES ............................ 91,744 88,699
PREPAID EXPENSES AND OTHER ......................... 3,762 4,549
-------- --------
TOTAL CURRENT ASSETS ...................... 99,796 96,784
PROPERTY, PLANT AND EQUIPMENT-AT COST ................ 76,841 80,811
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION ................................... 52,282 52,066
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT ................ 24,559 28,745
OTHER ASSETS ......................................... 804 903
-------- --------
$125,159 $126,432
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
CURRENT MATURITIES OF LONG-TERM OBLIGATIONS ........ $ 266 $ 373
TRADE ACCOUNTS PAYABLE ............................. 26,394 32,866
ACCRUED LIABILITIES ................................ 12,394 13,892
INCOME TAXES ....................................... 60 154
RESTRUCTURING RESERVE .............................. 7,806 10,971
-------- --------
TOTAL CURRENT LIABILITIES ................. 46,920 58,256
DEFERRED FEDERAL INCOME TAXES ........................ 297 313
LONG-TERM OBLIGATIONS ................................ 15,621 3,712
LONG-TERM RESTRUCTURING RESERVE ...................... 1,912 3,822
STOCKHOLDERS' EQUITY
COMMON STOCK ....................................... 5,805 5,805
ADDITIONAL CAPITAL ................................. 3,232 3,252
RETAINED EARNINGS .................................. 51,372 51,272
-------- --------
STOCKHOLDERS' EQUITY ...................... 60,409 60,329
-------- --------
$125,159 $126,432
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS
ENDED JULY 30, 1994 AND JULY 31, 1993
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- -----------------------
1994 1993 1994 1993
--------- ---------- --------- ----------
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
NET SALES ................................ $ 80,095 $ 81,290 $ 146,220 $ 145,456
COSTS AND EXPENSES:
COST OF GOODS SOLD ..................... 53,219 54,984 94,733 95,813
SELLING AND ADMINISTRATIVE EXPENSES .... 27,346 28,758 53,097 55,670
INTEREST EXPENSE ....................... 446 374 789 665
MISCELLANEOUS INCOME ................... (1,999) (740) (2,534) (721)
-------- --------- ---------- ---------
79,012 83,376 146,085 151,427
-------- --------- ---------- ---------
INCOME (LOSS) BEFORE INCOME TAXES ........ 1,083 (2,086) 135 (5,971)
INCOME TAXES (BENEFIT) ................... 35 (517) 35 (2,091)
-------- --------- ---------- ---------
NET INCOME (LOSS) $ 1,048 $ (1,569) $ 100 $ (3,880)
======== ========= ========== =========
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE ....................... $ 0.18 (0.27) $ 0.02 $ (0.67)
======== ========= ========== =========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES ........... 5,899 5,805 5,888 5,805
======== ========= ========== =========
DIVIDENDS PER SHARE ...................... $ 0.00 $ 0.00 $ 0.00 $ 0.00
======== ========= ========== =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 30, 1994 AND JULY 31, 1993
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
---------------------
1994 1993
--------- ---------
(RESTATED)
<S> <C> <C>
CASH FLOWS OF OPERATING ACTIVITIES:
NET INCOME (LOSS) ........................................................ $ 100 $ (3,880)
ADJUSTMENTS TO RECONCILE NET CASH (USED) PROVIDED IN OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION .......................................... 2,863 3,083
RESERVE FOR CORPORATE RESTRUCTURING,
NET OF DEPRECIATION AND AMORTIZATION ................................. (3,138) --
STOCK OPTION AND BONUS PLAN EXPENSE .................................... (20) --
GAIN ON DISPOSITION OF REAL ESTATE AND LEASEHOLDS ...................... (1,662) (341)
DECREASE IN DEFERRED INCOME TAXES ...................................... (16) (2,064)
LOSS (GAIN) ON DISPOSITION OF ASSETS ................................... 22 (223)
CHANGES IN ASSETS AND LIABILITIES:
INCREASE IN ACCOUNTS RECEIVABLE ...................................... (563) (496)
(INCREASE) DECREASE IN MERCHANDISE INVENTORIES ....................... (3,045) 152
DECREASE (INCREASE) IN PREPAID EXPENSES AND OTHER .................... 1,423 (213)
DECREASE IN TRADE ACCOUNTS PAYABLE ................................... (6,472) (11,838)
DECREASE IN ACCRUED LIABILITIES ...................................... (1,432) (2,210)
(DECREASE) INCREASE IN INCOME TAXES .................................. (94) 70
-------- --------
NET CASH USED IN OPERATING ACTIVITIES ............................. (12,034) (17,960)
-------- --------
CASH FLOWS OF INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF FIXED ASSETS ....................................... 12 941
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT ................................ (1,449) (2,830)
PROCEEDS FROM NOTE RECEIVABLE ............................................ 24 24
PROCEEDS FROM DISPOSITION OF REAL ESTATE AND LEASEHOLDS .................. 1,836 279
-------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES ....................... 423 (1,586)
-------- --------
CASH FLOWS OF FINANCING ACTIVITIES:
INCREASE IN LONG-TERM OBLIGATIONS ........................................ 11,802 14,382
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES .............................. 11,802 14,382
-------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS ............................ 191 (5,164)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ................................ 44 5,443
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD ...................................... $ 235 $ 279
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID
INCOME TAXES ........................................................... $ 145 $ 108
INTEREST ............................................................... $ 701 $ 569
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 30, 1994 AND JULY 31, 1993
(UNAUDITED)
NOTE A
THE FINANCIAL STATEMENTS ARE CONDENSED AND SHOULD BE READ IN
CONJUNCTION WITH THE 1993 ANNUAL REPORT. THE FINANCIAL INFORMATION
CONTAINED HEREIN IS UNAUDITED, BUT IN THE OPINION OF THE MANAGEMENT
OF THE COMPANY, INCLUDES ALL ADJUSTMENTS (CONSISTING OF NORMAL
RECURRING ADJUSTMENTS) FOR A FAIR PRESENTATION OF THE RESULTS OF
OPERATIONS FOR THE PERIODS INDICATED. THE RESULTS FOR THE THREE
MONTHS AND SIX MONTHS ENDED JULY 30, 1994 ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources
Cash and equivalents at July 30, 1994 were $235,000 compared to $44,000 at
January 29, 1994. In the first six months of 1994, cash totaling
$12,034,000 was used in operating activities. The primary use of cash was
related to a $3,045,000 increase in merchandise inventories, a decrease of
trade accounts payable of $6,472,000 and charges to the Company's
restructuring reserve, discussed below. Cash of $423,000 was provided by
investing activities, primarily as the result of proceeds from the sale of
real estate and leasehold interests in excess of amounts used for the
purchase of property, plant and equipment. Financing activities provided
cash of $11,802,000 as the Company utilized its credit facility to meet its
working capital needs during the first half of 1994.
Average borrowings under the Company's credit facility during the first six
months of 1994 were $14,669,000, and the highest amount of borrowings and
outstanding letters of credit was $25,325,000 at May 16,1994. During the
first six months of 1993, average borrowings were $12,999,000, and the
highest amount of borrowings and outstanding letters of credit was
$25,136,000 at May 21, 1993.
Property, plant and equipment at cost decreased a net of $3,970,000 as a
result of the closure of 16 stores during the first six months of 1994,
including the sale of real estate where one of the Company's retail stores
was located.
On December 27, 1993, the Company announced a restructuring plan to
accelerate the closing of 34 underperforming traditional stores over the
next two years. At the end of the first six months of 1994, 13 of the 34
stores had been closed. In the first six months of 1994, the stores
included in the restructure group used cash of approximately $3,138,000 to
cover losses before depreciation and amortization. Approximately $571,000
of this amount was for lease terminations related to stores closed as of
July 30, 1994. Sales volumes from all stores included in the restructure
group were $12,965,000 in the six months ended July 30, 1994 compared to
$16,289,000 in the same period last year. During the first six months of
1994, these stores incurred a loss of $4,464,000, which included
accelerated depreciation of approximately $1,734,000 and estimated
liquidation markdowns in excess of "normal" markdowns totaling
approximately $1,622,000, compared to a loss of $1,604,000 in the first six
months of 1993. During the six months ended July 30, 1994, the Company
charged its restructuring reserve $5,075,000 for the operating losses,
liquidation markdowns, lease termination costs and write-off of fixed
assets which have been incurred for the stores included in the restructure
group.
Results of Operations
Net sales for the quarter ended July 30, 1994 decreased 1.5%, while sales
for the six months then ended increased .5%, compared to the same periods
in 1993. Excluding stores included in the restructure group, net sales
increased 2.1% and 3.2%, respectively, for the quarter and six months ended
July 30, 1994 as a result of sales contributions from new stores opened
during the last 12 months. Comparable same store sales, excluding the
stores in the restructure group, decreased 3.2% in the second quarter and
.6% in the first six months of 1994 compared to the same periods in 1993.
Sales in the second quarter of 1994 were adversely impacted as a result of
reduced promotional advertising.
On May 4, 1994, the Company opened its ninth SuperSports USA megastore in
Webster, Texas. Net sales from the Company's SuperSports USA megastores,
which equalled 27.1% of total net sales in the first six months of 1994,
increased 44% to $39,630,000, from $27,526,000 in the same period last
year. SuperSports USA megastore same store sales increased 1.0% and 5.1%,
respectively, in the quarter and six months ended July 30, 1994 compared to
the same periods last year. The Company plans to open three additional
stores in 1994, including the conversion of a traditional store to a
megastore. At the end of the second quarter of 1994, the Company was
operating 146 stores, including nine megastores, compared to 166 stores,
including six megastores, at the same time a year ago.
Cost of goods sold was 66.4% and 64.8%, respectively, in the quarter and
six months ended July 30, 1994 compared to 67.6% and 65.9%, respectively,
for the same periods in 1993. The improved rate in 1994 as a percentage of
sales is due primarily to reduced markdowns and an improvement in the
initial rates of markon related to the Company's strategy to improve gross
profit margins.
Selling and administrative expenses as a percentage of sales were 34.1% and
36.3%, respectively, for the quarter and six months ended July 30, 1994,
compared to 35.4% and 38.3%, respectively, in the same periods last year.
Selling and administrative expenses includes a net credit of $586,000 in
the second quarter and $1,108,000 in the six months ended July 30, 1994,
related to the 34 stores included in the restructure group. Excluding this
adjustment, selling and administrative expenses as a percentage of sales
were 34.9% and 37.1%, respectively, for the quarter and six months ended
July 30, 1994. This improvement as a percentage of sales is related
primarily to reduced payroll and occupancy costs during the first six
months of 1994, and reduced promotional advertising expense in the second
quarter of 1994, compared to the same periods in 1993.
Interest expense for the quarter and six months ended July 30, 1994 was
$446,000 and $789,000, respectively, compared to $374,000 and $665,000,
respectively, for the same periods last year. The increase in interest
expense is primarily related to the increased average borrowings under the
Company's credit facility and to increased interest rates, primarily in the
second quarter of 1994.
The variations in miscellaneous (income) expense are set out in the table
below:
2ND QUARTER SIX MONTHS
----------------- ----------------
1994 1993 1994 1993
------- ------ ------ ------
(Amounts in thousands)
Gain on sales of real estate
and leasehold interest ............. $(1,830) $(606) $(1,830) $(606)
License fees ......................... (376) (325) (765) (568)
Provision for stores closed
in the normal course of
operations and write off of
other assets ....................... 199 223 155 406
Insurance recovery ................... -- -- (105) --
Other - net .......................... 8 (32) 11 47
------- ----- ------- -----
$(1,999) $(740) $(2,534) $(721)
======= ===== ======= =====
Income tax expense results from state income taxes only as the Company has
no Federal income tax liability due to the carry forward of net operating
losses and future deductible temporary differences in the calculation of
its tax expense under SFAS 109.
In the quarter ended July 30, 1994, the Company had pretax earnings of
$1,083,000 compared to a loss of $2,086,000 before income taxes in the same
quarter last year. For the six months ended July 30, 1994, the Company
earned $135,000 before income taxes compared to a pretax loss of $5,971,000
in the first six months of 1993. The improved results are primarily due to
improved gross profit margins, increased miscellaneous income as shown
above and the non-recurrence of pretax losses of approximately $864,000 and
$1,604,000, respectively, in the second quarter and first six months of
1993, attributable to the 34 stores included in the restructure group.
<PAGE>
PART II -- OTHER INFORMATION
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
(a) June 17, 1994 annual meeting of stockholders.
(c) Matters voted upon.
1. Election of seven directors to serve as the Board of Directors
until the next annual meeting of stockholders and until their
respective successors are elected.
NUMBER OF VOTES
-----------------------------------------------
WITHHELD BROKER
NOMINEE FOR AUTHORITY NON-VOTES
- - ------------------- --------- --------- ---------------
William N. Anderson 5,345,188 - -
Marvin Aronowitz 5,015,689 329,499 -
Fred M. Gerson 5,015,941 329,247 -
Alvin N. Lubetkin 5,015,689 329,499 -
Stewart Orton 5,015,589 329,599 -
Marilyn Oshman 5,015,689 329,499 -
Dolph B. H. Simon 5,015,941 329,247 -
2. Adoption of the Oshman's Sporting Goods, Inc. 1994 Omnibus
Plan.
NUMBER OF VOTES
-----------------------------------------------------------
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--------- ------- ------- ---------
4,281,826 472,800 38,868 551,694
<PAGE>
ITEM 6. EXHIBITS
EXHIBIT INDEX
10.1 Restricted Stock Grant Agreement dated July 15, 1994 between the
Company and Alvin N. Lubetkin.
10.2 Employment Agreement dated June 20, 1994 between the Company and
William N. Anderson.
11.1 Statement re: Computation of Per Share Earnings.
<PAGE>
SIGNATURES
Pursuant to the Requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OSHMAN'S SPORTING GOODS, INC.
Date: By: A. LYNN BOERNER
Vice President and
Chief Accounting Officer
EXHIBIT 10.1
RESTRICTED STOCK GRANT AGREEMENT
This Restricted Stock Grant Agreement ("Restricted Stock Grant") is
by and between Oshman's Sporting Goods, Inc., a Delaware corporation (the
"Company"), and Alvin N. Lubetkin, a resident of Harris County, Texas
("Grantee"). All references herein to specific paragraphs refer to the
paragraphs of this Restricted Stock Grant.
1. GRANT OF RESTRICTED SHARES. The Company hereby grants to Grantee,
all rights, title and interest in and to the record and beneficial
ownership of 100,000 shares (the "Restricted Shares") of common stock, $.01
par value per share, of the Company ("Common Stock"), upon the terms and
subject to the conditions described in Paragraphs 4 and 5 as well as the
other provisions hereof. By acceptance of this Restricted Stock Grant,
Grantee agrees (i) to be bound by all of the terms, provisions, conditions
and limitations hereof, (ii) not to disclose any trade or secret data or
any other confidential information of the Company acquired during
employment by the Company or a Subsidiary, or after termination of
employment or "Retirement" (as defined in Paragraph 5(a)), and (iii) not to
compete with the Company as more fully explained in Paragraph 7.
2. RESTRICTION PERIOD. The Restriction Period with respect to the
relevant portion of Restricted Shares shall end on the Grantee's "Vesting
Date" as defined in Paragraph 5(c).
3. DELIVERY OF RESTRICTED SHARES. Upon satisfaction of the conditions
precedent set forth in this Restricted Stock Grant, the Company shall issue
and deliver to Grantee a certificate or certificates for such number of
shares of Common Stock as are required to be issued and delivered under
this Restricted Stock Grant.
4. RISK OF FORFEITURE. To the extent that Grantee's employment with
the Company terminates for any reason other than death, Disability (as
defined below), "Retirement" (as defined in Paragraph 5(a)) or termination
of employment by Grantee for "Good Reason" (as defined in Paragraph 5(a)),
prior to being fully vested pursuant to Paragraph 5, Grantee shall forfeit
the right to receive the Restricted Shares that would otherwise have been
delivered upon satisfaction (as of the relevant time) of the conditions
precedent to issuance of a certificate or certificates for such Restricted
Shares. The term "Disability" as used herein shall mean any complete and
permanent disability as defined in Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended.
5. VESTING
(a) VESTING UPON RETIREMENT. Except as provided in subparagraphs
(b) and (c) below, Grantee shall acquire a vested interest in the
Restricted Shares only upon his
"Retirement" (as defined below), at which time the percentage of
Grantee's vested interest shall be determined by his age, as set forth
in the following table:
If Grantee's Retirement His Vested Percentage
Occurs At or After Age: Shall Be:
------------------------ ---------------------
62 25%
63 50%
64 75%
65 100%
For purposes of this Restricted Stock Grant, the term "Retirement"
shall mean the Grantee's voluntary termination of his employment with the
Company for reasons OTHER THAN "Good Reason," which latter term shall mean
either (i) any reduction in Grantee's annual base salary below $342,200 per
year, or (ii) Grantee's removal as chief executive officer of the Company.
(b) ACCELERATED VESTING UPON CERTAIN EVENTS. Notwithstanding the
provisions of subparagraph (a) above, but subject to subparagraph (c)
below, Grantee shall immediately become 100% vested in the Restricted
Shares upon the occurrence of any of the following events:
(1) Termination of Grantee's employment by the Company that is
not a Termination for Cause (as defined below);
(2) Termination of Grantee's employment by the Grantee for "Good
Reason" (as defined in subparagraph (a) above) at any time
following an event constituting Good Reason;
(3) Grantee's death;
(4) Grantee's Disability; or
(5) Upon any termination of Grantee's employment (whether by the
Company or by the Employee) following a Change in Control (as
defined in Section 5.7(a) of the Company's 1994 Omnibus Plan).
The term "Termination for Cause," as used herein, shall mean Grantee's
termination by the Company as a result of Grantee's willful misconduct or
disobedience, dishonesty or disloyalty.
(c) REDUCTION OF VESTED PERCENTAGE. Notwithstanding the foregoing
provisions of this Paragraph 4, if at the time Grantee would otherwise
become vested to any extent in the Restricted Shares pursuant to
subparagraphs (a) or (b) above (hereinafter, his "Vesting Date"),
Grantee is indebted to the Company by reason of any loan made to
Grantee that has not been fully repaid on or before such Vesting Date
("Outstanding Loan"), the number of Restricted Shares in which Grantee
would otherwise become fully vested pursuant to subparagraphs (a) or
(b) above shall be reduced by the number of shares that is equal to
the number derived by (i) dividing the unpaid balance of the
Outstanding Loan, by (ii) the Fair Market Value (as defined in Section
1.2(l) of the Company's 1994 Omnibus Plan) of one share of Common
Stock with the amounts described in both (i) and (ii) determined as of
the Vesting Date.
To the extent that a reduction in Grantee's vested interest in the
Restricted Shares occurs pursuant to the immediately preceding
paragraph, Grantee's Outstanding Loan shall be deemed to have been
repaid as of the Vesting Date to the extent Restricted Shares were
reduced, and the Company shall, as soon as practical thereafter,
provide Grantee with appropriate written documentation that evidences
such repayment.
To the extent that Grantee has a vested interest in any Restricted
Shares after the reduction described in this subparagraph (c), such
Restricted Shares shall be delivered to him, free of restrictions, as
soon as practical after the Vesting Date.
6. TAX BENEFIT PAYMENT. Subject to the following provisions of this
Paragraph 6, as soon as practical after the end of the Company's taxable
year in which occurs Grantee's Vesting Date, the Company shall pay to
Grantee in a single sum in cash an amount equal to the current tax savings
attributable to the federal income tax deduction to which the Company is
entitled as a result of the Grantee's vesting in the Restricted Shares. To
the extent that the Company derives a partial or no tax savings from the
tax deduction because the Company's taxable income for federal income tax
purposes is not sufficient for it to currently benefit from such deduction
or the Company has a net operating loss, payment of the amount or amounts
due hereunder will be made as described below if and when (and to the
extent) the Company does derive a current tax savings from the deduction.
In determining when the deduction attributable to the vesting of the
Restricted Shares is used by the Company, it shall be assumed that all
other deductions available to the Company are used before the deduction
attributable to the Restricted Shares is utilized. Payment of the amount or
amounts due hereunder shall be made to Grantee in cash as soon as
practicable after the end of the Company's taxable year or years, if
applicable, in which the Company derives a current tax savings from the
deduction. Should Grantee die before full payment of any amount due
hereunder is paid, such amount shall be paid to the personal representative
or representatives of his estate.
7. AGREEMENT NOT TO COMPETE WITH COMPANY. Grantee hereby acknowledges
that (i) in the event that he were to enter into competition with the
Company, Grantee's knowledge of the Company's proprietary information would
be of invaluable benefit to a competitor of the Company, and could cause
irreparable harm to the Company's business interests; and (ii) Grantee's
agreement to enter into the noncompetition provisions and covenants set
forth herein is an integral condition of this Restricted Stock Grant,
without which the Company would not have agreed to enter into this
Restricted Stock Grant. Accordingly, with respect to the Company's
operations within the United States of America and during the term of
Grantee's employment by the Company, and for a period of five years after
the effective date of Grantee's Retirement (as defined above), Grantee
hereby covenants, consents and agrees that he shall not, directly or
indirectly, acting alone or in conjunction with others, for his own account
or for the account of others, including, without limitation, as an officer,
director, stockholder, owner, partner, joint venturer, employee, promoter,
consultant, agent, representative, or otherwise:
(a) Solicit, canvass, or accept any fees or business from any
customer of the Company for himself or any other person or entity
engaged in a business competitive with the Company (hereinafter
referred to as a "Competitive Enterprise"); or
(b) Engage or participate in any Competitive Enterprise; or
(c) Request or advise any service provider or supplier to, or
customer of, the Company to reduce, curtail or cancel any business
that it may transact with the Company; or
(d) Solicit, induce, or otherwise attempt to influence any employee
or agent of the Company, or any of its Subsidiaries or affiliates, to
terminate his relationship with the Company; or
(e) Make any statement or perform any act intended to advance an
interest of an existing or prospective competitor of the Company in
any way that injures the goodwill or any other business interest of
the Company.
Grantee hereby agrees that the limitations set forth above on his
rights to compete with the Company after his termination of employment are
reasonable and necessary for the protection of the Company. However, should
the time period or any other noncompetition provision set forth herein be
deemed invalid or unenforceable in any respect, then Grantee acknowledges
and agrees that reformation may be made with respect to such time period or
other noncompetition provision in order to protect the Company's business
interests to the maximum permissible extent.
8. OWNERSHIP RIGHTS. Grantee shall have no rights as a stockholder
with respect to Restricted Shares subject to this Restricted Stock Grant
until Grantee becomes the holder of record of such shares following the
issuance of a stock certificate for Common Stock that is free of
restrictions hereunder. Without limiting the foregoing, Grantee shall have
no right to transfer any Restricted Shares or receive any dividends (other
than as provided in Paragraph 10) payable to stockholders of record prior
to the date that the Grantee so becomes a stockholder of record.
9. REORGANIZATION OF COMPANY AND SUBSIDIARIES/CHANGE IN CONTROL. The
existence of this Restricted Stock Grant shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or
consolidation of the Company or any issue of bonds, debentures, preferred
or prior preference stock ahead of or affecting the Restricted Shares or
the rights thereof, or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or
otherwise.
10. ADJUSTMENT OF SHARES.
(a) In the event of stock dividends, spin-offs of assets, or other
extraordinary dividends, stock splits, combinations of shares,
recapitalizations, mergers, consolidations, reorganizations,
liquidations, issuances of rights or warrants and similar transactions
or events involving the Company ("Recapitalization Events"), then for
all purposes references herein to Common Stock or to Restricted Shares
shall mean and include all securities or other property (other than
cash) that holders of Common Stock are entitled to receive in respect
of Common Stock by reason of each successive Recapitalization Event,
which securities or other property (other than cash) shall be treated
in the same manner and shall be subject to the same restrictions as
the underlying Restricted Shares.
(b) In the event of any change in applicable laws or any change in
circumstances which results in or would result in any dilution of the
rights of Grantee hereunder, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of this
Restricted Stock Grant, then, if the Board of Directors of the Company
(the "Board") shall, in its sole discretion, determine that such
change equitably requires an adjustment in the number or kind of
shares of stock or other securities or property theretofore subject to
issuance hereunder, such adjustment shall be made in accordance with
such determination. The Board shall give notice to Grantee, and upon
notice such adjustment shall be effective and binding for all purposes
of this Restricted Stock Grant.
11. CERTAIN RESTRICTIONS. By accepting this Restricted Stock Grant,
Grantee agrees that, if at the time of delivery of certificates for Common
Stock issued hereunder following the lapse of restrictions previously
applicable to such shares, any sale of such shares of Common Stock is not
covered by an effective registration statement filed under the Securities
Act of 1933 (the "Act"), or cannot be made in accordance with an applicable
exemption from the Act, Grantee will acquire the shares of Common Stock for
Grantee's own account and without a view to resale or distribution in
violation of the Act or any other securities law, and upon any such
acquisition Grantee will enter into such written representations,
warranties and agreements as the Company may reasonably request in order to
comply with the Act or any other securities law or with this document.
12. AMENDMENT AND TERMINATION. No amendment or termination of this
Restricted Stock Grant shall be made by the Board of Directors at any time
without the written consent of Grantee.
13. NO GUARANTEE OF EMPLOYMENT. This Restricted Stock Grant shall not
confer upon Grantee any right with respect to continuance of employment or
other service with the Company or any Subsidiary, nor shall it interfere in
any way with any right the Company or any Subsidiary would otherwise have
to terminate Grantee's employment or other service at any time.
14. WITHHOLDING OF TAXES. The Company shall have the right to (i) make
deductions from the number of Restricted Shares otherwise deliverable upon
satisfaction of the conditions precedent under this Restricted Stock Grant
(and other amounts payable under this Restricted Stock Grant) in an amount
sufficient to satisfy withholding of any federal, state or local taxes
required by law, or (ii) take such other action as may be necessary or
appropriate to satisfy any such tax withholding obligations.
15. NO GUARANTEE OF TAX CONSEQUENCES. Neither the Company nor the
Board makes any commitment or guarantee that any federal or state tax
treatment will apply or be available to any person eligible for benefits
under this Restricted Stock Grant.
16. SEVERABILITY. In the event that any provision of this Restricted
Stock Grant shall be held illegal, invalid, or unenforceable for any
reason, such provision shall be fully severable, but shall not affect the
remaining provisions of this Restricted Stock Grant and this Restricted
Stock Grant shall be construed and enforced as if the illegal, invalid, or
unenforceable provision had never been included herein.
17. GOVERNING LAW. This Restricted Stock Grant shall be construed in
accordance with the laws of the State of Texas to the extent federal law
does not supersede and preempt Texas law.
Executed the 15th day of July, 1994.
"COMPANY"
OSHMAN'S SPORTING GOODS, INC.
By: WILLIAM N. ANDERSON
President
Accepted the 15th day of July, 1994.
"GRANTEE"
ALVIN N. LUBETKIN
EXHIBIT 10.2
June 20, 1994
Mr. William N. Anderson
6007 Pine Forest Road
Houston, Texas 77057
Dear Bill:
The purpose of this letter is to set forth certain terms relating to
your employment with Oshman's Sporting Goods, Inc., a Delaware corporation
(the "Company").
1. TERMS OF EMPLOYMENT; CERTAIN COVENANTS OF THE COMPANY.
(a) The Company agrees to employ you as its President and Chief
Operating Officer at an initial annual salary of $300,000 per annum.
(b) On the first regular pay day following commencement of your
employment with the Company, you will receive a "signing" bonus of $25,000
in a lump-sum, cash payment. You will not be eligible for any other bonus
payment or award for fiscal year 1994 (ending January 28, 1995), but will
be eligible for a bonus for fiscal year 1995, subject to achievement of
such criteria as may be fixed by the Compensation Committee of the Board of
Directors.
(c) In addition to your regular salary and any bonus, the
Company will pay to you, at the commencement of each month, the sum of
$1,100 as an allowance for automobile and other personal expenses incurred
in the performance of your duties.
(d) The Company agrees to reimburse you for all ordinary and
reasonable expenses relating to your relocation to Houston, including
without limitation shipping household and personal effects, travel related
to locating housing, and temporary living expenses (if necessary). The
Company will also reimburse you for costs related to the early termination
of your home lease in Connecticut, which reimbursement shall not exceed
$10,000.
2. CERTAIN COVENANTS OF EXECUTIVE.
(a) You agree to devote your full working time, attention and
energy to the affairs of the Company and to perform the duties of your
position in good faith and in a manner you reasonably believe to be in the
best interests of the Company.
(b) You agree that you will not terminate your employment with
the Company without giving at least sixty (60) days advance written notice
to the Company.
(c) You agree that you will not, without the consent of the
Board of Directors or the Chief Executive Officer of the Company, (i) use
for your benefit or disclose, or permit to be disclosed, at any time during
your employment by the Company or thereafter, except to the extent required
by the performance of your duties as an employee of the Company, any
information obtained or developed by you while in the employ of the
Company, or information relating to any customers, suppliers, products,
employees, any financial or accounting data, designs, drawings or
blueprints or methods of distribution or procurement of the Company or any
of its subsidiaries or affiliates, or any confidential matter, except
information which at the time is available to others in the business or
generally known to the public other than as a result of disclosure by you
not permitted hereunder; or (ii) take with you upon leaving the Company's
employ, any document or paper relating to any of the foregoing or any
physical property of the Company or any of its subsidiaries or affiliates.
3. EMPLOYMENT AT WILL; TERMINATION.
(a) You acknowledge and agree that your employment is "at
will"; the Company may terminate you at any time for any reason, or for no
reason, without liability or obligation, except as set forth below. The
Company acknowledges and agrees that, subject to paragraph 2(b), you may
leave the employ of the Company at any time.
(b) If the Company terminates your employment at any time,
other than for Cause or Disability (as defined below) or you terminate your
employment for Good Reason (as defined below), then the Company shall pay
you, no later than thirty (30) days following the date of such termination,
a lump sum severance payment of three hundred thousand dollars ($300,000);
PROVIDED, HOWEVER, that the Company shall have no obligation under this
paragraph 3(b) if, as of the date of such termination, the aggregate value
of all stock options exercised by you (valued as of the date of each such
exercise), together with all vested but unexercised stock options held by
you (valued as of the date of termination of your employment) is equal to
or exceeds $1,000,000. For purposes of this paragraph 3(b), options shall
be valued by subtracting the exercise price from the last sale price of the
Company's common stock, par value $.01 per share, reported in The Wall
Street Journal prior to such exercise, in the case of exercised options,
and prior to such termination date, in the case of vested but unexercised
options. The Company may withhold from such payment such federal, state or
local taxes as shall be required to be withheld pursuant to any applicable
law or regulation.
(c) The term "Cause" as used herein shall mean:
(i) your conviction, whether or not appeal be taken, or
your plea of guilty or nolo contendere to charges of any felony
or other crime involving personal dishonesty, moral turpitude
or willfully violent misconduct; or
(ii) your gross negligence or malfeasance in the conduct of
your duties that has or can reasonably be expected to have a
materially adverse effect on the Company; or
(iii) your engaging in any fraudulent act or any
embezzlement or wrongful diversion of the funds of the Company
or any affiliate of the Company; or
(iv) your material failure to comply with any procedures or
policies of general application with respect to the operation
of the Company that remains unremedied after fifteen (15) days
written notice to you; or
(v) your willful failure to substantially perform your
duties after a demand for substantial performance is delivered
to you that specifically identifies the reason or reasons for
the determination by the Company's Board of Directors that you
have not substantially performed your duties; or
(vi) any act of dishonesty by you resulting in or intended
to result in gain or personal enrichment at the expense of the
Company, or any willful act that has the effect of causing
substantial injury to the Company; or
(vii) any breach by you of any of your covenants under
Section 2 of this Agreement.
(d) The term "Good Reason" as used herein shall mean:
(i) without your consent, the assignment to you of any
duties materially inconsistent with your status as a senior
executive officer of the Company that has not been rescinded or
otherwise remedied after thirty (30) days written notice from
you to the Company; or
(ii) without your consent, a reduction by the Company in
the base salary set forth in paragraph 1(a); or
(iii) without your consent, the Company's requiring you to
be based anywhere other than within Harris County, Texas,
except for required travel on the Company's business.
(e) The term "Disability" as used herein, shall mean any
complete and permanent disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended.
4. SCOPE OF AGREEMENT. This Agreement, together with your stock
option agreement of even date herewith, contains the entire understanding
and agreement between the Company and you with respect to their respective
subject matter and are not intended to confer any rights upon you not
expressly provided for herein or therein.
5. NOTICES. Any notice, request, demand or other communication
provided for by this Agreement or made pursuant to or in conjunction with
this Agreement shall be in writing and shall be sufficiently given if and
when mailed in the continental United States by registered or certified
mail or personally delivered to the intended recipient at the address
stated below or to such changed address as the addressee may have given by
a similar notice:
To the Company: Oshman's Sporting Goods, Inc.
2302 Maxwell Lane
Houston, Texas 77023
Attn: Alvin N. Lubetkin
Vice Chairman and Chief
Executive Officer
To the Executive: William N. Anderson
6007 Pine Forest Road
Houston, Texas 77057
6. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon, the Company, its successors and assigns, including
without limitation, any corporation which may acquire all or substantially
all of the Company's assets or businesses or into which the Company may be
consolidated or merged, and you, your heirs, executors, administrators and
legal representatives.
7. APPLICABLE LAW. This Agreement shall be governed by the internal
laws of the State of Texas without giving effect to principles of conflicts
of laws.
8. AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification or
waiver shall be agreed to in writing, signed by you and by an officer of
the Company thereunto duly authorized by resolution of the Board of
Directors of the Company. Except as otherwise specifically provided in this
Agreement, no waiver by either party hereto of any breach by the other
party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a subsequent
breach of such condition or provision of a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
If the foregoing terms and conditions accurately reflect our
agreement relative to your employment, please so acknowledge by signing
below.
Yours very truly,
Alvin N. Lubetkin
Vice Chairman and Chief
Executive Officer
Acknowledged and agreed to, effective as of the date first above written:
William N. Anderson
<PAGE>
<TABLE>
ITEM 6 - EXHIBITS
EXHIBIT 11.1
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
FOR THE THREE AND SIX MONTHS
ENDED JULY 30, 1994 AND JULY 31, 1993
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------- ------------------- -------------------
1994 1993 1994 1993
------------------ ------------------- ------------------- -------------------
FULLY FULLY FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET EARNINGS/(LOSS) $1,048 $1,048 $(1,569) $(1,569) $ 100 $ 100 $(3,880) $(3,880)
====== ====== ======= ======= ====== ====== ======= =======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING................ 5,805 5,805 5,805 5,805 5,805 5,805 5,805 5,805
EXCESS OF SHARES ISSUABLE UPON
EXERCISE OF STOCK OPTIONS OVER
SHARES DEEMED RETIRED UNDER THE
"TREASURY STOCK" METHOD........... 94 105 - - 83 96 - -
------ ------ ------- ------- ------ ------ ------- -------
WEIGHTED AVERAGE NUMBER OF COMMON
AND DILUTIVE COMMON EQUIVALENT
SHARES OUTSTANDING................ 5,899 5,910 5,805 5,805 5,888 5,901 5,805 5,805
====== ====== ======= ======= ====== ====== ======= =======
EARNINGS/(LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE....... $ 0.18 $ 0.18 $ (0.27) $ (0.27) $ 0.02 $ 0.02 $ (0.67) $ (0.67)
====== ====== ======= ======= ====== ====== ======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> JUL-30-1994
<CASH> 235
<SECURITIES> 0
<RECEIVABLES> 4,005
<ALLOWANCES> 247
<INVENTORY> 91,744
<CURRENT-ASSETS> 99,796
<PP&E> 76,841
<DEPRECIATION> 52,282
<TOTAL-ASSETS> 125,159
<CURRENT-LIABILITIES> 46,920
<BONDS> 0
<COMMON> 5,805
0
0
<OTHER-SE> 54,604
<TOTAL-LIABILITY-AND-EQUITY> 125,159
<SALES> 146,220
<TOTAL-REVENUES> 146,220
<CGS> 94,733
<TOTAL-COSTS> 94,733
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 789
<INCOME-PRETAX> 135
<INCOME-TAX> 35
<INCOME-CONTINUING> 100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
