<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1995
REGISTRATION NO. 33-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
OSHMAN'S SPORTING GOODS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
74-1031691
(I.R.S. EMPLOYER IDENTIFICATION NO.)
2302 MAXWELL LANE
HOUSTON, TEXAS 77023
(713) 928-3171
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
R. L. BOCKART
OSHMAN'S SPORTING GOODS, INC.
2302 MAXWELL LANE
HOUSTON, TEXAS 77023
(713) 928-3171
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JOHN B. CLUTTERBUCK RICHARD H. GILDEN
MAYOR, DAY, CALDWELL & KEETON, L.L.P. FULBRIGHT & JAWORSKI L.L.P.
700 LOUISIANA 666 FIFTH AVENUE
HOUSTON, TEXAS 77002 NEW YORK, NEW YORK 10103
(713) 225-7000 (212) 318-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$1.00 per share........ 1,121,250 $11.25 $12,614,063 $4,350
- -----------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes 146,250 shares subject to an over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, based upon
the average of the high and low per share sales prices of the Company's
Common Stock on December 18, 1995 as reported on the American Stock
Exchange.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
OSHMAN'S SPORTING GOODS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-2 ITEM NUMBER AND HEADING PROSPECTUS CAPTION OR PAGE
-------------------------------- --------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus.... Registration Statement Cover; Cross
Reference Sheet; Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus... Inside Front and Outside Back Cover Pages
of Prospectus; Additional Information
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed Charges... Prospectus Summary; Risk Factors
4. Use of Proceeds.............. Use of Proceeds
5. Determination of Offering
Price....................... Underwriting
6. Dilution..................... Not Applicable
7. Selling Security Holders..... Principal and Selling Stockholders
8. Plan of Distribution......... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to
be Registered............... Description of Capital Stock
10. Interests of Named Experts
Description of Capital Stock
and Counsel................. Certain Legal Matters; Experts
11. Information with Respect to
the Registrant.............. Prospectus Summary; The Company; Risk
Factors; Use of Proceeds; Price Range of
Common Stock and Dividend Policy; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Principal and Selling
Stockholders; Certain Transactions;
Description of Capital Stock; Index to
Consolidated Financial Statements
12. Incorporation of Certain
Information by Reference.... Incorporation of Certain Information by
Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................. Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 22, 1995
PROSPECTUS
975,000 SHARES
OSHMAN'S SPORTING GOODS, INC.
COMMON STOCK
-----------
All of the 975,000 shares of Common Stock of Oshman's Sporting Goods, Inc.
(the "Company") offered hereby are being sold by certain selling stockholders
(the "Selling Stockholders"). The Company will not receive any of the proceeds
from the sale of shares by the Selling Stockholders. See "Principal and Selling
Stockholders."
The Common Stock is traded on the American Stock Exchange under the symbol
"OSH." On December 18, 1995, the last reported sales price of the Common Stock
on the American Stock Exchange was $11.25 per share. See "Price Range of Common
Stock and Dividend Policy."
-----------
FOR INFORMATION CONCERNING CERTAIN FACTORS RELATING TO THIS OFFERING, SEE
"RISK FACTORS," BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........... $ $ $
Total(3)............ $ $ $
- ------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) For information concerning indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses of this offering estimated at $ payable by the
Selling Stockholders.
(3) The Company has granted to the Underwriters an option, exercisable within
30 days of the date hereof, to purchase up to 146,250 additional shares of
Common Stock solely to cover overallotments, if any, on the same terms and
conditions as the shares offered hereby. If such option is exercised in
full, the total "Price to Public" and "Underwriting Discounts and
Commissions" will be $ and $ , respectively, and proceeds to the
Company will be $ . See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters, when, as
and if delivered to and accepted by the several Underwriters, subject to their
right to reject any order in whole or in part and to certain other conditions.
It is expected that certificates representing the shares of Common Stock will
be available for delivery on or about , 1996 at the offices of Ladenburg,
Thalmann & Co. Inc., New York, New York.
LADENBURG, THALMANN & CO. INC.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
[PHOTOS ON GATEFOLD PAGE]
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference: (i) Annual Report on Form 10-K for the fiscal
year ended January 28, 1995; (ii) Quarterly Reports on Form 10-Q for the fiscal
quarters ended April 29, 1995, July 29, 1995 and October 28, 1995 and (iii) the
Company's Proxy Statement relating to the annual meeting of stockholders held
on June 16, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of this offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document, which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference herein, other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates. Written or oral requests for such copies should
be directed to: Oshman's Sporting Goods, Inc., 2302 Maxwell Lane, Houston,
Texas 77023, Attention: R. L. Bockart, telephone number (713) 928-3171.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act,
and in accordance therewith, files reports and other information with the
Commission. Reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
statements and other information may be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006-1881. See
"Other Information."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
[PHOTOS ON INSIDE COVER PAGE 1]
<PAGE>
[PHOTOS ON INSIDE COVER PAGE 2]
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this
Prospectus. For a discussion of certain factors relevant to an investment in
the Common Stock, see "Risk Factors." References in this Prospectus to the
"Company" or "Oshman's" refer to Oshman's Sporting Goods, Inc. and its
consolidated subsidiaries. Unless otherwise indicated, the information in this
Prospectus assumes that the Underwriters' over-allotment option is not
exercised. See "Underwriting." The terms "fiscal 1990," "fiscal 1991," "fiscal
1992," "fiscal 1993" and "fiscal 1994" refer to the Company's fiscal years
ended February 2, 1991, February 1, 1992, January 30, 1993, January 29, 1994
and January 28, 1995, respectively, and "fiscal 1995" refers to the Company's
fiscal year ending February 3, 1996.
THE COMPANY
Oshman's Sporting Goods, Inc. (the "Company" or "Oshman's"), the sixth
largest full-line sporting goods retailer in the United States as of the end of
1994, has developed an innovative, interactive concept in sporting goods
retailing that it is implementing through its SuperSports USA(R) megastores.
The Company is transforming its business by focusing on opening and operating
SuperSports USA megastores occupying, on average, approximately 61,000 square
feet, while rationalizing its pre-existing base of traditional stores, which
average approximately 11,000 square feet. SuperSports USA megastores offer a
dominant selection of sporting goods in a visually exciting upscale environment
featuring a variety of "play areas" that provide customers with the opportunity
to try out sporting goods merchandise. This "play-before-you-pay" approach
encourages customers, with the assistance of qualified sales personnel, to
purchase the equipment that best satisfies their particular needs and desires
while also providing an entertaining shopping experience.
SuperSports USA megastores are organized as a collection of distinctive
sporting goods specialty shops. The merchandising format and layout of each
megastore is designed to lead customers along a path through the store, in and
out of specialty shops that concentrate on specific sporting goods categories
such as in-line skating and skateboarding; skiing and snowboarding; cycling;
golf; tennis and other racquet sports; fitness and exercise equipment; hunting,
fishing, hiking and camping; and team sports such as baseball, softball,
football, basketball, hockey, soccer and volleyball. Each specialty area
merchandises sporting equipment as well as the appropriate apparel in a
department-store style. Based on the unique shopping experience it provides at
its SuperSports USA megastores, the Company intends to establish its megastores
as shopping destinations. In recent years, its megastores have performed as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
------------------------- -----------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
------- ------- ------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Megastores open at end of
period(1).................. 5 8 12 11 17
Total megastore net retail
sales...................... $41,018 $64,616 $95,711 $58,855 $95,526
Percentage of total net
retail sales(2)............ 13.4% 21.6% 34.0% 31.1% 45.0%
Total megastore direct store
contributions.............. $ 4,189 $ 5,577 $ 9,655 $ 5,449 $ 9,943
Percentage of total direct
store contributions(2)..... 17.5% 35.7% 39.3% 38.1% 57.8%
Contribution margin......... 10.2% 8.6% 10.1% 9.3% 10.4%
</TABLE>
- --------
(1) Seven megastores opened by the Company in November 1995 at locations
purchased from SportsTown, Inc. are not included.
(2) Results for fiscal 1994 and the first nine months of fiscal 1994 and fiscal
1995 do not consider results of operations of 34 traditional stores
included in the restructure group pursuant to the restructuring plan
initiated in fiscal 1993.
3
<PAGE>
As of December 18, 1995, the Company operated 24 SuperSports USA megastores
and 109 traditional stores located primarily in medium to large metropolitan
areas across the United States, with a significant presence in Texas and
California. The Company intends to continue to open additional SuperSports USA
megastores in both its existing and new markets and currently anticipates
opening at least eight additional megastores during fiscal 1996. In addition,
the Company currently anticipates opening at least 12 new megastores in each of
fiscal 1997 and 1998. Future store openings are, however, dependent upon
numerous factors including timing of construction and general market
conditions. Since the beginning of fiscal 1990, the Company has reduced its
traditional store base from 193 to 109, including four stores that remain in
the restructure group. The Company does not intend to open any additional
traditional stores in the future and will continue to reexamine and evaluate
the performance of each of its stores.
The Company believes that it is successfully transforming itself into
primarily an operator of megastores based upon the percentage of direct store
contributions attributable to its megastores. The Company believes that this
percentage will continue to increase based upon additional megastores that have
already been opened and megastores that are expected to be opened in fiscal
1996 and beyond.
The following are key elements of the Company's business strategy:
Unique Megastore Concept. SuperSports USA megastores are designed to offer
customers an interactive and engaging shopping experience not available at
competing sporting goods megastores. The Company believes that it has
distinguished its SuperSports USA megastores from those of its primary
megastore competitors by offering customers the unique "play-before-you-pay"
opportunity to use sporting equipment. The Company believes that this
interactive approach enables customers to find the merchandise best suited to
their needs and desires, which, in turn, encourages them to spend more time in
the SuperSports USA megastores and to become repeat shoppers. The opportunity
for customers to entertain themselves in a variety of innovative indoor
athletic settings also encourages repeat shopping. The Company designs each of
its megastores to include at least four of the following "play areas:" adult
and youth basketball courts; baseball and softball batting cages;
electronically simulated golf courses; putting greens; tennis and racquetball
courts; treadmill-style ski slope decks; in-line skating areas; and mini-boxing
rings.
Superior Shopping Experience. The Company's SuperSports USA megastores are
designed as a series of specialty sporting goods shops brought together under
one roof, each offering high-quality merchandise in an upscale setting that
results in an overall environment similar to a major department store and
unlike the Company's warehouse-format competitors. Each specialty area is
designed to concentrate on a specific sporting goods category and present
equipment alongside apparel appropriate for that category, creating a focused
shopping experience. The merchandise in each specialty area is displayed in a
visually creative fashion, utilizing an upscale department-store-style, point-
of-purchase presentation. The layout and intended traffic flow of each
SuperSports USA megastore are designed to guide customers through the entire
store along a path that introduces them to each specialty shop.
Favorable Merchandising Mix. Because of the unique specialty shop design and
upscale department store-style merchandise presentation that is emphasized in
the SuperSports USA megastore concept, the Company believes that it sells a
greater percentage of higher-margin sportswear than its primary megastore
competitors. The Company's advertising and promotional strategy is also
designed to support this favorable merchandising mix.
Destination Shopping Locations. By providing a differentiated and
entertaining shopping experience at its megastores, the Company intends to
establish each of its SuperSports USA megastores as a shopping destination. As
part of this strategy, the Company has sought and obtained mall and shopping
center anchor positions for a number of its megastore locations. The ability of
the SuperSports USA megastores to serve as mall anchors expands the Company's
universe of potential sites for its megastores. Anchor locations generally
afford retail tenants more favorable lease terms.
4
<PAGE>
Dominant Merchandise Selection. By offering high quality, name-brand
merchandise across a broad selection of sporting goods categories, the Company
targets both enthusiasts of a particular sport and casual sporting goods
consumers. Among the approximately 1,200 name brands the Company sells are
popular and traditional lines, including Nike, Rollerblade, Reebok,
Weslo/ProForm, Canstar/Bauer, Spalding, Columbia, Adidas, Russell Athletic and
Wilson Sporting Goods, as well as a number of higher-end specialty brands, such
as Nishiki bicycles, Filson and Barbour hunting apparel, G. Loomis fishing
equipment, Salomon skis, Teva footwear and Izod apparel.
Customer Service. As a part of its interactive and engaging SuperSports USA
megastore concept, Oshman's(R) encourages its sales associates to be
enthusiastic and outgoing in assisting customers. Each specialty sporting goods
shop is staffed with knowledgeable and qualified sales personnel whose goal is
to assist customers in selecting the merchandise best suited to their needs and
desires. Sales personnel are trained to encourage customers to use the play
areas and to sample a number of products in a given category. The Company also
offers many on-site services, including full service bicycle shops providing
custom assembly and tuning, racket stringing and regripping, snow ski equipment
repair and maintenance, golf club regripping and fishing and hunting equipment
repair.
THE OFFERING
<TABLE>
<S> <C>
Common Stock, par value $1.00 per share ("Common Stock"),
offered by the Selling Stockholders.......................... 975,000 shares
Common Stock outstanding after the offering(1)................ 5,818,699 shares
American Stock Exchange symbol................................ OSH
</TABLE>
- --------
(1) Based on number of shares outstanding as of December 18, 1995. Excludes
683,250 shares of Common Stock issuable upon the exercise of outstanding
stock options and stock grants subject to certain vesting requirements
granted pursuant to employee and non-employee director benefit plans, of
which 360,850 were exercisable as of December 18, 1995.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA AND SELECTED OPERATING DATA
<TABLE>
<CAPTION>
FISCAL YEAR(1) NINE MONTHS ENDED
----------------------------- ------------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA
(IN THOUSANDS EXCEPT
PER SHARE DATA):
Net sales............... $313,253 $307,935 $311,419 $212,692 $225,627
Cost of goods sold...... 200,348 205,250 202,110 138,120 145,875
-------- -------- -------- -------- --------
Gross profit.......... 112,905 102,685 109,309 74,572 79,752
Operating expenses:
Selling and
administrative
expenses............. 113,808 112,979 110,449 79,506 82,421
Corporate
restructuring........ -- 15,000 -- -- --
Miscellaneous
income(2)............ (530) (921) (2,944) (2,561) (2,127)
-------- -------- -------- -------- --------
Operating income
(loss).............. (373) (24,373) 1,804 (2,373) (542)
Interest expense,
net(2)................. 758 1,358 1,382 1,130 1,502
-------- -------- -------- -------- --------
Earnings (loss) before
income taxes........... (1,131) (25,731) 422 (3,503) (2,044)
Income tax (benefit).... (452) (6,237) 132 87 155
-------- -------- -------- -------- --------
Net earnings (loss)..... $ (679) $(19,494) $ 290 $ (3,590) $ (2,199)
======== ======== ======== ======== ========
Earnings (loss) per
common and common
equivalent share....... $ (.12) $ (3.36) $ .05 $ (.62) $ (.38)
======== ======== ======== ======== ========
Weighted average number
of common shares
outstanding............ 5,804 5,805 5,807 5,806 5,814
SELECTED OPERATING
DATA(3):
Stores open at end of
period:
Megastores............ 5 8 12 11 17
Traditional stores.... 165 153 113 115 105
-------- -------- -------- -------- --------
Total stores......... 170 161 125 126 122
======== ======== ======== ======== ========
Comparable store sales
increase (decrease)(4):
Megastores(5)......... 3.6% 9.9% 3.4% 4.3% 8.6%
Traditional stores.... 1.6% (6.0%) (.5%) (.9%) (1.4%)
Total stores......... 1.7% (4.2%) 1.7% .7% 5.0%
Weighted average net
sales per square
foot(6):
Megastores............ $ 170 $ 154 $ 155 $ 105 $ 111
Traditional stores.... 133 128 145 101 97
Total stores......... 137 133 148 102 103
Weighted average net
sales per store (in
thousands)(7):
Megastores............ $ 11,958 $ 9,850 $ 9,970 $ 6,658 $ 7,210
Traditional stores.... 1,529 1,460 1,600 1,119 1,067
Total stores......... 1,731 1,788 2,238 1,509 1,730
Direct store
contributions (in
thousands)(8):
Megastores............ $ 4,189 $ 5,577 $ 9,655 $ 5,449 $ 9,943
Traditional stores.... 19,749 10,062 14,931 8,858 7,270
-------- -------- -------- -------- --------
Total stores......... 23,938 15,639 24,586 14,307 17,213
======== ======== ======== ======== ========
Contribution margin(9):
Megastores............ 10.2% 8.6% 10.1% 9.3% 10.4%
Traditional stores.... 7.5% 4.3% 8.0% 6.8% 6.2%
Total stores......... 7.8% 5.2% 8.7% 7.6% 8.1%
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 28, 1995
----------------
<S> <C>
BALANCE SHEET DATA (IN THOUSANDS):
Working capital................................................ $59,936
Total assets................................................... 178,846
Long term obligations.......................................... 37,704
Total stockholders' equity..................................... 58,933
</TABLE>
6
<PAGE>
- --------
(1) The Company's fiscal year ends on the Saturday closest to the end of
January, resulting in the Company having a 52/53 week year and each of the
fiscal year periods presented consists of 52 weeks.
(2) Interest expense is net of interest income which historically had been
reported as part of miscellaneous income. Interest income amounted to
$327,000; $69,000; $116,000; $50,000; and $275,000, for fiscal 1992, fiscal
1993 and fiscal 1994 and the first nine months of fiscal 1994 and fiscal
1995, respectively.
(3) Excludes (i) seven megastores opened by the Company in November 1995 at
locations purchased from SportsTown, Inc. and (ii) traditional stores in
the Company's restructure group in fiscal 1994 and in the first nine months
of fiscal 1994 and fiscal 1995. Traditional store amounts include results
from the Company's three clearance stores and from occasional off-premises
sales.
(4) A store's sales growth is included in the comparable store sales
calculation after 12 full months of operation, as of the beginning of the
current fiscal year.
(5) Data for fiscal 1993, fiscal 1994 and the first nine months of fiscal 1994
exclude sales of a megastore converted from a traditional store in May
1993. Data for fiscal 1994 and the first nine months of fiscal 1995 exclude
sales of a megastore converted from a traditional store in October 1994. If
such stores were included, the megastore comparable sales increases for
fiscal 1993, fiscal 1994 and for the first nine months of fiscal 1994 and
fiscal 1995 would have been 13.2%, 8.5%, 6.0% and 18.2%, respectively.
(6) Net sales for the period divided by the weighted average gross square
footage for stores operated during the period.
(7) Net sales for the period divided by the weighted average number of stores
operated during the period.
(8) Direct store contributions are presented for comparative purposes and do
not include any charges for warehousing, buying or administrative expenses.
Direct store contributions include all direct revenues and expenses
incurred within the respective stores and allocated charges for
advertising, insurance, accrual for shrinkage, merchandise markdowns and
certain other expenses.
(9) Direct store contributions divided by net retail sales.
7
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus.
RISKS ASSOCIATED WITH FUTURE GROWTH
The Company has expanded its SuperSports USA megastore operations during the
past five years, adding 12 megastores during fiscal 1995, and expects to
continue to expand its megastore operations in the future. The Company plans to
open at least eight new megastores in fiscal 1996 and 12 new megastores in each
of fiscal 1997 and 1998; however, there can be no assurance that the Company
will be able to achieve this goal. The Company's success in the future will be
dependent on continuing to open additional SuperSports USA megastores in
additional markets as well as expanding the number of megastores in certain of
its key existing markets. The Company's ability to continue to expand its
SuperSports USA megastore operations is dependent upon, among other things, the
Company's ability to identify and obtain suitable sites for new stores on
acceptable terms; the construction and improvement of such sites; the hiring,
training and retention of qualified management and store personnel; the
Company's ability to open stores on a timely basis and manage them profitably
and the general business and economic conditions affecting consumer confidence
and spending. The Company's overall financial performance will be dependent
upon management's ability to effectively implement the Company's expansion plan
and, to a lesser extent, to increase sales in its existing stores. There can be
no assurance that the Company will continue to open new stores on a timely
basis, operate them on a profitable basis or increase sales in its existing
stores. As it continues to grow, the Company may be required to make further
investments in personnel, infrastructure, distribution and management
information systems. Failure to do so effectively could materially adversely
affect the Company's results of operations and financial condition. See
"Business--Business Strategy, --Expansion and Stores."
As the Company obtains greater megastore penetration in the markets in which
it currently operates traditional stores, there is substantial risk of
cannibalizing sales at existing traditional stores. While management believes
that greater megastore penetration in these markets provides economies of scale
in advertising and distribution that will enable the Company to compete more
effectively, there can be no assurance that the level of cannibalization that
occurs in the future will not adversely affect its total sales or
profitability.
NEED FOR CAPITAL
The Company anticipates that its growth strategy will create an increased
need for cash to finance working capital and capital expenditures. The Company
currently has a $55.0 million credit line, with additional seasonal advances of
$15.0 million available, with The CIT Group/Business Credit, Inc. ("CIT"),
which represents the Company's principal source of liquidity. The total amount
outstanding as of December 15, 1995 was $36.0 million and the Company had an
additional $2.6 million of letters of credit outstanding as of that date.
Although the Company currently believes it will be able to secure increases in
its credit line with CIT which would be sufficient to finance future growth and
working capital needs, there can be no assurance that the Company will be able
to do so on favorable terms, if at all. If the Company is unable to secure
additional financing in the future, its ability to pursue its business strategy
and its results of operations for future periods may be adversely affected. The
Company is also subject to a variety of financial and other covenants under its
credit agreement with CIT. Its ability to comply with such covenants is
dependent upon its results of operations. A breach of any covenant under the
agreement with CIT could have a material adverse effect upon the Company's
ability to obtain further financing from CIT or elsewhere and upon the
Company's financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
8
<PAGE>
RECENT HISTORY OF OPERATING LOSSES
The Company experienced a loss during each fiscal year from fiscal 1989
through fiscal 1993. While the Company realized a profit during fiscal 1994 and
expects to realize a profit for fiscal 1995, the Company's viability is
dependent upon its ability to continue to achieve profitable results of
operations. During fiscal 1993, the Company implemented a restructuring plan
pursuant to which 34 underperforming traditional stores were to be closed. Four
stores remained in the restructure group as of October 28, 1995. The Company
recorded a charge of $15.0 million in fiscal 1993 to allow for future charges
in connection with the restructuring plan. Although $3.2 million of the $15.0
million restructuring reserve remained as of October 28, 1995, there can be no
assurance that such remainder will be sufficient to cover all charges necessary
to complete the restructuring plan, or that the Company will not initiate
additional restructuring programs or close additional stores in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RISK OF FUTURE TRADITIONAL STORE PERFORMANCE
Although the Company is transforming itself into a megastore operator, for
fiscal 1994 and for the first nine months of fiscal 1995 it continued to derive
approximately 66.0% and 55.0%, respectively, of its net retail sales, and 60.7%
and 42.2%, respectively, of direct store contributions from its traditional
store operations, excluding stores in the restructure group. Traditional stores
have been experiencing comparable store sales decreases since 1992, with such
decreases being (.5%) and (1.4%) for fiscal 1994 and the first nine months of
fiscal 1995, respectively, excluding stores in the restructure group. If
consumer trends favoring megastores continue, there is a risk that the
performance of the Company's traditional stores could decline further or that
such decline could be accelerated. A continued decline in traditional store
performance could have a material adverse effect on the Company's results of
operations and financial condition.
HIGHLY COMPETITIVE MARKET
The market for retail sporting goods is highly competitive, fragmented and
segmented. The Company competes with many different types of retail stores,
including full-line sporting goods chains, specialty footwear stores,
warehouse-format stores, specialty stores, discount and department stores and
other stores with a megastore format. While its stores face competition in
individual markets from a variety of retailers, the Company believes that its
greatest competition is likely to come from other megastore operators and from
warehouse-format operations. There can be no assurance that the Company will be
able to maintain or increase its current level of pricing, sales or
profitability in light of such competition, particularly as the Company expands
into markets served by existing competitors or as new competitors enter into
the Company's markets. Furthermore, there is substantial competition from
large-format retailers for prime commercial locations and favorable lease terms
that could adversely affect both the Company's ability to expand and its
profitability.
The Company's ability to remain competitive is largely dependent upon its
ability to provide a selection of merchandise that appeals to its customers'
changing desires and that appropriately reflects geographical differences in
seasonality, brands and sports preferences. A failure by the Company to
accurately identify and respond to emerging trends in sports equipment or
athletic footwear, apparel or accessories could have a material adverse affect
on the Company's financial performance and results of operations.
Several sporting goods retailers currently operate stores with a megastore
format, including some with significantly greater resources than the Company.
In addition, there are other businesses, retailers and otherwise, with
substantially greater resources than the Company that may decide to enter the
sporting goods megastore retail business. This competition could have a
material adverse effect on the Company. While the Company believes that none of
its major competitors is currently duplicating the SuperSports USA megastore
concept, there can be no assurance that an existing or new competitor of the
Company will not, in the future, attempt to duplicate the Company's SuperSports
USA megastore format. Such competition may have a
9
<PAGE>
material adverse effect on the Company's results of operations and financial
condition. See "Business--Industry Overview and Competition."
SUBSTANTIAL RELIANCE ON FOURTH QUARTER RESULTS; QUARTERLY FLUCTUATIONS
The Company's business is highly seasonal in nature, with sales generally
higher in the fourth quarter, peaking in December due to holiday shopping.
During fiscal 1994, 1993 and 1992, 31.7%, 31.1% and 32.2%, respectively, of the
Company's sales were generated during the fourth quarter. In addition, the
Company's operating income for the fourth quarter substantially exceeded the
operating income for any other quarter during these fiscal years and is
expected to continue to do so in the future. Any substantial decrease in sales
during the fourth quarter could have a material adverse effect on the Company's
results of operations. Weather conditions add to the seasonal nature of the
business, particularly with respect to ski equipment and cold weather apparel.
The Company's results of operations may also fluctuate on a quarterly basis as
a result of seasonal variances and time and costs associated with selecting,
constructing, staffing, stocking and opening new stores, as well as the timing
of promotions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Seasonality."
DEPENDENCE ON DISCRETIONARY SPENDING
Sales of sporting goods have historically been dependent upon discretionary
consumer spending, which may be affected by general economic conditions. A
decline in consumer spending on sporting goods apparel, footwear and equipment
could have a material adverse effect on the Company's financial condition or
results of operations. This risk could be heightened in the case of the Company
as compared to its competitors because of the Company's focus on upscale
merchandise.
RISK ASSOCIATED WITH GEOGRAPHICAL CONCENTRATION
The Company's sales of sporting goods have historically been affected by
general economic conditions and specific economic conditions in geographical
areas in which the Company's stores are concentrated. A decrease in consumer
spending on sporting goods, particularly in Texas and California, where stores
that accounted for 40.8% and 22.6%, respectively, of the Company's fiscal 1994
net sales are located, could have a material adverse effect on the Company's
financial condition and results of operations. In addition, particularly in
Southern California where the Company has a high concentration of stores,
seasonal factors such as unfavorable ski conditions or other localized
conditions such as flooding or earthquakes could have a material adverse effect
on the Company's operations.
DEPENDENCE ON VENDOR RELATIONSHIPS
In fiscal 1994, the Company's largest vendor, Nike, accounted for
approximately 10.4% of purchases by the Company. Although the Company purchases
merchandise from approximately 1,200 different vendors, the Company focuses its
efforts on high-margin, well-known, upscale brands. While the Company believes
that its relations with its vendors are generally good, the inability of the
Company to obtain merchandise from existing or new vendors in the future, or
any other major disruption in its major vendor relationships, could have a
material adverse effect on the Company's financial conditions or results of
operations. See "Business--Purchasing and Suppliers."
DEPENDENCE ON KEY MANAGEMENT
The Company depends on the services of its executive officers for the
management of the Company and the implementation of its business strategy.
Alvin N. Lubetkin, the Company's Chief Executive Officer, has been an executive
officer of the Company since 1966. The Company could be materially adversely
affected if Mr. Lubetkin or certain other executive officers were unwilling or
unable to continue in the Company's
10
<PAGE>
employ. The cessation of Mr. Lubetkin's active involvement in managing the
Company's business for any reason other than his death is an event of default
under the Company's credit agreement with CIT, unless Mr. Lubetkin is replaced
with a person or persons of comparable competence. See "Management."
CONTROL BY CERTAIN STOCKHOLDERS
As of December 18, 1995, the Company's officers, Directors and their families
and family trusts, in the aggregate, beneficially owned approximately 64.4% of
the outstanding shares of Common Stock of the Company. After the Offering, the
Company's officers, Directors and their families and family trusts, in the
aggregate, will beneficially own approximately 48.6% of the outstanding shares
of Common Stock of the Company (approximately 47.5% if the Underwriters' over-
allotment option is exercised). As a result, these stockholders acting together
would be able to exert significant influence over matters submitted to a vote
of the Company's stockholders, including the election of directors and the
approval of extraordinary corporate transactions. See "Principal and Selling
Stockholders."
LIMITED TRADING VOLUME OF COMMON STOCK
During the five months ended November 30, 1995, the daily average number of
shares of Common Stock traded on the American Stock Exchange was approximately
6,764 shares. If such trading levels continue, it may be difficult for
stockholders to effect sales of their shares on the American Stock Exchange
without significantly depressing the share price, and the placement of a
substantial number of sell orders could materially and adversely impact the
market price of the Common Stock. The limited trading activity could result in
volatility in the trading price of the Common Stock.
NO EXPECTATION OF DIVIDENDS
The Company has paid no dividends since January 1991. For the foreseeable
future, it is anticipated that earnings will be retained for operation and
expansion of the Company's business and that cash dividends will not be paid to
holders of Common Stock. Additionally, the Company's credit agreement with CIT
places certain limitations and restrictions on the Company's ability to pay
dividends on its Common Stock. See "Price Range of Common Stock and Dividend
Policy."
SUBSTANTIAL NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE
A substantial number of outstanding shares of Common Stock belonging to
officers, Directors and other affiliates of the Company, including shares of
Common Stock issuable upon the exercise of outstanding options are currently
"restricted securities" under the Securities Act. These shares are, or will
become, eligible for future sale in the public market at prescribed times
pursuant to Rule 144 under the Securities Act or otherwise. Sales of a
significant number of these shares of Common Stock in the public market could
adversely affect the market price of the Common Stock. See "Principal and
Selling Stockholders" and "Description of Capital Stock."
11
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of its Common
Stock by the Selling Stockholders. In the event the Underwriters' over-
allotment is exercised in full, the net proceeds to the Company from the sale
of the 146,250 shares of Common Stock will be approximately $ , after
deducting the underwriting discount. See "Underwriting." The Company intends to
use the net proceeds, if any, for general corporate purposes, including working
capital requirements.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock of the Company has been listed on the American Stock
Exchange under the symbol "OSH" since June 21, 1995. Prior to that date, the
Common Stock of the Company was quoted on the Nasdaq Stock Market's National
Market. The following table sets forth the quarterly high and low reported
sales prices per share for the Common Stock:
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED JANUARY 29, 1994
First Quarter ended May 1, 1993............................ $11.00 $ 7.50
Second Quarter ended July 31, 1993......................... 9.00 4.63
Third Quarter ended October 30, 1993....................... 8.50 4.75
Fourth Quarter ended January 29, 1994...................... 9.00 5.63
FISCAL YEAR ENDED JANUARY 28, 1995
First Quarter ended April 30,1994.......................... 8.00 5.50
Second Quarter ended July 30, 1994......................... 8.75 6.75
Third Quarter ended October 29, 1994....................... 9.00 7.63
Fourth Quarter ended January 28, 1995...................... 9.25 6.50
FISCAL YEAR ENDING FEBRUARY 3, 1996
First Quarter ended April 29, 1995......................... 7.63 5.75
Second Quarter ended July 29, 1995......................... 9.63 6.25
Third Quarter ended October 28, 1995....................... 15.13 9.38
Fourth Quarter ending February 3, 1996
(through December 18, 1995)............................... 13.88 11.25
</TABLE>
As of December 18, 1995, there were approximately 1,263 holders of record of
the Common Stock. The last reported sale price for the Common Stock on the
American Stock Exchange composite tape as of a recent date is quoted on the
cover page of this Prospectus.
The Board of Directors of the Company suspended the payment of dividends in
March 1991 and does not anticipate paying dividends in the foreseeable future.
The Company's credit agreement with CIT places certain limitations and
restrictions on the Company's ability to pay dividends on its Common Stock.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented below under the captions "Statements of
Operations Data" and "Balance Sheet Data" for and as of the end of each of the
fiscal years in the five-year period ended January 28, 1995, are derived from
the audited consolidated financial statements of the Company. The data
presented for and as of the end of each of the nine month periods ended October
29, 1994 and October 28, 1995 are derived from the Company's unaudited
statements, which include, in the opinion of management, all adjustments,
consisting only of normal recurring accruals, necessary to present fairly the
results of operations and financial position of the Company for the periods and
at the dates presented. The results of operations for the nine month period
ended October 28, 1995 are not necessarily indicative of results for the full
fiscal year. The consolidated financial statements of the Company for fiscal
1990, 1991, 1992, 1993 and 1994 were audited by Grant Thornton LLP, independent
certified public accountants. This data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements, the notes thereto and other
financial information included elsewhere in this Prospectus. The Selected
Operating Data are unaudited.
<TABLE>
<CAPTION>
FISCAL YEAR(1) NINE MONTHS ENDED
--------------------------------------------------- ------------------------
OCTOBER 29, OCTOBER 28,
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA
(IN THOUSANDS, EXCEPT
PER SHARE DATA):
Net sales............... $318,100 $297,829 $313,253 $307,935 $311,419 $212,692 $225,627
Cost of goods sold...... 204,942 190,706 200,348 205,250 202,110 138,120 145,875
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 113,158 107,123 112,905 102,685 109,309 74,572 79,752
Operating expenses:
Selling and
administrative
expenses.............. 115,374 112,002 113,808 112,979 110,449 79,506 82,421
Corporate
restructuring......... 1,966 -- -- 15,000 -- -- --
Miscellaneous expense
(income)(2)........... (449) 62 (530) (921) (2,944) (2,561) (2,127)
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss).............. (3,733) (4,941) (373) (24,373) 1,804 (2,373) (542)
Interest expense,
net(2)................. 2,247 1,380 758 1,358 1,382 1,130 1,502
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
income taxes and
cumulative effect of
change in accounting
principle.............. (5,980) (6,321) (1,131) (25,731) 422 (3,503) (2,044)
Income tax (benefit).... (2,146) (2,271) (452) (6,237) 132 87 155
Cumulative effect
(credit) of change in
accounting
principle(3)........... -- (2,150) -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..... $ (3,834) $ (1,900) $ (679) $(19,494) $ 290 $ (3,590) $ (2,199)
======== ======== ======== ======== ======== ======== ========
Earnings (loss) per
common and common
equivalent share....... $ (.66) $ (.33) $ (.12) $ (3.36) $ .05 $ (.62) $ (.38)
======== ======== ======== ======== ======== ======== ========
Weighted average number
of common shares
outstanding............ 5,790 5,799 5,804 5,805 5,807 5,806 5,814
SELECTED OPERATING
DATA(4):
Stores open at end of
period:
Megastores............. 2 2 5 8 12 11 17
Traditional stores..... 187 181 165 153 113 115 105
-------- -------- -------- -------- -------- -------- --------
Total stores......... 189 183 170 161 125 126 122
======== ======== ======== ======== ======== ======== ========
Comparable store sales
increase (decrease)(5):
Megastores (6)......... N/A N/A 3.6% 9.9% 3.4% 4.3% 8.6%
Traditional stores..... (3.5%) (6.4%) 1.6% (6.0%) (.5%) (.9%) (1.4%)
Total stores......... (3.5%) (6.4%) 1.7% (4.2%) 1.7% .7% 5.0%
Weighted average net
sales per square
foot(7):
Megastores............. $ 184 $ 133 $ 170 $ 154 $ 155 $ 105 $ 111
Traditional stores..... 137 130 133 128 145 101 97
Total stores......... 139 130 137 133 148 102 103
Weighted average net
sales per store
(in thousands)(8):
Megastores............. $ 14,594 $ 10,542 $ 11,958 $ 9,850 $ 9,970 $ 6,658 $ 7,210
Traditional stores..... 1,547 1,466 1,529 1,460 1,600 1,119 1,067
Total stores......... 1,618 1,563 1,731 1,788 2,238 1,509 1,730
Direct store
contributions (in
thousands)(9):
Megastores............. $ 1,118 $ 1,576 $ 4,189 $ 5,577 $ 9,655 $ 5,449 $ 9,943
Traditional stores..... 24,278 19,567 19,749 10,062 14,931 8,858 7,270
-------- -------- -------- -------- -------- -------- --------
Total stores......... 25,396 21,143 23,938 15,639 24,586 14,307 17,213
======== ======== ======== ======== ======== ======== ========
Contribution margin(10):
Megastores............. 7.2% 7.5% 10.2% 8.6% 10.1% 9.3% 10.4%
Traditional stores..... 8.2% 7.2% 7.5% 4.3% 8.0% 6.8% 6.2%
Total stores......... 8.2% 7.3% 7.8% 5.2% 8.7% 7.6% 8.1%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
FEBRUARY FEBRUARY JANUARY JANUARY JANUARY OCTOBER OCTOBER
2, 1, 30, 29, 28, 29, 28,
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (IN
THOUSANDS):
Working capital......... $ 56,850 $ 56,893 $ 55,491 $ 38,528 $ 40,375 $ 53,159 $ 59,936
Total assets............ 155,257 143,384 138,341 126,432 135,077 140,808 178,846
Long term obligations... 8,885 5,510 1,696 3,712 5,665 21,542 37,704
Total stockholders'
equity................. 82,404 80,500 79,823 60,329 60,786 56,813 58,933
</TABLE>
- --------
(1) The Company's fiscal year ends on the Saturday closest to the end of
January, resulting in the Company having a 52/53 week year and each of
fiscal year periods presented consists of 52 weeks.
(2) Interest expense is net of interest income which historically had been
reported as part of miscellaneous income. Interest income amounted to
$39,000; $175,000; $327,000; $69,000; $116,000; $50,000; and $275,000, for
fiscal 1990, 1991, 1992, 1993 and 1994 and the first nine months of fiscal
1994 and fiscal 1995, respectively.
(3) During the first quarter of fiscal 1991, the Company changed its method of
accounting for income taxes to conform to Statement of Financial
Accounting Standards No. 96, Accounting for Income Taxes. Under SFAS No.
96, deferred tax assets and liabilities represent the tax effect, based on
current law, of future deductible or taxable amounts attributable to
events that have been recognized in financial statements. The cumulative
effect of this accounting change on the years ended February 2, 1991 and
prior was to reduce the Company's net loss by $2.2 million.
(4) Excludes (i) seven megastores opened by the Company in November 1995 at
locations purchased from SportsTown, Inc. and (ii) traditional stores in
the Company's restructure group in fiscal 1994 and in the first nine
months of fiscal 1994 and fiscal 1995. Traditional store amounts include
results from the Company's three clearance stores and from occasional off-
premises sales.
(5) A store's sales growth is included in the comparable store sales
calculation after 12 full months of operation as of the beginning of the
current fiscal year.
(6) Data for fiscal 1993, fiscal 1994 and the first nine months of fiscal 1994
exclude sales of a megastore converted from a traditional store in May
1993. Data for fiscal 1994 and the first nine months of fiscal 1995
exclude sales of a megastore converted from a traditional store in October
1994. If such stores were included, the megastore comparable sales
increases for fiscal 1993, fiscal 1994 and for the first nine months of
fiscal 1994 and fiscal 1995 would be 13.2%, 8.5%, 6.0% and 18.2%,
respectively.
(7) Net sales for the period divided by the weighted average gross square
footage for stores operated during the period.
(8) Net sales for the period divided by the weighted average number of stores
operated during the period.
(9) Direct store contributions are presented for comparative purposes and do
not include any charges for warehousing, buying or administrative
expenses. Direct store contributions include all direct revenues and
expenses incurred within the respective stores and allocated charges for
advertising, insurance, accrual of shrinkage and merchandise markdowns and
certain other expenses.
(10) Direct store contributions divided by net retail sales.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company has been in operation since 1931, having been incorporated in
1946 as the successor to a proprietorship founded by J.S. Oshman. After
building a base in Texas, where it is headquartered, the Company expanded into
other states across the Sun Belt, growing from 11 stores in 1970 to 193 stores
at the beginning of fiscal 1990. In fiscal 1993, Management determined that the
megastore format offered the most potential profit in sporting goods retailing
and launched its distinctive SuperSports USA megastore concept. The Company is
in the process of transforming its business by focusing on opening and
operating SuperSports USA megastores occupying, on average, approximately
61,000 square feet, while rationalizing its pre-existing base of traditional
stores, which average approximately 11,000 square feet. As of December 18,
1995, the Company operated 24 megastores and 109 traditional stores located
primarily in medium to large metropolitan areas across the United States. The
Company has a significant presence in Texas and California as well as stores in
Arizona, Arkansas, Florida, Georgia, Hawaii, Louisiana, Minnesota, Missouri,
Nevada, New Jersey, New Mexico, Oklahoma, South Carolina, Tennessee and
Washington. Since the beginning of fiscal 1990, the Company has reduced its
traditional store base from 193 to 109, including four stores that remain in
the restructure group. The Company does not intend to open any additional
traditional stores in the future and will continue to reexamine and evaluate
the performance of each of its stores. The Company believes that it is
successfully transforming itself into a megastore operator based upon its
SuperSports USA megastores achieving comparable store sales growth of 3.4% and
8.6% (excluding sales from megastores converted from traditional stores during
the respective prior fiscal years) for fiscal 1994 and through the third
quarter of fiscal 1995, respectively, and making weighted average direct store
contributions of $1.0 million and $750,000 per store for fiscal 1994 and
through the third quarter of fiscal 1995, respectively.
NON-RECURRING ITEMS
Restructuring Charge
In the fourth quarter of fiscal 1993, the Company implemented a restructuring
plan to accelerate the closing of 34 underperforming traditional stores during
1994 and 1995 and recorded a $15.0 million pretax restructuring charge.
Management believed the Company would be better served by redeploying the
assets invested in these stores toward the more profitable megastore strategy,
thereby accelerating the Company's transformation into a megastore sporting
goods operator. The significant components of the charge, which the Company
expected to negatively affect future cash flows of the Company, were (i)
estimated operating losses totaling approximately $3.4 million before
depreciation, (ii) approximately $3.7 million for estimated lease termination
costs, (iii) approximately $3.1 million for markdowns related to the
liquidation of merchandise inventories and (iv) approximately $1.1 million for
severance pay and various other store closing costs. In addition, the Company
expected non-cash flow charges of approximately $3.5 million in connection with
disposition of fixed assets.
As of October 28, 1995, the Company had closed 28 of the 34 stores in the
restructure group and had removed two stores from the restructure group and
will continue to operate them as a result of successful measures taken by
management to achieve more suitable profitability for these stores. In the
first nine months of fiscal 1995, these stores as a group used cash of
approximately $3.6 million to cover losses before depreciation and
amortization. Approximately $608,000 of this amount was for lease terminations
related to stores closed through October 28, 1995. Sales from all stores
included in the restructure group were $474,000 and $7.8 million, respectively,
in the quarter and nine months ended October 28, 1995 compared to $3.5 million
and $16.5 million, respectively, in the same periods in fiscal 1994. During the
first nine months of fiscal 1995, the Company charged its restructuring reserve
$3.9 million 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.
15
<PAGE>
Management believes that the closure of the stores in the restructure group
is proceeding in accordance with expectations and that the restructure reserve
remaining at the end of the first nine months of fiscal 1995, which is
approximately $3.2 million, is adequate to provide for the costs associated
with the remaining stores in the restructure group.
Same Store Sales Results for New Stores
During the quarter ended July 31, 1993, the Company changed its method of
determining same store sales results. Previously, a store's sales had been
included in same store sales after its twelfth full month of operation. To
prevent distortions of same store sales results caused by the relatively high
sales levels associated with the grand opening promotions of its SuperSports
USA megastores, the Company has redefined same store sales to include only
those stores that have been open for a full 12 months as of the beginning of
the current fiscal year.
RESULTS OF OPERATIONS
The following table sets forth selected statements of operations data of the
Company expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------------------------
FISCAL YEAR NINE MONTHS ENDED
-------------------- -----------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
------ ------ ------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................ 64.0% 66.7% 64.9% 64.9% 64.7%
------ ------ ------ ------ ------
Gross profit.................... 36.0% 33.3% 35.1% 35.1% 35.3%
Operating expenses:
Selling and administrative
expenses....................... 36.3% 36.7% 35.5% 37.4% 36.5%
Corporate restructuring......... -- 4.9% -- -- --
Miscellaneous (income).......... (.2%) (.4%) (.9%) (1.1%) (1.0%)
------ ------ ------ ------ ------
Operating income (loss)....... (.1%) (7.9%) .5% (1.1%) (.2%)
Interest expense, net............. .2% .4% .4% .5% .7%
------ ------ ------ ------ ------
Earnings (loss) before income
taxes............................ (.4%) (8.4%) .1% (1.6%) (.9%)
Income tax (benefit).............. (.1%) (2.0%) -- -- .1%
------ ------ ------ ------ ------
Net earnings (loss)............... (.2%) (6.3%) .1% (1.7%) (1.0%)
====== ====== ====== ====== ======
</TABLE>
First Nine Months of Fiscal 1995 Compared to the First Nine Months of Fiscal
1994
Net sales for the first nine months of fiscal 1995 increased $12.9 million,
or 6.1%, compared to the same period of fiscal 1994. The increase in sales is
primarily attributable to a 49.5% increase in SuperSports USA megastore sales
over the same period in the prior year after giving consideration to the pre-
and post-conversion sales of a traditional store converted to a SuperSports USA
megastore in October 1994. The megastore sales increase was attributable to,
among other things, sales contributions from the nine new SuperSports USA
megastores opened in fiscal 1994 and fiscal 1995 and same store sales increases
in existing megastores of 8.6% (excluding sales from the megastore converted
from a traditional store in October 1994) for the first nine months of fiscal
1995. Megastore sales represented 43.4% of total retail sales during the first
nine months of fiscal 1995 compared to 28.5% in the first nine months of fiscal
1994. These megastore sales increases were partially offset by reduced sales
from the Company's traditional stores as the Company continued to close
marginally performing traditional stores. Since the end of fiscal 1993, the
Company has closed 43 traditional stores, 26 of which were a part of its
restructure group. Sales reductions attributable to all closed stores were
$16.2 million in the first nine months of fiscal 1995. Excluding sales from
stores in the restructure group, net sales increased $21.6 million, or 11.0%,
for the first nine months of fiscal 1995 compared to the first nine months of
fiscal 1994. Comparable same store sales, excluding the stores in the
restructure group, increased 5.0% in the first nine months of fiscal 1995
compared to the same period in the prior year.
16
<PAGE>
At October 28, 1995, the Company was operating 126 stores, including 17
megastores, compared to 145 stores, including 11 megastores, at the same time a
year ago. In early November 1995, the Company opened seven new megastores at
locations acquired from SportsTown, Inc., raising the total number of
megastores in operation to 24.
Gross profit, as a percentage of net sales, increased slightly to 35.3% for
the first nine months of fiscal 1995 compared to 35.1% for the same period in
fiscal 1994 as the gross profit from the SuperSports USA megastores comprised a
greater portion of total gross profit. SuperSports USA megastores, on average,
realize a higher gross profit as a percentage of net sales than the Company's
traditional stores.
Selling and administrative expenses as a percentage of sales was 36.5% in the
first nine months of fiscal 1995, compared to 37.4% for the same period in the
prior year. This improvement as a percentage of sales primarily related to (i)
increased same store sales and a corresponding overall reduction, as a
percentage of sales, in occupancy costs, (ii) an increase in the number of
SuperSports USA megastores, which enjoy lower occupancy costs relative to net
sales compared to traditional stores and (iii) an increase in the proportionate
contribution to overall Company results by its SuperSports USA megastores.
The major components of miscellaneous income for the first nine months of
fiscal 1994 and fiscal 1995 are set out in the table below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
OCTOBER 29, OCTOBER 28,
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Gain on sale of real estate and leasehold
interests....................................... $1,830 $1,550
Provision for stores closed in the normal course
of business
and write-off of other assets................... (462) (275)
License fees from foreign licensee............... 1,143 1,010
Other, net....................................... 50 (158)
------ ------
Total.......................................... $2,561 $2,127
====== ======
</TABLE>
Net interest expense for the first nine months of fiscal 1995 was $1.5
million, compared to $1.1 million for the first nine months of fiscal 1994. The
increased net interest expense is related to increased average borrowings under
the Company's credit facility and to increases in the prime and LIBOR interest
rates.
Income taxes in the first nine months of fiscal 1995 and fiscal 1994 are
related primarily to state income taxes. There was no income tax benefit in the
first nine months of fiscal 1995 or fiscal 1994 as a result of the Company's
inability to fully recognize the tax benefits of net operating losses and
future deductible temporary differences in the calculation of its tax expense
under SFAS 109. However, these amounts will be available to reduce future tax
liabilities in any years in which the Company has taxable earnings.
For the first nine months of fiscal 1995, the Company had a loss of $2.0
million before income taxes compared to a pretax loss of $3.5 million in the
first nine months of fiscal 1994. The improved results are primarily due to
increased sales volumes and reduced cost of goods sold and selling and
administrative expenses, as a percentage of net sales, as the Company continues
to increase the number of SuperSports USA megastores in operation and to
selectively close traditional stores which do not meet the Company's current
criteria for profitability.
Fiscal 1994 Compared to Fiscal 1993
Net sales for fiscal 1994 increased $3.5 million, or 1.1%, to $311.4 million
from $307.9 million in fiscal 1993, while same store sales increased 1.7%. The
increase in net sales during fiscal 1994 reflects an increase in net sales of
$29.4 million contributed by new and ongoing stores offset by lost sales of
$26.0 million in
17
<PAGE>
traditional stores closed during the year and stores remaining in the
restructure group. Net sales from the 35 stores closed during fiscal 1993 and
fiscal 1994 were $14.4 million in fiscal 1994 and $36.6 million in fiscal 1993.
Same store sales in the Company's SuperSports USA megastores, excluding sales
of two traditional stores which were converted to megastores in May 1993 and
October 1994, increased 3.4% for fiscal 1994, while total sales from all
SuperSports USA megastores open at the end of fiscal 1994 (including the four
stores excluded from the same store sales comparison) increased $31.1 million,
or 48.1%, to $95.7 million from $64.6 million for megastores open at the end of
fiscal 1993. At the end of fiscal 1994, sales from the SuperSports USA
megastores represented 31.6% of total net retail sales compared to 21.6% in the
previous year.
Gross profit as a percentage of net sales for fiscal years 1994 and 1993 was
35.1% and 33.3%, respectively. The increase in gross profit as a percentage of
net sales in fiscal 1994 was primarily due to reduced promotional markdowns
resulting from the Company's strategy to discontinue competitive pricing which
did not prove to be productive.
Selling and administrative expenses as a percentage of net sales was 35.5% in
fiscal 1994 and 36.7% for fiscal 1993. The decrease in fiscal 1994 of selling
and administrative expenses, as a percentage of net sales, was related
primarily to lower occupancy costs as a percentage of net sales, which
decreased to 8.0% in fiscal 1994 from 8.6% in fiscal 1993, and the removal of
the selling and administrative expenses, in excess of gross profit of stores in
the restructure group. The reduced rate of occupancy costs in fiscal 1994 is
largely attributable to lower occupancy costs, as a percentage of net sales, in
the SuperSports USA megastores as a group, compared to the traditional stores,
and to the Company's continued closing of higher cost, marginally performing,
traditional stores. In addition, advertising costs decreased slightly, both in
dollars spent and as a percentage of net sales to 5.0% from 5.2% in fiscal
1993, as a result of the Company conducting a less aggressive advertising
program.
The major components of miscellaneous income for fiscal 1993 and fiscal 1994
are set out in the table below:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------
1993 1994
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Gain on sale of real estate and leasehold interests...... $ 698 $1,633
Provision for stores closed in the normal course of
business
and write-off of other assets........................... (719) (543)
License fees from foreign licensees ..................... 1,303 1,418
Provision for earthquake loss............................ (500) 164
Insurance recovery....................................... -- 372
Reversal of legal settlement accrual..................... 235 --
Other, net............................................... (96) (100)
------ ------
Total.................................................. $ 921 $2,944
====== ======
</TABLE>
Net interest expense was $1.4 million in each of fiscal 1994 and fiscal 1993.
The income tax (benefit) rates for fiscal years 1994 and 1993 were 31.3% and
(24.2%), respectively. The tax rate in fiscal 1994 was related primarily to
state income taxes.
Pretax income in fiscal 1994 was $422,000 compared to a $10.7 million pretax
loss before the $15.0 million restructuring charge in fiscal 1993. The improved
results were primarily due to (i) a $6.6 million increase in gross profit
caused by both increased net sales and a decrease in the rate of cost of goods
sold as a percentage of net sales, (ii) the non-recurrence of direct store
losses of approximately $3.0 million by the stores in the restructure group and
(iii) an increase in miscellaneous income.
18
<PAGE>
Fiscal 1993 Compared to Fiscal 1992
Net sales for fiscal 1993 decreased $5.3 million, or 1.7%, to $307.9 million
from $313.3 million in fiscal 1992, while same store sales decreased 4.2% in
fiscal 1993 and increased 1.7% in fiscal 1992. In fiscal 1993, sales declined
largely as a result of lost sales in California resulting primarily from the
declining economic environment, poor snow-ski conditions and disruptions caused
by the natural disasters which occurred in the state. Sales also declined in
Florida as a result of a substantial reduction in advertising expenditures that
had been increased to combat large-format competitors during fiscal 1992. A
substantial number of the Company's Florida stores are included in the
restructure group.
Even though the Company experienced an overall same store sales decrease in
fiscal 1993, the SuperSports USA megastores experienced a same store sales
increase of 9.9%; excluding the sales of a traditional store converted to a
SuperSports USA megastore in May 1993, while total net sales from all
megastores (including two new stores) open at the end of the year increased
57.5% to $64.6 million. Same store sales from stores to be closed pursuant to
the restructure plan declined 10.9% from fiscal 1992.
Gross profit as a percentage of net sales for fiscal years 1993 and 1992 was
33.3% and 36.0%, respectively. In fiscal 1993, gross profit as a percentage of
net sales decreased primarily because of increased price reductions and
promotional markdowns. The Company aggressively pursued competitive pricing,
which did not produce sufficient sales increases to cover the increased cost of
goods sold as a percentage of net sales.
Selling and administrative expenses as a percentage of net sales was 36.7%
and 36.3% for the fiscal years 1993 and 1992, respectively. Occupancy costs as
a percentage of net sales increased to 8.6% in fiscal 1993 compared to 8.3% in
fiscal 1992. Advertising costs as a percentage of net sales was 5.2% in each of
fiscal 1993 and fiscal 1992.
The slightly increased rate of selling and administrative expenses as a
percentage of net sales in fiscal 1993 was primarily related to reduced same
store sales and the resulting effect on relatively fixed costs. However,
payroll and related taxes and benefit costs decreased .4% as a percentage of
net sales from the prior year levels. This decrease of approximately $2.1
million from fiscal 1992 levels resulted primarily from a net reduction of
sales related payrolls in existing and closed stores, offset by payrolls in new
stores.
The major components of miscellaneous income for fiscal 1992 and fiscal 1993
are set out in the table below:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------
1992 1993
----- ------
(IN
THOUSANDS)
<S> <C> <C>
Gain on sale of real estate and leasehold interests....... $ 960 $ 698
Provision for stores closed in the normal course of
business
and write-off of other assets............................ (660) (719)
License fees from foreign licensees ...................... 625 1,303
Provision for earthquake loss............................. -- (500)
Accrual for legal settlement.............................. (300) 235
Other, net................................................ (95) (96)
----- ------
Total................................................... $ 530 $ 921
===== ======
</TABLE>
Net interest expense for fiscal years 1993 and 1992 was $1.4 million and
$758,000, respectively. The increased expense in fiscal 1993 resulted from the
Company's increased average borrowing during that year compared to fiscal 1992.
The income tax (benefit) rates for fiscal years 1993 and 1992 were (24.2%)
and (40.0%), respectively. The decreased benefit rate in fiscal 1993 compared
to fiscal 1992 was the result of the Company's inability to
19
<PAGE>
fully recognize the tax benefits of net operating losses and future deductible
temporary differences in the calculation of its tax expense under SFAS 109.
However, these amounts will be available to reduce future tax liabilities in
any years in which the Company has taxable earnings.
In fiscal 1993, the Company's net loss was $19.5 million. Before income tax
benefit and the $15.0 million charge related to the Company's restructuring
plan, the Company incurred a loss of $10.7 million compared to a pretax loss of
$1.1 million in fiscal 1992. The increase in the loss before income tax benefit
and the restructuring charge was primarily attributable to a $10.2 million
decrease in gross profit, which was somewhat offset by a slight reduction in
selling and administrative expenses. The reduction of gross profit was caused
by a decline in net sales of $5.3 million in fiscal 1993 compared to fiscal
1992 and the increased rate of cost of goods sold as a percentage of net sales
in fiscal 1993 as discussed above. The Company also recorded a charge of
$500,000 to miscellaneous income for damages suffered during the California
earthquake in January 1994.
LIQUIDITY AND CAPITAL RESOURCES
In the first nine months of fiscal 1995, cash totaling $17.0 million was used
in operating activities. The primary use of cash during this period was related
to a $31.4 million increase in merchandise inventories, cash charges of $3.6
million to the Company's restructuring reserve and a $2.3 million increase in
prepaid expenses. These amounts were partially offset by increases in trade
accounts payable of $9.5 million, a $4.5 million increase in income taxes
payable, including the receipt of an income tax refund and a $3.3 million
increase in accrued liabilities.
The increase in merchandise inventories and corresponding increase in trade
accounts payable are related to inventories in the five new SuperSports USA
megastores opened during the first nine months of fiscal 1995 plus the initial
inventory buildup in the seven new megastores opened on November 4, 1995 at
locations acquired from SportsTown, Inc., in addition to normal seasonal
increases in preparation for the Christmas holiday selling season.
The increase in prepaid expenses is related to preopening costs related to
the five new SuperSports USA megastores opened during the first nine months of
fiscal 1995 and the seven megastores opened in November 1995. The increase in
accrued liabilities is primarily related to normal increases in items such as
sales and property taxes, payrolls and also to amounts received from real
estate developers in connection with new stores.
Cash totaling $15.1 million was used by investing activities, primarily for
the purchase of property, plant, and equipment, including the opening of five
SuperSports USA megastores during the first nine months of fiscal 1995 and the
purchase of seven store locations from SportsTown, Inc. on October 6, 1995 at a
cost of approximately $5.5 million.
In the third quarter of fiscal 1995, the Company received income tax refunds
of $4.1 million plus interest of $662,000 resulting from the application of net
operating loss carrybacks. Approximately $1.7 million of the tax refunds relate
to the benefit of carrying back net operating losses to periods for which the
tax rates exceeded the current 34% Federal income tax rate. Recognition of this
refund as a tax benefit in the Company's statement of operations will be
deferred until a later date, as more fully described in Note E to the
Consolidated Financial Statements.
In fiscal 1994, operating activities provided cash of $2.4 million. The
primary sources of the cash provided were pretax earnings before depreciation,
amortization and real estate gains of $4.4 million and an increase in trade
accounts payable of $12.8 million. These amounts were partially offset by a
$9.6 million increase in merchandise inventories and by $4.7 million used by
stores included in the restructure group. Investing activities used $4.0
million, primarily for the purchase of property, plant and equipment totaling
$7.9 million, offset by developer provided funds of $1.9 million in excess of
amounts applied to new store
20
<PAGE>
construction costs and by proceeds from the sale of real estate and a leasehold
interest of $1.9 million. Financing activities provided net cash of $1.8
million as a result of increased utilization of the Company's credit facility
at the end of fiscal 1994. Cash of $859,000 was used for scheduled payments of
long-term debt and the prepayment of mortgage debt in relation to a sale of
real estate.
During fiscal 1993, net cash of $4.5 million was used in operating
activities. The primary causes for the net use of cash were (i) a pretax loss
of $4.6 million before depreciation, amortization and the $15.0 million
restructuring charge and (ii) a $2.6 million decrease in accounts payable,
offset by cash provided by a reduction in merchandise inventories of $4.6
million. Cash used by investing activities was $3.0 million, which related
primarily to the net purchase of property, plant and equipment of $4.5 million
after reduction for landlord-provided construction funds of $1.6 million,
offset by proceeds of $1.3 million from the sale of real estate and leasehold
interests. Financing activities provided net cash of $2.0 million due to the
Company's utilization of its credit facility at the end of the year in the
amount of $2.0 million and the addition of a five-year mortgage note for
$855,000 in the second quarter of 1993 in connection with the purchase of real
estate where one of the Company's stores was under lease. Cash of $765,000 was
used for scheduled payments of long-term debt and the prepayment of mortgage
debt in relation to a sale of real estate.
In fiscal 1992, operating activities provided a net cash increase of $3.9
million. The primary sources of the net cash increase from operating activities
were pretax profits before depreciation and amortization of $5.0 million and a
decrease in prepaid expenses and other of $2.9 million, related primarily to
the realization of a Federal income tax refund. These items were offset by an
increase in merchandise inventories of $7.2 million reduced by a related
increase in trade accounts payable of $3.6 million. Cash used by investing
activities was $2.0 million, including net purchase of property, plant and
equipment totaling $2.9 million after reduction for landlord-provided
construction funds of $2.8 million. Financing activities used cash of $7.7
million for payment of scheduled long-term debt installments, costs associated
with the acquisition of a new revolving credit facility and prepayment of
certain long-term debt obligations.
Inventories were $129.7 million at October 28, 1995, $98.3 million at the end
of fiscal 1994, $88.7 million at the end of fiscal 1993 and $93.3 million at
the end of fiscal 1992. In fiscal 1993, as a result of the Company's efforts to
continue to improve its inventory management and in consideration of declining
sales trends, inventories were reduced. Inventory levels and trade accounts
payable increased at the end of fiscal 1994 primarily as a result of early
receipts of footwear and certain direct import categories of merchandise in
anticipation of additional promotions planned for February 1995 and as selected
categories of merchandise were increased from relatively low end-of-fiscal-1993
levels in order to improve early 1995 spring season sales compared to the prior
year.
Additions to property, plant and equipment during the first nine months of
fiscal 1995 were $15.3 million. Approximately $11.9 million was used for the
opening of five new SuperSports USA megastores and the acquisition of the seven
store locations from SportsTown, Inc., at which SuperSports USA megastores were
opened in November 1995. Approximately $2.8 million was used for computer
hardware and software and the remaining amount was used for renovation and
refurbishment of existing locations. The Company expects capital expenditures
in fiscal 1995 to be approximately $20.0 million. In connection with the
acquisition of the seven locations from SportsTown, Inc., the Company's credit
facility was amended to permit the additional capital expenditures required and
to increase the maximum level of borrowings available under the line of credit.
Subsequent to October 28, 1995, the Company entered into a $4.0 million
mortgage loan collateralized by land and a building in Houston, Texas where the
Company operates one of its SuperSports USA megastores.
Additions to property, plant and equipment in fiscal 1994, fiscal 1993 and
fiscal 1992 were $7.9 million, $4.5 million and $2.9 million, respectively. In
fiscal 1994, the Company opened three new SuperSports USA megastores and
converted an existing traditional store to a SuperSports USA megastore at a net
cost of $3.2 million over and above developer funding. In addition, the Company
spent $1.4 million to
21
<PAGE>
purchase a tract of land in Houston, Texas where it opened a SuperSports USA
megastore in 1995. In 1994, the Company began a two-year program to upgrade its
point of sale information systems. The total cost is expected to be
approximately $2.6 million, of which $2.0 million was expended through October
28, 1995. Additionally, the Company spent approximately $850,000 to upgrade its
merchandise planning and advertising systems, $860,000 for other hardware and
software and $894,000 for renovation and refurbishment of existing locations.
In fiscal 1993, the Company opened three new stores, two of which were
SuperSports USA megastores, and converted an existing traditional store to a
megastore at a net expenditure, over and above developer funding, of
approximately $1.1 million. Approximately $1.7 million was spent to renovate
and refurbish existing locations, and $953,000 was used for the purchase of
real estate where one of the Company's retail stores was under lease. Five
stores, including three new SuperSports USA megastores, were opened during
fiscal 1992, the construction of and appointments for which were substantially
funded by developers. Approximately $1.7 million was spent to renovate and
refurbish existing locations and $750,000 was used in the exercise of an
advantageous option to purchase real estate where one of the Company's stores
was under lease. Additions of approximately $687,000 in fiscal 1993 and
$450,000 in fiscal 1992 were related to the acquisition of computer hardware
and software.
The Company's policy regarding developer funding of new stores is to offset
the respective construction cost of real property improvements by any amount of
funding provided by developers. In fiscal 1994, developer funding of stores
opened exceeded the respective real property construction costs by $1.9 million
in the aggregate. This amount will be amortized over the life of the respective
leases to which they apply as a reduction of rental expense. As of October 28,
1995, the non-current portion of this developer funding is presented on the
Company's balance sheet as deferred rental allowances in the amount of $1.7
million. The remaining portion is included in accrued liabilities. In previous
years, developer funding in excess of real property construction costs has been
immaterial.
On August 31, 1992, the Company entered into an agreement providing for a
three-year, $32.5 million revolving credit facility with The CIT Group/Business
Credit, Inc. Advances under the facility are based on a borrowing base formula,
and subject to certain loan reserves. The facility is secured primarily by
inventory, accounts receivable and real estate. The credit agreement includes
various restrictions, requirements and financial covenants. The agreement was
subsequently amended several times to increase the revolving line of credit to
$55.0 million, with a further seasonal increase to $70.0 million during the
period from mid-September through mid-December each year and to extend the term
of the facility through August 1997. The Company is in compliance with all
covenants of the agreement.
The Company's primary source of liquidity in the first nine months of fiscal
1995 and the first nine months of fiscal 1994 was the Company's credit
facility. Average borrowings under the facility during such periods were $24.4
million and $14.5 million, respectively. During the first nine months of fiscal
1995, the highest amount of borrowings and outstanding letters of credit under
the facility was $39.7 million at October 23, 1995, as compared to $25.3
million at May 16, 1994, for the same period of fiscal 1994. At October 28,
1995, borrowings outstanding against the Company's credit facility were $36.5
million compared to $20.4 million at October 29, 1994. The Company had
outstanding letters of credit (used primarily to purchase certain of the
Company's imported inventory) at October 28, 1995 of $2.7 million compared to
$4.4 million at October 29, 1994.
The Company's primary source of liquidity for fiscal years 1994, 1993 and
1992 was the use of its credit facility and lines of credit, under which
average borrowings were $13.8 million, $13.8 million and $5.6 million,
respectively. In fiscal 1994 and fiscal 1992, operating activities provided
cash of $2.4 million and $3.9 million, respectively, as additional sources of
liquidity. Because of the seasonal nature of its business and the build up in
inventory for the Christmas holiday season, the amount of outstanding
borrowings and letters of credit under the Company's credit facility and lines
of credit typically is highest in November and was $43.7 million at November 6,
1995, $27.4 million at November 14, 1994, $30.5 million at November 12, 1993
and $25.7 million at November 13, 1992.
22
<PAGE>
At the end of fiscal 1994, borrowings outstanding against the Company's
credit facility were $4.6 million compared to $2.0 million at the end of fiscal
1993. There were no borrowings outstanding against the Company's credit
facilities at the end of fiscal 1992. The Company had outstanding letters of
credit totaling $2.8 million at the end of fiscal 1994, $3.4 million at the end
of fiscal 1993 and $3.1 million at the end of fiscal 1992. The Company
anticipates being able to satisfy its capital needs during the balance of
fiscal 1995 and fiscal 1996 from developer funding, the use of its credit
facility and internally generated funds.
SEASONALITY
Oshman's business is highly seasonal. Retail sales reach their peak in
December due to holiday shopping and the purchase of skiing and snowboarding
equipment. Additionally, weather conditions add to the seasonal nature of the
business and may have a significant effect, especially on sales of the
Company's snow sport equipment and cold weather apparel, particularly in its
California stores.
The following table sets forth certain unaudited financial information for
the Company for each of the quarterly periods in fiscal 1994 and fiscal 1995:
<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995
------------------------------------ --------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $66,125 $80,095 $66,472 $98,727 $69,407 $84,481 $71,739
Gross profit............ $24,611 $26,876 $23,085 $34,737 $26,139 $28,230 $25,383
Gross margin............ 37.2% 33.6% 34.7% 35.2% 37.7% 33.4% 35.4%
Operating income (loss). $ (606) $ 1,482 $(3,249) $ 4,176 $ 32 $ 1,918 $(2,492)
Operating margin........ (.9%) 1.9% (4.9%) 4.2% .1% 2.3% (3.5%)
Net income (loss)....... $ (948) $ 1,048 $(3,690) $ 3,880 $ (478) $ 1,420 $(3,141)
Net income (loss)
margin.................. (1.4%) 1.3% (5.6%) 3.9% (.7%) 1.7% (4.4%)
</TABLE>
23
<PAGE>
BUSINESS
Oshman's Sporting Goods, Inc., the sixth largest full-line sporting goods
retailer in the United States as of the end of fiscal 1994, has developed an
innovative, interactive concept in sporting goods retailing that it is
implementing through its SuperSports USA megastores. The Company is
transforming its business by focusing on opening and operating SuperSports USA
megastores occupying, on average, approximately 61,000 square feet while
rationalizing its pre-existing base of traditional stores, which average
approximately 11,000 square feet. SuperSports USA megastores offer a dominant
selection of sporting goods in a visually exciting upscale environment
featuring a variety of "play areas" that provide customers with the opportunity
to try out sporting goods merchandise. This "play-before-you-pay" approach
encourages customers, with the assistance of qualified sales personnel, to
purchase the equipment that best satisfies their particular needs and desires
while also providing an entertaining shopping experience.
SuperSports USA megastores are organized as a collection of distinctive
sporting goods specialty shops. The merchandising format and layout of each
megastore is designed to lead customers along a path through the store, in and
out of specialty shops that concentrate on specific sporting goods categories
such as in-line skating and skateboarding; skiing and snowboarding; cycling;
golf; tennis and other racquet sports; fitness and exercise equipment; hunting,
fishing, hiking and camping; and team sports such as baseball, softball,
football, basketball, hockey, soccer and volleyball. Each specialty area
merchandises sporting equipment as well as the appropriate apparel in a
department-store style. Based on the unique shopping experience it provides at
its SuperSports USA megastores, the Company intends to establish its megastores
as shopping destinations.
As of December 18, 1995, the Company operated 24 SuperSports USA megastores
and 109 traditional stores located primarily in medium to large metropolitan
areas across the United States. The Company has a significant presence in Texas
and California, as well as stores in Arizona, Arkansas, Florida, Georgia,
Hawaii, Louisiana, Minnesota, Missouri, Nevada, New Jersey, New Mexico,
Oklahoma, South Carolina, Tennessee and Washington. The Company currently
anticipates opening at least eight additional SuperSports USA megastores during
fiscal 1996. In addition, the Company currently anticipates opening at least 12
new megastores in each of fiscal 1997 and 1998. This expansion plan includes
markets where the Company does not currently have a SuperSports USA location,
such as Phoenix, Arizona; Orange County, California; Orlando, Florida; San
Antonio, Texas and Ogden/Salt Lake City, Utah. Future store openings are,
however, dependent upon numerous factors including timing of construction and
general market conditions. Since the beginning of fiscal 1990, the Company has
reduced its traditional store base from 193 to 109, including four stores that
remain in the restructure group pursuant to a restructuring plan initiated in
fiscal 1993. The Company does not intend to open any additional traditional
stores in the future and will continue to reexamine and evaluate the
performance of each of its stores.
The Company believes that it is successfully transforming itself into
primarily an operator of megastores based upon the megastores' accounting for
57.8% of the Company's total direct store contributions, excluding stores in
the restructure group. The Company believes that this percentage will continue
to increase based upon additional megastores that have already been opened and
megastores that are expected to be opened in fiscal 1996 and beyond.
The Company is a Delaware corporation with its principal executive offices
located at 2302 Maxwell Lane, Houston, Texas, 77023, where its telephone number
is (713) 928-3171.
24
<PAGE>
The following table summarizes the contributions of the Company's stores
since 1990. The table does not include (i) stores in the Company's restructure
group for fiscal 1994 or for the nine month periods ended October 29, 1994 and
October 28, 1995 or (ii) seven stores opened by the Company on November 4, 1995
at locations purchased from SportsTown, Inc. Traditional store data include
results from the Company's clearance stores and occasional off-premises sales:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
------------------------------------------------ -----------------------
OCTOBER 29, OCTOBER 28,
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Stores open at end of
period:
Megastores............ 2 2 5 8 12 11 17
Traditional stores.... 187 181 165 153 113 115 105
-------- -------- -------- -------- -------- -------- --------
Total stores........ 189 183 170 161 125 126 122
Net retail sales:
Megastores............ $ 15,470 $ 21,083 $ 41,018 $ 64,616 $ 95,711 $ 58,855 $ 95,526
Traditional stores.... 295,799 270,401 264,872 235,100 185,993 130,593 116,740
-------- -------- -------- -------- -------- -------- --------
Total net retail
sales.............. 311,269 291,484 305,890 299,716 281,704 189,448 212,266
======== ======== ======== ======== ======== ======== ========
Weighted average net
sales per store(1):
Megastores............ $ 14,594 $ 10,542 $ 11,958 $ 9,850 $ 9,970 $ 6,658 $ 7,210
Traditional stores.... 1,547 1,466 1,529 1,460 1,600 1,119 1,067
Percentage of net retail
sales:
Megastores............ 5.0% 7.2% 13.4% 21.6% 34.0% 31.1% 45.0%
Traditional stores.... 95.0% 92.8% 86.6% 78.4% 66.0% 68.9% 55.0%
Direct store
contributions(2):
Megastores............ $ 1,118 $ 1,576 $ 4,189 $ 5,577 $ 9,655 $ 5,449 $ 9,943
Traditional stores.... 24,278 19,567 19,749 10,062 14,931 8,858 7,270
-------- -------- -------- -------- -------- -------- --------
Total............... 25,396 21,143 23,938 15,639 24,586 14,307 17,213
======== ======== ======== ======== ======== ======== ========
Weighted average direct
store contribution per
store(3):
Megastores............ $ 1,055 $ 788 $ 1,221 $ 850 $ 1,006 $ 616 $ 750
Traditional stores.... 127 106 114 62 128 76 66
Percentage of total
direct store
contributions:
Megastores............ 4.4% 7.5% 17.5% 35.7% 39.3% 38.1% 57.8%
Traditional stores.... 95.6% 92.5% 82.5% 64.3% 60.7% 61.9% 42.2%
Contribution margin (4):
Megastores............ 7.2% 7.5% 10.2% 8.6% 10.1% 9.3% 10.4%
Traditional stores.... 8.2% 7.2% 7.5% 4.3% 8.0% 6.8% 6.2%
Total............... 8.2% 7.3% 7.8% 5.2% 8.7% 7.6% 8.1%
</TABLE>
- --------
(1) Net retail sales for the period divided by the weighted average number of
stores operated during the period.
(2) Direct store contributions are presented for comparative purposes and do
not include any charges for warehousing, buying or administrative expenses.
Direct store contributions include all direct revenues and expenses
incurred within the respective stores and allocated charges for
advertising, insurance, accrual of shrinkage and merchandise markdowns and
certain other expenses.
(3) Direct store contributions divided by the weighted average number of stores
operated during the period.
(4) Direct store contributions divided by net retail sales.
25
<PAGE>
INDUSTRY OVERVIEW AND COMPETITION
Retail sales of sporting goods in the United States were approximately $30
billion in 1994, according to the National Sporting Goods Association. The
retail market for sporting goods is highly fragmented with the top 100
retailers, which include department stores, specialty retailers, discount
stores and footwear retailers, as well as full-line sporting goods retailers
such as the Company, having combined sales in 1994 of approximately $20
billion, or two-thirds of total industry sales. The top ten full-line sporting
goods stores, which includes the Company, had 1994 sales of approximately $3.5
billion, which represented approximately 12% of total sporting goods retail
sales for that year.
The principal categories of sporting goods retailers are (i) megastores
(e.g., Sports Authority, Sportmart and Sports & Recreation), (ii) traditional
stores (e.g., large chains such as Herman's, Big 5 and Modell's, as well as
local independent stores and pro shops), (iii) specialty stores and catalog
merchants (e.g., Foot Locker, The Athlete's Foot and REI) and (iv) mass
merchandisers (e.g., Wal-Mart, Kmart and Sears). Megastores, as a group, have
grown faster in recent years than other types of sporting goods retailers, with
the eight largest megastore chains as a group experiencing revenue growth of
between 30% and 35% for each year from 1990 to 1994. The Company believes that
the industry will remain highly competitive, and it expects that for the
foreseeable future other megastore retailers will continue to expand
aggressively and increase their market share relative to traditional, specialty
and mass merchandise retailers.
BUSINESS STRATEGY
The following are key elements of the Company's business strategy:
Unique Megastore Concept. SuperSports USA megastores are designed to offer
customers an interactive and engaging shopping experience not available at
competing sporting goods megastores. The Company believes that it has
distinguished its SuperSports USA megastores from those of its primary
megastore competitors by offering customers the unique "play-before-you-pay"
opportunity to use sporting equipment. The Company believes that this
interactive approach enables customers to find the merchandise best suited to
their needs and desires, which, in turn, encourages them to spend more time in
the SuperSports USA megastores and to become repeat shoppers. The opportunity
for customers to entertain themselves in a variety of innovative indoor
athletic settings also encourages repeat shopping. The Company designs each of
its megastores to include at least four of the following "play areas:" adult
and youth basketball courts; baseball and softball batting cages;
electronically simulated golf courses; putting greens; tennis and racquetball
courts; treadmill-style ski slope decks; in-line skating areas; and mini-boxing
rings.
Superior Shopping Experience. The Company's SuperSports USA megastores are
designed as a series of specialty sporting goods shops brought together under
one roof, each offering high-quality merchandise in an upscale setting that
results in an overall environment similar to a major department store and
unlike the Company's warehouse-format competitors. Each specialty area is
designed to concentrate on a specific sporting goods category and present
equipment alongside apparel appropriate for that category, creating a focused
shopping experience. The merchandise in each specialty area is displayed in a
visually creative fashion, utilizing an upscale department-store-style, point-
of-purchase presentation. The layout and intended traffic flow pattern of each
SuperSports USA megastore are designed to guide customers through the entire
store along a path that introduces them to each specialty shop.
Favorable Merchandising Mix. Because of the unique specialty shop design and
upscale department-store-style merchandise presentation that is emphasized in
the SuperSports USA megastore concept, the Company believes that it sells a
greater percentage of higher-margin sportswear than its primary megastore
competitors. The Company's advertising and promotional strategy is also
designed to support this favorable merchandising mix.
Destination Shopping Locations. By providing a differentiated and
entertaining shopping experience at its megastores, the Company intends to
establish each of its SuperSports USA megastores as a shopping
26
<PAGE>
destination. As part of this strategy, the Company has sought and obtained mall
and shopping center anchor positions for a number of its megastore locations.
The ability of the SuperSports USA megastores to serve as mall anchors expands
the Company's universe of potential sites for its megastores. Anchor locations
generally afford retail tenants more favorable lease terms.
Dominant Merchandise Selection. By offering high quality, name-brand
merchandise across a broad selection of sporting goods categories, the Company
targets both enthusiasts of a particular sport and casual sporting goods
consumers. Among the approximately 1,200 name brands the Company sells are
popular and traditional lines, including Adidas, Asics, Champion, Coleman,
Columbia, Ektelon, K2, Mitre, New Balance, Nike, Nordica, Prince, Rawlings,
Reebok, Rollerblade, Rossignol, Russell Athletic, Spalding, Starter and Wilson,
as well as a number of higher-end specialty brands, such as Nishiki bicycles,
Filson and Barbour hunting apparel, G. Loomis fishing equipment, Salomon skis,
Teva footwear and Izod apparel.
Customer Service. As a part of its interactive and engaging SuperSports USA
megastore concept, Oshman's encourages its sales associates to be enthusiastic
and outgoing in assisting customers. Each specialty sporting goods shop is
staffed with knowledgeable and qualified sales personnel whose goal is to
assist customers in selecting the merchandise best suited to their needs and
desires. Sales personnel are trained to encourage customers to use the play
areas and to sample a number of products in a given category. The Company also
offers many on-site services, including full service bicycle shops providing
custom assembly and tuning, racket stringing and regripping, snow ski equipment
repair and maintenance, golf club regripping and fishing and hunting equipment
repair.
TRANSFORMATION PLAN
As reflected in the following table, the Company has reduced its total number
of stores since the beginning of fiscal 1990, and in December 1993 announced a
restructuring plan that included closing of 34 underperforming traditional
stores and redeploying its assets to its megastore transformation strategy. The
Company has since removed two stores from the restructure group and will
continue to operate these stores. As of December 18, 1995, Oshman's was
operating 133 stores, 109 of which were traditional stores and 24 of which were
SuperSports USA megastores. Changes in the number of stores and square footage
during the last five fiscal years and thus far during fiscal 1995 are
summarized below:
<TABLE>
<CAPTION>
NUMBER OF STORES SQUARE FOOTAGE (AT END OF PERIOD)
-------------------------------------------- ---------------------------------
SUPERSPORTS
TRADITIONAL USA TRADITIONAL OPERATED SUPERSPORTS
STORES MEGASTORES STORES AT YEAR TRADITIONAL USA
FISCAL YEAR OPENED OPENED CLOSED END STORES MEGASTORES TOTAL
----------- ----------- ----------- ----------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1990.................... 5 2 11 189 2,090,000 158,000 2,248,000
1991.................... 2 0 8 183 2,036,000 158,000 2,194,000
1992.................... 2 3 18 170 1,879,000 337,000 2,216,000
1993.................... 1 3(a) 13(a) 161(a) 1,744,000 504,000 2,248,000
1994.................... 0 4(a) 24(a) 141(a) 1,454,000 785,000 2,239,000
1995 (to 12/18/95)...... 0 12(b) 20 133(b) 1,196,000 1,454,000 2,650,000
--- --- ---
Total................. 10 24 94
=== === ===
</TABLE>
- --------
(a) Includes a traditional store which was expanded and converted to a
megastore.
(b) Includes megastores opened at seven locations purchased from SportsTown,
Inc.
The Company intends to continue to open additional SuperSports USA megastores
in both its existing and new markets and currently anticipates opening at least
eight additional megastores during fiscal 1996. In addition, the Company
currently anticipates opening at least 12 new megastores in each of fiscal 1997
and 1998. Future store openings are, however, dependent upon numerous factors
including timing of construction
27
<PAGE>
and general market conditions. Since the beginning of fiscal 1990, the Company
has reduced its traditional store base from 193 to 109, including four stores
that remain in the restructure group. The Company does not intend to open any
additional traditional stores in the future and will continue to reexamine and
evaluate the performance of each of its stores.
SITE SELECTION
The Company subjects each potential new store location to extensive analysis
and evaluation, using its in-house staff to work with local real estate
developers and brokers. Sites are selected primarily based on the Company's
evaluation of the potential financial return on its investment, taking into
account internally prepared sales projections, estimated gross margins and
store operating expenses as compared to required capital expenditures and
inventory investments. The Company also utilizes demographic, geographic and
competitive analyses in arriving at its estimates for sales and gross margin.
Oshman's seeks to locate stores in areas that are experiencing growth in
population and have high concentrations of white collar workers with growing
families and sufficient financial resources and disposable income to devote
significant spending to leisure and sporting activities. Seven of the Company's
existing megastores serve as anchors for regional shopping malls and shopping
centers. The Company intends to continue to pursue locations that offer this
desirable marquee status and the associated benefits.
Although the Company realizes certain economies of scale in warehousing,
distribution and advertising through the "clustering" of several stores in one
market (most notably in the Dallas/Fort Worth, Houston and Los Angeles areas),
it has also taken advantage of opportunities to successfully open and
profitably maintain single SuperSports USA megastores in certain markets (e.g.,
Greenville, South Carolina and Mall of America in Minneapolis, Minnesota) and
intends to continue to pursue this flexible strategy.
The Company traditionally has obtained new store locations through long-term
operating leases negotiated with developers. On a lease basis, the investment
by the Company required to open a new SuperSports USA megastore consists
primarily of the investment in inventory, the cost of preparing the premises
for occupancy and pre-opening expenses, such as the costs associated with
training employees and stocking the store. Inventory for a new megastore is
estimated at approximately $2.5 million, at cost, or approximately $1.5 million
net of vendor accounts payable. The cost of preparing the premises for
occupancy is frequently partly or wholly financed by the owner or developer of
the new location. In general, the net cost to the Company of preparing the
premises for occupancy by a megastore averages approximately $600,000. Pre-
opening costs of megastores are generally deferred and amortized over a one-
year period subsequent to the opening and typically average approximately
$300,000 per megastore.
From time to time, the Company is presented with opportunities to purchase
stores or locations from other sporting goods retailers. In October 1995, the
Company purchased seven locations from SportsTown, Inc. and opened SuperSports
USA megastores at these locations in November 1995 following renovation and
partial reconfiguration efforts. The Company intends to complete its
reconfiguration of these stores during fiscal 1996.
SUPERSPORTS USA MEGASTORES
The Company's SuperSports USA megastores range from approximately 40,000 to
85,000 square feet and are located both in shopping malls and shopping centers
and as free-standing locations in high traffic, high-visibility retail areas.
SuperSports USA megastores offer a dominant selection of sporting goods in a
visually exciting upscale store environment designed to offer customers an
interactive and engaging shopping experience not available at competing
megastores. The Company believes that it has differentiated its SuperSports USA
megastores from competing sporting goods megastores by offering customers the
unique "play-before-you-pay" opportunity to use sporting equipment and
entertain themselves in a variety of interactive indoor athletic settings. To
implement this retailer-based entertainment concept, the Company designs each
of its megastores to include at least four of the following "play areas:" adult
and youth basketball
28
<PAGE>
courts; baseball and softball batting cages; electronically simulated golf
courses; putting greens; tennis and racquetball courts; treadmill-style ski
slope decks; in-line skating areas; and mini-boxing rings. Customers are
encouraged to try out the equipment and to spend more time shopping than they
otherwise would.
SuperSports USA megastores are organized as a collection of distinctive
sporting goods specialty shops brought together under one roof, each offering
high-quality merchandise in an upscale setting that results in an overall
environment similar to a major department store and unlike the Company's
primary megastore competitors. Each specialty area is designed to concentrate
on a specific sporting goods category and present equipment alongside the
sporting apparel appropriate for that category. The layout and intended traffic
pattern of each SuperSports USA megastore is designed to guide customers
through the entire store along a path that introduces them to each specialty
shop. The Company intends to establish its megastores as shopping destinations
through the unique shopping experience it provides at its SuperSports USA
megastores.
The seven megastore locations the Company recently purchased from SportsTown,
Inc., were renovated, partially reconfigured, furnished and opened as
SuperSports USA megastores on November 4, 1995 to take advantage of the 1995
holiday shopping season. Because these seven locations do not currently contain
play areas like the Company's other megastores, the Company intends to
undertake additional renovations in fiscal 1996 in order to fully implement its
SuperSports USA megastore concept in these stores.
Approximately 83% of the gross square feet of each SuperSports USA megastore
is dedicated to retail selling space, of which approximately 6% to 9% is
devoted to play areas, with the remaining 17% being used for merchandise
receiving and storage and office space. A typical megastore has a general
manager, three assistant managers and five to seven area managers. Each
megastore also has a full-time visual display manager who oversees all
merchandising and point-of-purchase elements of the store. Each store general
manager reports to one of the Company's eight regional managers.
29
<PAGE>
The following table summarizes certain information concerning each of the 24
SuperSports USA megastores that are currently operating, as well as four
additional megastore locations for which the Company has signed leases and at
which it expects to open SuperSports USA megastores in fiscal 1996. There can
be no assurance that store openings will not be delayed depending on the timing
of construction and other factors.
SUPERSPORTS USA MEGASTORES
<TABLE>
<CAPTION>
LOCATION OPENING DATE TYPE SQUARE FOOTAGE
- -------- ------------ ---- --------------
<S> <C> <C> <C>
1. Houston, TX........ March 1990 Free Standing 78,472
2. Austin, TX......... November 1990 Shopping Center (3) 80,000
3. Albuquerque, NM.... May 1992 Shopping Center (3) 50,000
4. Minneapolis, MN.... August 1992 Shopping Center (3) 73,714
5. San Diego, CA...... November 1992 Shopping Center (3) 55,000
6. Dallas, TX......... May 1993 Shopping Center 41,384
7. Arlington, TX...... August 1993 Shopping Center 65,520
8. St. Louis, MO...... September 1993 Shopping Center 59,814
9. Houston, TX........ May 1994 Shopping Center 67,333
10. Milpitas, CA....... September 1994 Shopping Center (3) 85,000
11. Houston, TX........ October 1994 Shopping Center 68,068
12. Fort Worth, TX..... November 1994 Shopping Center 61,193
13. Houston, TX........ April 1995 Shopping Center 55,000
14. Seattle, WA........ August 1995 Shopping Center (3) 75,915
15. Houston, TX (1).... September 1995 Free Standing 69,057
16. Palm Desert, CA.... September 1995 Shopping Center 49,980
17. Greenville, SC..... October 1995 Shopping Center (3) 75,172
18. Dallas, TX (2)..... November 1995 Shopping Center 56,626
19. Dallas, TX (2)..... November 1995 Shopping Center 39,996
20. Dallas, TX (2)..... November 1995 Free Standing 47,054
21. Dallas, TX (2)..... November 1995 Free Standing 50,000
22. Dallas, TX (2)..... November 1995 Shopping Center 49,944
23. Dallas, TX (2)..... November 1995 Shopping Center 50,000
24. Tulsa, OK (2)...... November 1995 Shopping Center 50,000
Phoenix, AZ........... Expected fiscal 1996 Shopping Center 62,500
Dallas, TX............ Expected fiscal 1996 Shopping Center 55,000
Houston, TX........... Expected fiscal 1996 Shopping Center 55,000
San Antonio, TX....... Expected fiscal 1996 Free Standing 65,000
</TABLE>
- --------
(1) Company-owned store.
(2) Leases acquired from SportsTown, Inc.
(3) Mall or shopping center anchor.
30
<PAGE>
TRADITIONAL STORES
The Company's traditional stores range in size from 3,600 to 32,000 square
feet, with an average of approximately 11,000 square feet. These stores offer
high quality, name-brand merchandise similar to SuperSports USA megastores but
focus on a less broad selection of sporting goods categories while still
retaining as deep an assortment as space constraints will allow. Due to space
constraints, the merchandise mix is more heavily weighted toward sporting goods
equipment. The stores are located in a variety of environments, including major
regional or suburban shopping centers, shopping malls and as free-standing
locations in suburban shopping districts. Substantially all of the traditional
stores occupy leased space in modern structures, with the leases expiring at
various dates from 1995 to 2017 (exclusive of renewal options). The Company
owns two of its traditional stores.
The following table summarizes geographic locations of the Company's
traditional stores that were operating as of December 15, 1995:
TRADITIONAL STORES
<TABLE>
<CAPTION>
NUMBER
LOCATION OF STORES
-------- ---------
<S> <C>
Texas:
Dallas/Fort Worth............................................. 10
Houston....................................................... 9
San Antonio................................................... 5
Austin........................................................ 1
Other cities.................................................. 11
---
Texas subtotal.............................................. 36
California:
Los Angeles................................................... 31
San Francisco/Bay Area........................................ 5
Other cities.................................................. 7
---
California subtotal......................................... 43
Other states:
Arizona....................................................... 5
Florida....................................................... 5
Louisiana..................................................... 5
Hawaii........................................................ 4
New Mexico.................................................... 4
Nevada........................................................ 2
Arkansas...................................................... 1
Georgia....................................................... 1
New Jersey.................................................... 1
Oklahoma...................................................... 1
Tennessee..................................................... 1
---
Other states subtotal....................................... 30
---
Total..................................................... 109
===
</TABLE>
Included in the Company's traditional stores are three clearance stores, two
in Houston and one in Los Angeles, which sell slow-moving and discontinued
merchandise at substantial discounts. The four traditional stores located in
Hawaii are operated under the name "Honsport."
31
<PAGE>
MERCHANDISING
The Company's merchandising strategy focuses on offering high quality, name-
brand merchandise across a broad selection of sporting goods categories,
targeting both sports enthusiasts and casual sporting goods customers. The
Company believes that it offers a broader selection of merchandise than is
generally available elsewhere, including other large format sporting goods
retailers. Each megastore offers approximately 100,000 active SKUs (stock
keeping units) across more than 1,200 merchandise classes, while traditional
stores offer approximately 50,000 active SKUs and approximately 900 merchandise
categories.
Each of the Company's stores has the ability to customize its merchandise
selection based on local customer interest and demand as well as the seasonal
needs of the market. This customization is accomplished by recognizing
differences related to the region and market in which a store is located, as
well as by recognizing subtle differences in the demographic characteristics of
the surrounding communities. Each SuperSports USA megastore manager is given a
discretionary budget to be used to purchase locally selected merchandise, such
as items relating to local sports teams, and to conduct local promotional
activities, such as sponsorship of local sporting events.
Oshman's offers a full line of sporting goods equipment, sportswear and
athletic footwear focusing on middle to high-end products. Nationally
advertised brand name products are featured, along with the Company's own
labels in certain categories. While certain of the Company's primary megastore
competitors employ "every-day-low-price" strategies, the Company is a
promotional retailer. As such, the Company seeks to drive traffic into its
stores through advertised price reductions on selected merchandise, while
maintaining full markups on other merchandise.
The following table sets forth the approximate percentage of sales
attributable to apparel, footwear and sporting equipment for the periods
presented:
<TABLE>
<CAPTION>
PERCENTAGE OF NET RETAIL SALES
--------------------------------------------
FISCAL YEAR NINE MONTHS ENDED
------------------- -----------------------
OCTOBER 29, OCTOBER 28,
MERCHANDISE GROUP 1992 1993 1994 1994 1995
----------------- ----- ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sporting apparel............. 32.5% 30.5% 29.2% 26.5% 26.2%
Athletic footwear............ 16.8 17.1 18.8 20.6 24.1
Sporting equipment........... 50.7 52.4 52.0 52.9 49.7
----- ----- ----- ----- -----
Total...................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
Sales of sporting goods apparel generally yield higher profit margins to the
Company than sales of sporting goods equipment and footwear. The Company
believes that a higher percentage of its total net sales are derived from
apparel as compared to its primary competitors. The Company attributes this
advantage to superior soft goods merchandising and presentation as well as the
SuperSports USA megastore retail concept. The advantage is enhanced by the
Company's focused advertising and promotional activities.
SuperSports USA Megastores
Presented within each SuperSports USA megastore are the following merchandise
categories and specialty sporting goods shops:
Athletic and Active Apparel. The Company carries general active and leisure
apparel, as well as apparel designed for specific sports and activities in a
broad range of styles and sizes. Apparel is displayed in a visually exciting
manner in professionally designed display areas. Athletic attire geared toward
a specific sport is generally displayed alongside equipment relating to that
sport. In addition, certain megastores contain selected vendor-specific
specialty shops featuring a broad selection of clothing from a single
manufacturer, such as the "Nike Shop." Brands carried by the SuperSports USA
megastores include Adidas, Champion,
32
<PAGE>
Columbia, Marika, Gilda Marx, Nike, Quiksilver, Reebok, Russell Athletic, Side-
Out, Speedo and Weekend Exercise as well as certain upscale brands such as
Izod, Liz Claiborne and Royal Robbins. Megastores also carry a complete line of
licensed products including T-shirts, sweatshirts, jackets, uniforms and other
apparel featuring the logos and colors of prominent college and professional
sports teams. Brands stocked by the Company include Champion, Logo Athletic,
Nutmeg, ProPlayer, Russell Athletic, Sports Specialties and Starter.
Active and Outdoor Footwear. Each SuperSports USA megastore carries a wide
selection of footwear for both the casual consumer and the serious sports
enthusiast. Footwear is available for a variety of activities, including
aerobics, basketball, baseball, golf, walking, running, cycling, tennis and
hiking. A typical SuperSports USA megastore carries more than 700 styles of
footwear. Footwear is sold in a full-service environment. Unlike in a typical
warehouse-format megastore, trained personnel are available to assist and
advise customers as to sizes, styles and characteristics of shoes and to
retrieve customers' selections from inventory located off of the sales floor.
Brands carried by the Company include Adidas, Asics, Avia, Fila, K-Swiss, New
Balance, Nike, Reebok, Saucony and Teva.
In-line Skating and Skateboarding. Each of the SuperSports USA megastores
carries a selection of in-line skates and skateboards, in a variety of styles
and price ranges, as well as accessories, clothing and protective gear. Store
personnel assist each customer in selecting the correct size and style. In
addition, megastores offer parts and service for equipment in this specialty
sporting goods area. Several of the megastores have a specially designed
skating floor on which customers can try out new skates before they buy them.
Brands carried by the megastores include Canstar/Bauer, Easton, Hyper,
Kryptonics, K2, Mission, Nash, Rollerblade and Scott.
Skiing and Snowboarding. Each SuperSports USA megastore stocks a full line of
snow skis, snowboards, boots, bindings, poles and accessories, as well as
skiing and cold weather apparel and footwear. This specialty shop is a full-
service ski shop where trained staff assist each customer in selecting the skis
or snowboard best-suited to the customer's preferences and level of expertise,
fit the customer with appropriate ski boots and select, install and adjust ski
bindings. A wide selection of ski apparel is also featured and, in some stores,
qualified instructors are available to give lessons on this specialty shop's
play area, a treadmill-style ski slope deck. Brands carried by the megastores
include Columbia, Johns, K2, Marker, Nordica, Rossignol, Salomon, Scott and
Smith.
Cycling. Each megastore contains a full-service bicycle shop selling a broad
range of bicycles, including mountain bikes, street racing bikes, BMX bikes,
hybrids and tandem bicycles. In addition, the megastores carry a wide array of
replacement parts, clothing and accessories, such as gloves, helmets and water
bottles. Knowledgeable sales staff assist customers in selecting bicycles,
parts and equipment from a wide selection of brands and price ranges. Similar
to a specialty bicycle shop, the megastore staff will not only repair and tune
bicycles, but will also build to order a bicycle comprised of components from a
variety of top manufacturers. Brands stocked by the megastores include Bell,
Fuji, Nishiki and Specialized.
Golf. SuperSports USA megastores carry a wide variety of golf equipment,
including clubs, bags, balls, clothing, shoes and other accessories.
Knowledgeable personnel are trained to offer expert advice to shoppers and
provide services such as regripping golf clubs, all in the atmosphere of a
full-service, full selection pro-shop. Many of the megastores include putting
greens and computerized simulated golf courses on which customers can try out
equipment before purchase. Brands carried include Footjoy, MacGregor, Maxfli,
Mizuno, Ram, Spalding, Titleist, Wilson and Zebra.
Tennis and Other Racquet Sports. Each megastore carries a wide selection of
tennis racquets, shoes and apparel as well as equipment for other racquet
sports such as racquetball and squash. In addition, each store offers a full
service racquet-stringing and regripping service. Many stores offer a play area
that features an indoor court in which customers can play with a racquet before
buying it. Brands carried by the stores include Dunlop, Head, Prince, Wilson
and Yonex.
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<PAGE>
Fitness and Exercise Equipment. SuperSports USA megastores carry a full range
of fitness machines and equipment, including stationary bicycles, home gyms,
weight benches, treadmills, stair climbers, rowing machines and a wide
selection of weightlifting machines and free weights. SuperSports USA
megastores also offer home delivery and installation of exercise equipment.
Some of the megastores feature a play area consisting of a mini-boxing ring
featuring a heavy bag, speed bag and other exercise equipment. Brands carried
by the stores include Bollinger, CSA, Fitness Quest, Healthrider, Impex, Pro-
Form, Tunturi and Weslo.
Hunting, Fishing, Hiking and Camping. SuperSports USA megastores carry a wide
array of merchandise in these activities, including clothing, footwear and
equipment such as tents, backpacks, sleeping bags, lanterns, flashlights,
coolers, fishing tackle, tackle boxes, rods and reels, fishing line, scopes,
binoculars, archery equipment, firearms and accessories. Brands include Alpine,
Berkley, Coleman, Columbia, Fenwick, Garcia, Igloo, Kelty, Lowrance, Shimano
and Zebco, as well as such upscale brands as Timberland hiking footwear, G.
Loomis fishing equipment, Filson and Barbour hunting apparel and Zeiss and
Nikon binoculars.
Water Sports. Water sports and marine merchandise includes an array of
merchandise for boating and water sports such as swimming, water skiing, jet
skiing and snorkeling. The selection includes water skis, boogie boards,
wetsuits, fins, masks, canoes and life vests. The megastores carry popular
brands such as Body Glove, Connelly, HO, O'Brien and Voit, as well as upscale
brands such as Dacor and U.S. Divers.
Team Sports including Baseball, Softball, Football, Basketball, Ice and
Street Hockey, Soccer and Volleyball. SuperSports USA megastores carry a wide
selection of team sports equipment, including balls, bats, gloves, sticks and
protective clothing, as well as equipment such as basketball backboards and
volleyball nets. Several of the stores contain play areas such as batting cages
featuring computerized simulations of major league baseball pitchers and adult
and youth basketball courts, where customers can use the equipment with the
advice of Oshman's sales staff. Brands stocked include Brine, Easton, Hillerich
& Bradsby, Huffy, Mitre, Mizuno, Porter, Rawlings, Spalding, Wilson and Worth.
General Merchandise. In addition to goods available in its individual
specialty shops, each SuperSports USA megastore carries a wide selection of
general merchandise to complement sport specific merchandise. This includes
licensed team novelties such as pennants and posters, as well as items such as
books, videos, picture frames, watches and sunglasses.
Traditional Stores
The Company's traditional stores offer high quality, name-brand merchandise
like SuperSports USA megastores but focus on a less broad selection of sporting
goods categories while still retaining as deep an assortment as space
constraints will allow. Due to these constraints the merchandise mix is more
heavily weighted toward sporting goods equipment. Traditional stores do not
contain play areas or provide certain of the specialized services offered by
the SuperSports USA megastores.
CUSTOMER SERVICE
In each area within a SuperSports USA megastore, the Company employs
individuals who are knowledgeable with respect to the sporting goods sold
there. In addition, to create a specialty store atmosphere in each area of a
megastore, the Company actively seeks to employ individuals with an affinity
for specific sports. The Company encourages employee enthusiasm and engagement
of the customer in its customer service training. It issues periodic bulletins
and encourages store personnel to attend training seminars presented by the
Company's vendors and the Company, which keep personnel apprised of recent
developments in sporting goods products. Sales staff are also encouraged to
participate in Company sponsored clinics and demonstrations to gain first-hand
product knowledge.
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<PAGE>
As a customer enters a specialty shop, store personnel are encouraged to
greet the customer and use their expertise to assist in identifying and
locating a product that the customer wishes to try. Sales staff then encourage
the customer to use the product in that shop's play area, while the staff
member offers advice and suggestions as to proper usage or product
alternatives. To reinforce SuperSports USA megastores' status as shopping
destinations, enhance the shopping experience and encourage customers to remain
in the megastores longer than they otherwise would, sales staff are trained to
promote the play areas for their entertainment value alone. In addition, the
Company offers many on-site services including: full-service bicycle shops
providing custom assembly and tuning; racket stringing and regripping; snow ski
equipment service and maintenance; golf club regripping; set-up and home
delivery of fitness equipment; and fishing and hunting equipment repair.
While the Company seeks to employ a similar caliber of individuals in its
traditional stores and to offer similar training to such individuals, many of
the specialty shop services available in the SuperSports USA megastores are not
available in the traditional stores.
The Company employs various means for evaluating customer satisfaction
including a mystery shopper program and customer surveys which evaluate store
personnel and store operations based on criteria that the Company considers
important components of its customer service strategy. Customer service
assessments are an important part of store personnel performance evaluations.
PURCHASING AND SUPPLIERS
The Company purchases its merchandise directly from a diverse group of
leading domestic and international suppliers, and achieves significant
efficiencies through large quantity purchases. The Company's largest supplier,
Nike, accounted for 10.4%, 9.0% and 6.0% of the Company's total purchases in
fiscal 1994, 1993 and 1992, respectively. No other supplier accounted for more
than 10% of the Company's purchases in any of the last three years. The
Company's top ten suppliers during the 1994 fiscal year were Asics, Authentic
Fitness/Speedo, Canstar/Bauer, Columbia Sportswear, Nike, Reebok, Rollerblade,
Russell Athletic, Weslo/ProForm and Wilson Sporting Goods.
The buying staff reviews and selects an appropriate merchandise assortment
for the Company's target customer from the product offerings available through
a wide variety of sporting goods vendors. In purchasing merchandise, the buyers
develop plans that consider merchandising, inventory levels, gross margin
levels, timing of purchases and retail pricing to optimize store profitability.
Oshman's buyers regularly meet with key representatives of each of the
Company's major vendors and attend a variety of sporting goods industry trade
shows in order to stay abreast of sporting goods trends, new products, new
technologies and current pricing levels. The Company's central purchasing
department also maintains regular contact with store personnel in an effort to
assess customer needs and opinions. In addition, Oshman's officers strive to
build and maintain strong vendor relationships by meeting regularly with key
executives of the Company's vendors.
DISTRIBUTION AND WAREHOUSING
The Company utilizes a centralized distribution system in which it operates
three distribution centers. Two are located in Houston, Texas, and the other is
located in Santa Ana, California. Approximately 90% of the Company's inventory
is shipped through these distribution centers. Management believes that its
distribution system provides the following benefits: (i) optimized individual
store inventory investment; (ii) enhanced ability to quickly satisfy stores'
inventory needs; (iii) efficient use of store retail space; and (iv) ease of
merchandise returns to vendors. However, for certain items which the Company
believes require more rapid delivery to stores because of higher product
turnover or other conditions, the Company uses direct delivery from vendors.
Substantially all of the merchandise distributed to Texas, Louisiana, New
Mexico, Oklahoma and locations east of the Mississippi flows through the
Company's distribution centers located in
35
<PAGE>
Houston, Texas. The Company's distribution center in Santa Ana, California is
responsible for distributing substantially all of the merchandise to the
Company's stores in California, Arizona, Hawaii, Nevada and Washington.
Vendors ship products to the distribution centers, where the merchandise is
inspected, verified against the original purchase order, ticketed and
repackaged for shipment to individual stores. The Company often uses its own
trucks to deliver merchandise to stores located in the same metropolitan areas
as its distribution centers and contracts with a common carrier in each region
to ship the products to stores outside of those metropolitan areas.
MERCHANDISE PLANNING AND INFORMATION SYSTEMS
The Company installed the first phase of a new merchandise planning system in
late fiscal 1994 to facilitate merchandise budgeting and forecasting. The
second phase of the installation was completed in fiscal 1995 allowing desk top
access to performance statistics by store location. Point of sale terminals in
all of the Company's SuperSports USA megastores and 92 of its 109 traditional
stores were upgraded during fiscal 1995, resulting in quicker credit
verification, greater SKU capacity and faster communications with the Company's
corporate offices.
A distribution team separate from the buying staff is charged with managing
overall store and department inventory levels, inventory turnover by store and
allocations of new merchandise receipts. Buyers develop seasonal assortment
plans for each store location, based upon expected sales volume and regional
customer preferences. Automatic replenishment systems are in place to maintain
stocks of basic inventory items, generating shipments from the warehouses on a
regular basis.
The Company is currently in the process of implementing an Electronic Data
Interchange (EDI) system in its stores and warehouses. At present, the system
is to be used solely for the transmission of purchase orders to selected
vendors, but in the future the Company anticipates utilizing EDI to connect
directly with certain vendors for vendor-managed quick response inventory
control. The Company believes that this system of electronically ordering and
replenishing inventory is a developing trend in its industry and will be
required by major suppliers in order to obtain the most favorable pricing and
delivery schedule.
ADVERTISING AND PROMOTION
Oshman's comprehensive advertising program focuses on extensive newspaper
advertising. Advertising is increased during key shopping periods such as
Father's Day, Back-to-School and the Christmas holiday season, as well as
during the Company's Once-a-Year sale in May and anniversary sale in October.
Recently, the Company has launched a major television advertising campaign in
selected markets for the 1995 Christmas holiday shopping season. The Company's
advertising program is administered by its in-house advertising staff with
support from outside advertising agencies.
The Company advertises in major metropolitan newspapers as well as regional
newspapers circulated in areas surrounding Oshman's locations. Advertisements
typically consist of weekly four and eight page color inserts in local
newspapers. In the last year, the Company has begun using photography in its
advertising rather than the line drawings it had utilized previously. The
Company receives substantial vendor cooperative advertising reimbursements.
Oshman's also sponsors numerous athletic tournaments and special events, such
as sports clinics in the stores' play areas, special instructions on specific
sporting activities and celebrity appearances, in an effort to attract
customers to its stores.
LICENSING ARRANGEMENT AND INSTITUTIONAL SALES
Since 1983 the Company has had a licensing agreement and consulting
arrangement with a major Japanese retailer, Ito-Yokado Co., Ltd., that
currently operates four stores in Japan under the Oshman's
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<PAGE>
name. The Company also sells merchandise to this entity. The Company also sells
sporting goods and equipment to certain institutional customers, including
scholastic, industrial and amateur sports teams. In fiscal 1994, institutional
sales accounted for 3.0% of net sales.
PROPERTIES
Oshman's 79,000 square foot general and executive offices are leased by the
Company and located in Houston, Texas. See "Certain Transactions." A Houston
warehouse and distribution center occupies approximately 257,000 square feet of
leased space in the same building complex and the Company also rents an
office/warehouse in Santa Ana, California, in which approximately 7,000 square
feet are devoted to office space and 151,000 square feet are used as warehouse
space. In addition, the Company owns an 83,000 square foot warehouse on six
acres of land in Houston, Texas. Oshman's owns other properties in San Antonio,
Texas, Los Angeles and Millbrae, California and Houston, Texas. Each of the
properties owned by the Company are subject to mortgage liens of certain of the
Company's lenders, including CIT.
Substantially all of Oshman's retail stores occupy leased space in modern
structures. As of December 18, 1995, these retail stores occupied an aggregate
of approximately 2,551,000 square feet of floor space under leases expiring at
various dates from 1995 to 2017 (exclusive of renewal options). Traditional
stores on average are comprised of approximately 11,000 square feet, while the
average megastore occupies approximately 61,000 square feet. The two
traditional stores and one megastore in locations owned by Oshman's aggregate
approximately 99,000 square feet of floor space.
Aggregate rentals paid by the Company under all its leases amounted to
approximately $15.6 million during the 1994 fiscal year. Most store leases
provide for rentals which are the greater of a fixed minimum or a specified
percentage of sales. Oshman's owns the fixtures in its retail stores and
considers all property owned or leased to be well maintained, adequately
insured and suitable for its purposes.
TRADEMARKS AND SERVICE MARKS
As of December 18, 1995, Oshman's owned approximately 35 trademarks and
service marks that were employed in its advertising and operations. The Company
has registered the "Oshman's" and "SuperSports USA" trademarks. The Company
believes that its marks are, in the aggregate, materially important in its
business and that the "Oshman's" and "SuperSports USA" marks are individually
material. The Company anticipates that it will continue to own each of its
trademarks and service marks for so long as it finds it beneficial to use them
in connection with its operations.
LEGAL PROCEEDINGS AND INSURANCE
The Company is subject to certain pending legal proceedings, most of which
are ordinary and routine litigation incidental to its business. None of such
legal proceedings, in the opinion of the Company, is material to its business
or financial condition. The Company maintains liability insurance coverage that
it believes to be customary in the sporting goods retailing industry and
sufficient to cover risks arising in the ordinary course of its business.
EMPLOYEES
At December 9, 1995, the Company had approximately 2,400 full-time and 2,100
part-time employees. Approximately 200 of its employees at such date were
seasonal employees, hired in connection with the Christmas holiday season. None
of the Company's employees is represented by a labor union. The Company
considers its relations with employees to be good.
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<PAGE>
MANAGEMENT
The following table sets forth the name and age of each executive officer and
Director of the Company and all positions and offices with the Company held by
each person named:
<TABLE>
<CAPTION>
NAME AGE POSITIONS AND OFFICES HELD
---- --- --------------------------
<S> <C> <C>
Alvin N. Lubetkin(1)............ 62 Vice Chairman of the Board, Chief Executive
Officer and Director
Marilyn Oshman(1)............... 56 Chairman of the Board and Director
William N. Anderson(1).......... 48 President, Chief Operating Officer and
Director
Lindsay J. Rice................. 41 Executive Vice President
Richard L. Bockart.............. 61 Vice President, Treasurer and Secretary
A. Lynn Boerner................. 55 Vice President and Chief Accounting Officer
Will A. Clark................... 49 Vice President
Richard G. Dennis............... 43 Vice President, Assistant Secretary and
General Counsel
Steven U. Rath.................. 40 Vice President
Morrie K. Abramson(2)........... 61 Director
Marvin Aronowitz(1)............. 71 Director
Fred M. Gerson(2)............... 57 Director
Dolph B. H. Simon(2)............ 62 Director
</TABLE>
- --------
(1) Member of Executive Committee
(2)Member of Compensation Committee and Audit Committee
Mr. Lubetkin has been an officer of the Company since 1966 and a Director
since 1962. Mr. Lubetkin, in addition to having overall responsibility for the
Company's operations, is primarily responsible for finance, real estate, store
operations and corporate development for the Company. He was originally hired
by the Company in 1961.
Ms. Oshman was elected Chairman of the Board in April 1993 and has been a
Director of the Company since 1979. She has been employed by the Company since
1990.
Mr. Anderson was elected President, Chief Operating Officer and Director in
June 1994. Mr. Anderson shares certain executive responsibilities with Mr.
Lubetkin and is primarily responsible for merchandising, advertising, human
resources and management information systems at the Company. Prior to June
1994, Mr. Anderson served as Senior Vice President and General Manager of Ames
Department Stores, Inc., from 1992 to 1994, Chief Executive Officer of Reality
Technologies, Ltd., a computer software developer in the financial
planning/services sector, from 1991 until 1992, and President and Chief
Operating Officer of Domain, Inc., a specialty home furnishings retailer from
1985 to 1991.
Mr. Rice was elected Executive Vice President in March 1991, and he oversees
all merchandising activities of the Company. Prior to that time, he served as
California Division Vice President from 1988 until 1991 and Divisional
Merchandise Manager from 1986 through 1988.
Mr. Bockart was elected Treasurer of the Company in June 1990. He has been a
Vice President and Secretary of the Company since 1969. He is responsible for
treasury operations and various administrative functions at the Company.
Mr. Boerner has been an officer of the Company since 1984 and was elected
Vice President in 1988. He is the Company's principal accounting officer. He
was hired by the Company in 1971.
Mr. Clark became Vice President of the Company in 1992. He is primarily
responsible for store operations. Prior to becoming Vice President, Mr. Clark
served as a Divisional Vice President in the warehousing and human resource
functions from 1990 until 1992 and in store operations from 1989 to 1990.
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<PAGE>
Mr. Dennis was elected Vice President in June 1994. Mr. Dennis has also
served as General Counsel of the Company since 1993. Prior to that, he was
employed as Managing Attorney, Banc One New Hampshire Asset Management Company
from 1992 to 1993 and Associate Attorney, Weil, Gotshal & Manges from 1986
until 1992.
Mr. Rath was elected as a Vice President of the Company in 1992. He is
primarily responsible for the real estate functions of the Company, both with
respect to new store development and the restructuring of the traditional store
operations. Prior to becoming a Vice President of the Company, Mr. Rath served
as a Divisional Vice President for Corporate Development from 1990 to 1992, and
Director of Corporate Development from 1988 to 1989.
Mr. Abramson was elected as a Director of the Company in 1995. He is
currently Chairman of the Board and Chief Executive Officer of Kent Electronics
Corporation, a manufacturer of electronic components.
Mr. Aronowitz has served as a Director of the Company since 1962. He also
served as President and Chief Operating Officer of the Company until June,
1989, at which time he resigned as an officer and Mr. Lubetkin was elected
President. Mr. Aronowitz remains an employee of the Company and was originally
hired by the Company in 1945. He is a cousin of Marilyn Oshman.
Mr. Gerson has served as a Director of the Company since 1962. He currently
manages his personal investments and from 1982 to 1992 he was Chairman of the
Board of Gerson Brothers, Incorporated, an office supply and stationery
business.
Mr. Simon has served as a Director of the Company since 1987. He is currently
engaged in the private practice of law. He served as Vice President and General
Counsel of Zale Corporation from 1978 until 1995. In January 1992, involuntary
petitions for reorganization under Chapter 11 of the Federal bankruptcy laws
were filed against Zale Corporation, and it consented to the entry of an order
for relief under such filings. In June 1993, Zale Corporation completed its
plan of reorganization and emerged from bankruptcy.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
Common Stock ownership as of December 18, 1995, by all persons known by the
Company to own beneficially more than 5% of the Common Stock of the Company
then outstanding and identifies each Selling Stockholder.
<TABLE>
<CAPTION>
PERCENTAGE
AMOUNT AND AMOUNT AND OF
NATURE OF NATURE OF OWNERSHIP
BENEFICIAL BENEFICIAL UPON
OWNERSHIP AMOUNT OWNERSHIP COMPLETION
BEFORE TO AFTER OF
NAME OF STOCKHOLDER OFFERING(1) BE SOLD OFFERING OFFERING
------------------- ----------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Marilyn Oshman.............. 1,219,647(2) 0 1,219,647 21.0%
2302 Maxwell Lane
Houston, Texas 77023
Judy Oshman Margolis ....... 801,618(3) 550,791(7) 125,050(8) 2.1%
1400 Post Oak Blvd., Suite
808
Houston, Texas 77056
Edward C. Stanton III,
Trustee ................... 422,300(4) 0 422,300 7.3%
6363 Woodway, Suite 300
Houston, Texas 77057
Jeanette Oshman Efron....... 398,829 0 398,829 6.9%
2302 Maxwell Lane
Houston, Texas 77023
Vendamerica B.V. ........... 300,000 0 300,000 5.2%
De Klencke 6 1083 HH
Amsterdam, Netherlands
Barry M. Lewis, Trustee..... 298,432(5) 298,432 0 0%
515 Post Oak Blvd., Suite
300
Houston, Texas 77027
Dimensional Fund Advisors,
Inc. ...................... 294,300 0 294,300 5.1%
1299 Ocean Avenue, 11th
Floor
Santa Monica, California
90401
Judy Oshman Margolis,
Trustee of the
Jay Oshman Gerson Trust.... 153,900(6) 30,350 123,550(9) 2.1%
1400 Post Oak Blvd., Suite
808
Houston, Texas 77056
Judy Oshman Margolis,
Trustee of the
Gary Oshman Gerson Trust... 83,900(6) 83,900 0 0%
1400 Post Oak Blvd., Suite
808
Houston, Texas 77056
Kenneth C. Margolis, Trustee
of the Jay
Oshman Gerson 1976 Trust... 11,527(6) 11,527 0 0%
1400 Post Oak Blvd., Suite
808
Houston, Texas 77056
</TABLE>
- --------
(1) The persons listed have the sole power to vote and to dispose of the shares
beneficially owned by them except as otherwise indicated. Does not include
11,802 shares owned by the Oshman Foundation. Jeanette Oshman Efron,
Marilyn Oshman and Judy Oshman Margolis are three of six trustees of the
Oshman Foundation. Such trustees are vested with the power to vote and
dispose of all assets of the Foundation, including such shares. These
persons disclaim all beneficial ownership of shares owned by the
Foundation.
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<PAGE>
(2) Includes 251,800 shares held by Ms. Oshman as trustee for the benefit of
her children. Does not include 422,300 shares held in trust for the benefit
of Ms. Oshman and her children.
(3) Includes 237,800 shares held by Ms. Margolis as trustee for the benefit of
her children, 1,500 shares held by Ms. Margolis as custodian for three
grandchildren and 11,527 shares held by the husband of Ms. Margolis as
trustee for one of Ms. Margolis' sons. Does not include 298,432 shares held
in trust for the benefit of Ms. Margolis and her children.
(4) These shares are held by Edward C. Stanton III as trustee for the benefit
of Marilyn Oshman and her children.
(5) These shares are held by Barry M. Lewis as trustee for the benefit of Judy
O. Margolis and her children.
(6) Included in the number of shares beneficially owned by Ms. Margolis and
described in Note 3.
(7) Excludes shares sold by Ms. Margolis and Mr. Margolis as trustees for the
benefit of their children.
(8) Represents 123,550 shares held by Ms. Margolis as trustee of the Jay Oshman
Gerson Trust and 1,500 shares held by Ms. Margolis as custodian for three
grandchildren.
(9) Included in the number of shares beneficially owned by Ms. Margolis and
described in Note 8.
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<PAGE>
CERTAIN TRANSACTIONS
In numerous transactions since 1959, the Company has leased both land and
buildings for its executive offices, warehouses and one store in Houston, Texas
from two trusts (the "Warehouse Trusts") of which Marilyn Oshman, Chairman of
the Board and a Director of the Company, and Judy Oshman Margolis, a Selling
Stockholder and Ms. Oshman's sister, are the respective beneficiaries. Many of
these leases are currently in effect, with the term of some of the leases
extending until 1998. The aggregate rental payments from the Company to the
Warehouse Trusts were approximately $362,600 and $271,950 during fiscal 1994
and the first nine months of fiscal 1995, respectively. The Company believes
that the terms of all of these leases with the Warehouse Trusts are as
favorable to the Company as the terms under which it could lease comparable
facilities from an unaffiliated lessor in arm's length transactions. If the
Company needs to further expand its offices or warehouse facilities, it may
enter into other leases with the Warehouse Trusts. However, no lease will be
entered into unless its terms are as favorable to the Company as those which
could be obtained in arm's length negotiations for comparable premises. Marvin
Aronowitz, a Director of the Company, was a trustee of both Warehouse Trusts
during a portion of fiscal 1994 and resigned both trusteeships prior to January
28, 1995. Fred M. Gerson, a Director of the Company, is a trustee under one
Warehouse Trust.
The Company has a non-interest bearing note receivable from Alvin N.
Lubetkin, the Company's Chief Executive Officer and a Director. As of the end
of fiscal 1993 and fiscal 1994 and October 28, 1995, the principal balance of
the note was $556,000, $511,000, and $477,000, respectively. The note is
payable in 228 bi-weekly installments of approximately $2,000 beginning April
1, 1991, with the remainder due September 2000. The note is collateralized by
life insurance and Company stock options.
In March 1988, the Company entered into an agreement with Flagship Associates
providing for the lease by the Company of the land and building in Union, New
Jersey where one of the Company's stores was operated from March 1990 to
September 1993. Charles Lubetkin, the brother of the Company's Chief Executive
Officer, Alvin N. Lubetkin, is a general partner of Flagship Associates and has
a 19.75% interest in such partnership. The lease is for a term of 20 years,
provides for annual rental payments of $600,000 and is on terms the Company
believes to be no less favorable than could be obtained from an unrelated third
party. This lease was amended and assigned to an unrelated third party in
September 1993, however, the Company remains liable on the lease.
The daughter of Marilyn Oshman and Alvin N. Lubetkin, Karen Desenberg, is
employed by the Company as a Divisional Vice President--Merchandise Manager.
During fiscal 1994, Ms. Desenberg received compensation of $91,057. In
addition, Ms. Desenberg is entitled to the benefits available to other Company
employees of similar position. Although the specific value of such benefits
cannot be determined by the Company, such value does not exceed 10% of her
reported compensation.
DESCRIPTION OF CAPITAL STOCK
The following summary of the Company's capital stock is qualified in its
entirety by reference to the Company's Certificate of Incorporation and Bylaws,
each of which is filed as an exhibit to the registration statement of which
this Prospectus is a part.
COMMON STOCK
The Company is authorized to issue 15,000,000 shares of Common Stock, $1.00
par value per share. Following this offering, 5,818,699 shares (5,964,949
shares if the Underwriter's over-allotment option is exercised) of Common Stock
will be issued and outstanding. In addition, the Company has issued restricted
stock grants with certain vesting requirements for 100,000 shares of Common
Stock and options to purchase up to 583,250 shares of Common Stock at an
average exercise price of $7.00 per share. Holders of Common Stock are entitled
to one vote per share on all matters on which the holders of Common Stock are
entitled to
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<PAGE>
vote. Because holders of Common Stock do not have cumulative voting rights,
holders of a majority of the shares voting for the election of directors can
elect all of the members of the Board of Directors. A majority vote is also
sufficient for other actions that require the vote or concurrence of
stockholders. The Common Stock is not redeemable and has no conversion or
preemptive rights. All of the shares sold in this offering by the Selling
Stockholders are, and if the over-allotment option is exercised, all of the
shares of Common Stock sold by the Company in the offering will be, when issued
and paid for, validly issued, fully paid and non-assessable. In the event of
the liquidation or dissolution of the Company, subject to the rights of the
holders of any outstanding shares of the Company's Preferred Stock, the holders
of Common Stock are entitled to share pro rata in any balance of the corporate
assets available for distribution to them. The Company may pay dividends if,
when and as declared by the Board of Directors from funds legally available
therefor. The Company's credit facility with CIT places certain limitations and
restrictions on the Company's ability to pay dividends on the Common Stock. See
"Price Range of Common Stock and Dividend Policy."
PREFERRED STOCK
The Company is authorized to issue up to 500,000 shares of Preferred Stock,
par value $1.00 per share. No shares of Preferred Stock are currently
outstanding. The Company's Board of Directors is authorized to issue the
Preferred Stock in series and, with respect to each series, to determine number
of shares in any such series, and fix the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of
shares of any series of Preferred Stock. The Board of Directors could, without
stockholder approval, issue Preferred Stock with voting rights and other rights
that could adversely affect the voting power of holders of Common Stock and
could be used to prevent a third party from acquiring control of the Company.
The Company has no present plans to issue any shares of Preferred Stock.
SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND DELAWARE LAW
The provisions of the Company's Certificate of Incorporation and Bylaws may
be deemed to have an anti-takeover effect or may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in such
stockholder's best interest, including those attempts that might result in a
premium over the market price for the shares held by a stockholder.
Limitation of Director Liability. Section 102(b)(7) of the Delaware General
Corporation Law ("Section 102(b)") authorizes corporations to limit or to
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. Although Section 102(b) does not change directors' duty of care, it
enables corporations to limit available relief to equitable remedies such as
injunction or rescission. The Certificate of Incorporation limits the liability
of directors to the Company or its stockholders to the full extent permitted by
Section 102(b). Specifically, directors of the Company will not be personally
liable for monetary damages for breach of a director's fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law
or (iv) for any transaction from which the director derived an improper
personal benefit.
Indemnification. To the maximum extent permitted by law, the Bylaws provide
for mandatory indemnification of directors and officers of the Company against
all expense, liability and loss to which they may become subject, or which they
may incur as a result of being or having been a director or officer of the
Company. In addition, the Company must advance or reimburse directors and
officers for expenses incurred by them in connection with indemnifiable claims.
Delaware Anti-Takeover Law. Section 203 of the Delaware General Corporation
Law ("Section 203") generally provides that a person who, together with
affiliates and associates, owns, or within three years did
43
<PAGE>
own, 15% or more of the outstanding voting stock of a corporation subject to
the statute (an "Interested Stockholder") but less than 85% of such stock may
not engage in certain business combinations with the corporation for a period
of three years after the date on which the person became an Interested
Stockholder unless (i) prior to such date, the corporation's board of directors
approved either the business combination or the transaction in which the
stockholder became an Interested Stockholder or (ii) subsequent to such date,
the business combination is approved by the corporation's board of directors
and authorized at a stockholders' meeting by a vote of at least two-thirds of
the corporation's outstanding voting stock not owned by the Interested
Stockholder. Section 203 defines the term "business combination" to encompass a
wide variety of transactions with or caused by an Interested Stockholder,
including mergers, asset sales and other transactions in which the Interested
Stockholder receives or could receive a benefit on other than a pro rata basis
with other stockholders.
The provisions of Section 203, coupled with the Board's authority to issue
Preferred Stock without further stockholder action, could delay or frustrate
the removal of incumbent directors or a change in control of the Company. The
provisions also could discourage, impede or prevent a merger, tender offer or
proxy contest, even if such event would be favorable to the interests of
stockholders. The Company's stockholders, by adopting an amendment to the
Certificate of Incorporation, may elect not to be governed by Section 203,
which election would be effective 12 months after such adoption. Neither the
Certificate of Incorporation nor the Bylaws exclude the Company from the
restrictions imposed by Section 203.
TRANSFER AGENT
The Company's transfer agent and registrar for its Common Stock is the
Society National Bank, Dallas, Texas.
44
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part, the Underwriters named below have, severally and not
jointly, agreed, through Ladenburg, Thalmann & Co. Inc. (the "Representative"),
the Representative of the Underwriters, to purchase from the Selling
Stockholders, and the Selling Stockholders have agreed to sell to the
Underwriters, the aggregate number of shares set forth opposite their
respective names:
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
----------- -------
<S> <C>
Ladenburg, Thalmann & Co. Inc...........................................
-------
Total................................................................. 975,000
=======
</TABLE>
The Underwriters are committed to take and to pay for all of the shares of
Common Stock offered hereby, if any are purchased.
The Underwriters have advised the Company that they propose to offer all or
part of the Common Stock offered hereby directly to the public initially at the
price to the public set forth on the cover page of this Prospectus, that they
may offer shares to certain dealers at a price which represents a concession of
not more than $ per share, and that the Underwriters may allow, and such
dealers may reallow, a concession of not more than $ per share to certain
other dealers. After the commencement of the offering, the price to the public
and the concessions may be changed.
The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 146,250
shares of Common Stock at the same price per share as the initial 975,000
shares to be purchased by the Underwriters. The Underwriters may exercise this
option only to cover overallotments, if any. To the extent the Underwriters
exercise this option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase the same percentage thereof as the
percentage of the initial 975,000 shares to be purchased by that Underwriter.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act of 1933, and to contribute to payments the Underwriters may
be required to make in respect thereof.
The Company, its officers and directors, the Selling Stockholders and their
affiliates and the holders of more than 5% of the Common Stock have agreed not
to, directly or indirectly, offer, pledge, sell, contract to sell, transfer or
otherwise dispose of any shares of Common Stock or any securities convertible
into, or exchangeable or exercisable for, shares of Common Stock for a period
of 90 days after the date of this Prospectus without the prior written consent
of the Representative.
The Selling Stockholders have agreed to pay all of the expenses of the
offering other than the expenses incurred by the Company in connection with the
marketing of the Common Stock offered hereby. If the over-allotment option is
exercised, the Underwriters will bear the Company's marketing expenses.
45
<PAGE>
CERTAIN LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
shares of Common Stock offered hereby have been passed upon for the Company by
Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas and for the Selling
Stockholders by Weil, Gotshal & Manges, Houston, Texas. Fulbright & Jaworski
L.L.P., New York, New York, will pass on certain legal matters for the
Underwriters in connection with this offering.
EXPERTS
The consolidated financial statements of the Company as of January 29, 1994
and January 28, 1995 and for each of the three years in the period ended
January 28, 1995 included in this Prospectus have been so included in reliance
on the report of Grant Thornton LLP, independent certified public accountants,
given on the authority of said firm as experts in auditing and accounting.
OTHER INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments thereto) on Form S-2 under the Securities
Act, with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to herein are not necessarily complete.
With respect to each such contract, agreement or document filed as an exhibit
to the Registration Statement, reference is made to such exhibit for a more
complete description, and each such statement is deemed to be qualified in all
respects by such reference. The Registration Statement may be inspected,
without charge, at the offices of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its regional offices at Seven World Trade Center,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the public
reference section of the SEC at its Washington address upon payment of the
prescribed fee.
46
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants....................... F-2
Consolidated Balance Sheets--January 29, 1994, January 28, 1995 and
October 28, 1995........................................................ F-3
Consolidated Statements of Operations for the Years Ended January 30,
1993, January 29, 1994 and January 28, 1995 and for the Nine Months
Ended October 29, 1994 and October 28, 1995............................. F-4
Consolidated Statement of Stockholders' Equity for the Years Ended
January 30, 1993, January 29, 1994 and January 28, 1995 and for the Nine
Months Ended October 28, 1995........................................... F-5
Consolidated Statements of Cash Flows for the Years Ended January 30,
1993, January 29, 1994 and January 28, 1995 and for the Nine Months
ended October 29, 1994 and October 28, 1995............................. F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Oshman's Sporting Goods, Inc.
We have audited the accompanying consolidated balance sheets of Oshman's
Sporting Goods, Inc. (a Delaware corporation) and Subsidiaries as of January
29, 1994 and January 28, 1995, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended January 28, 1995. 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 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 consolidated financial position of Oshman's Sporting
Goods, Inc. and Subsidiaries as of January 29, 1994 and January 28, 1995, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended January 28, 1995, in conformity
with generally accepted accounting principles.
Grant Thornton LLP
Houston, Texas
March 15, 1995
F-2
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 29, 1994, JANUARY 28, 1995 AND OCTOBER 28, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 28,
ASSETS 1993 1994 1995
------ -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents..................... $ 44 $ 254 $ 408
Accounts receivable, less allowance of $242 in
1993 and $395 in 1994 and at October 28,
1995......................................... 3,492 3,437 2,742
Merchandise inventories....................... 88,699 98,294 129,699
Prepaid expenses and other.................... 4,549 4,976 7,281
-------- -------- --------
Total current assets........................ 96,784 106,961 140,130
PROPERTY, PLANT AND EQUIPMENT--AT COST.......... 80,811 80,374 90,892
Less accumulated depreciation and
amortization................................. 52,066 52,964 52,757
-------- -------- --------
28,745 27,410 38,135
OTHER ASSETS.................................... 903 706 581
-------- -------- --------
$126,432 $135,077 $178,846
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term obligations... $ 373 $ 186 $ 403
Trade accounts payable........................ 32,866 45,686 55,138
Accrued liabilities........................... 13,892 13,458 16,802
Income taxes.................................. 154 128 4,641
Restructuring reserve......................... 10,971 7,128 3,210
-------- -------- --------
Total current liabilities................... 58,256 66,586 80,194
DEFERRED INCOME TAXES........................... 313 302 290
DEFERRED RENTAL ALLOWANCES...................... -- 1,738 1,725
LONG-TERM OBLIGATIONS........................... 3,712 5,665 37,704
LONG-TERM RESTRUCTURING RESERVE................. 3,822 -- --
STOCKHOLDERS' EQUITY
Common stock.................................. 5,805 5,811 5,821
Additional capital............................ 3,252 3,434 3,770
Retained earnings............................. 51,272 51,562 49,363
Less treasury stock, at cost................ -- (21) (21)
-------- -------- --------
60,329 60,786 58,933
-------- -------- --------
$126,432 $135,077 $178,846
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 30, 1993, JANUARY 29, 1994 AND JANUARY 28, 1995
AND THE NINE MONTHS ENDED OCTOBER 29, 1994 AND OCTOBER 28, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
----------------------------- -----------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
-------- --------- -------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $313,253 $ 307,935 $311,419 $212,692 $225,627
Cost of goods sold...... 200,348 205,250 202,110 138,120 145,875
-------- --------- -------- -------- --------
Gross profit........ 112,905 102,685 109,309 74,572 79,752
Operating expenses:
Selling and
administrative
expenses............. 113,808 112,979 110,449 79,506 82,421
Corporate
restructuring........ -- 15,000 -- -- --
Miscellaneous income.. (530) (921) (2,944) (2,561) (2,127)
-------- --------- -------- -------- --------
Operating profit
(loss)............. (373) (24,373) 1,804 (2,373) (542)
Interest expense, net... 758 1,358 1,382 1,130 1,502
-------- --------- -------- -------- --------
Earnings (loss)
before income
taxes.............. (1,131) (25,731) 422 (3,503) (2,044)
Income tax (benefit)
expense................ (452) (6,237) 132 87 155
-------- --------- -------- -------- --------
NET EARNINGS (LOSS). $ (679) $ (19,494) $ 290 $ (3,590) $ (2,199)
======== ========= ======== ======== ========
Earnings (loss) per
share
Earnings (loss) per
common and common
equivalent share..... $ (.12) $ (3.36) $ .05 $ (.62) $ (.38)
======== ========= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 30, 1993, JANUARY 29, 1994 AND JANUARY 28, 1995
AND NINE MONTHS ENDED OCTOBER 28, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------- TREASURY ADDITIONAL RETAINED
SHARES AMOUNT STOCK CAPITAL EARNINGS
------ ------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance at February 2, 1992........ 5,804 $5,804 $ - $3,251 $ 71,445
Issuance of shares under stock
bonus plan........................ 1 1 -- 1 --
Net loss for the year.............. -- -- -- -- (679)
----- ------ ----- ------ --------
Balance at January 30, 1993........ 5,805 5,805 -- 3,252 70,766
Net loss for the year.............. -- -- -- -- (19,494)
----- ------ ----- ------ --------
Balance at January 29, 1994........ 5,805 5,805 -- 3,252 51,272
Compensation under stock option and
stock bonus plans................. -- -- -- 155 --
Issuance of shares under stock
option plans...................... 6 6 -- 27 --
Acquisition of Treasury stock...... -- -- (21) -- --
Net earnings for the year.......... -- -- -- -- 290
----- ------ ----- ------ --------
Balance at January 28, 1995........ 5,811 5,811 (21) 3,434 51,562
Compensation under stock option and
bonus plans (unaudited)........... -- -- -- 263 --
Issuance of shares under stock
option plans (unaudited).......... 10 10 -- 73 --
Net loss for the period
(unaudited)....................... -- -- -- -- (2,199)
----- ------ ----- ------ --------
Balance at October 28, 1995
(unaudited)....................... 5,821 $5,821 $ (21) $3,770 $ 49,363
===== ====== ===== ====== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 30, 1993, JANUARY 29, 1994 AND JANUARY 28, 1995
AND THE NINE MONTHS ENDED OCTOBER 29, 1994 AND OCTOBER 28, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
-------------------------- -----------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
------- -------- ------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows of operating
activities
Net earnings (loss)...... $ (679) $(19,494) $ 290 $ (3,590) $ (2,199)
Adjustments to reconcile
net cash provided (used)
by operating activities.
Depreciation and
amortization.......... 6,142 6,144 5,643 4,247 4,111
Provision for losses on
accounts receivable... (16) (2) 153 44 --
Reserve for corporate
restructuring......... -- 15,000 -- -- --
Charge to reserve for
corporate
restructuring, net of
depreciation and
amortization.......... -- (207) (4,745) (3,747) (3,551)
Stock option and bonus
plan expense, net of
stock retained for
income taxes.......... 2 -- 155 68 263
Loss (gain) on
disposition of fixed
assets................ 368 (130) 178 (84) 164
Decrease in deferred
income taxes.......... (247) (5,510) (11) (16) (12)
Amortization of
deferred rental
allowance............. -- -- (63) -- (106)
Gain on disposition of
real estate and
leaseholds............ (960) (698) (1,633) (1,654) --
Change in assets and
liabilities
(Increase) decrease
in accounts
receivable.......... 412 100 (98) 124 695
(Increase) decrease
in merchandise
inventories......... (7,200) 4,634 (9,595) (17,473) (31,405)
(Increase) decrease
in prepaid expenses
and other........... 2,900 (469) (108) 132 (2,326)
Increase (decrease)
in trade accounts
payable............. 3,643 (2,622) 12,820 4,674 9,452
Increase (decrease)
in accrued
liabilities......... (93) (350) (564) 2,353 3,337
Increase (decrease)
in income taxes..... (366) (858) (26) (47) 4,513
------- -------- ------- -------- --------
Net cash provided
(used) by operating
activities......... 3,906 (4,462) 2,396 (14,969) (17,064)
Cash flows of investing
activities
Proceeds from sale of
fixed assets............ 102 132 42 18 22
Purchase of property,
plant and equipment..... (2,876) (4,497) (7,905) (4,270) (15,287)
Proceeds from disposition
of real estate and
leaseholds.............. 710 1,284 1,923 1,921 10
Proceeds from note
receivable.............. 43 46 45 34 34
Proceeds from rental
allowances.............. -- 56 1,931 -- 100
------- -------- ------- -------- --------
Net cash used by
investing
activities......... (2,021) (2,979) (3,964) (2,297) (15,121)
Cash flows of financing
activities
Proceeds from stock
issuance................ -- -- 33 27 83
Acquisition of treasury
stock................... -- -- (21) (21) --
Payment of loan
acquisition costs....... (421) (34) -- -- --
Proceeds (payment) of
long-term obligations,
net..................... (7,303) 2,076 1,766 17,678 32,256
------- -------- ------- -------- --------
Net cash provided
(used) by financing
activities......... (7,724) 2,042 1,778 17,684 32,339
------- -------- ------- -------- --------
Net increase (decrease) in
cash and cash
equivalents.............. (5,839) (5,399) 210 418 154
Cash and cash equivalents
at beginning of period... 11,282 5,443 44 44 254
------- -------- ------- -------- --------
Cash and cash equivalents
at end of period......... $ 5,443 $ 44 $ 254 $ 462 $ 408
======= ======== ======= ======== ========
Supplemental disclosures
of cash flow information
Cash paid (refunded)
during the period for
Income taxes........... $(4,501) $ 108 $ 139 $ 126 $ (3,708)
Interest............... 1,343 1,403 1,504 1,072 1,488
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE A--BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
GENERAL BUSINESS
Oshman's Sporting Goods, Inc. (the "Company") operates a chain of retail
sporting goods specialty stores, primarily in the Southwestern, Western and
Southern United States. The Texas and California stores accounted for
approximately 41% and 23%, respectively, of sales for the year ended January
28, 1995 and 47% and 22%, respectively, of sales for the nine months ended
October 28, 1995. The majority of the Company's sales are either cash or
through major national credit cards.
1. FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to the end of January.
Fiscal years 1992 (52 weeks), 1993 (52 weeks) and 1994 (52 weeks) ended on
January 30, 1993, January 29, 1994, and January 28, 1995, respectively.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Oshman's
Sporting Goods, Inc. and its subsidiaries, all wholly-owned. In consolidation,
all significant intercompany transactions have been eliminated.
3. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
4. MERCHANDISE INVENTORIES
Merchandise inventories are valued principally by the retail method and are
stated at the lower of cost, determined on a first-in, first-out (FIFO) basis,
or market. During the year ended January 29, 1994, the Company changed its
method of valuing its inventory to the FIFO method from the last-in, first-out
(LIFO) method in order to better measure the current value of such inventories
and the financial position of the Company.
5. PROPERTY, PLANT AND EQUIPMENT
Depreciation and amortization are provided principally by the straight-line
method based upon estimated useful lives of 3 to 10 years for furniture,
fixtures and equipment, 3 to 30 years for leasehold improvements and 20 to 40
years for buildings. Estimated useful lives of leasehold improvements represent
the lesser of the estimated useful life of the improvement or the remaining
term of the lease in effect at the time the improvements are made.
6. AMORTIZATION OF OTHER ASSETS
Loan acquisition costs are being amortized over the term of the related debt.
7. DEFERRED RENTAL ALLOWANCES
The Company may receive payments from landlords as inducements to sign new
store leases. The construction costs of real property improvements are offset
by this landlord funding. Deferred rental allowances represent payments in
excess of the costs of the real property improvements and are recognized as a
reduction of rent expense over the life of each applicable lease.
F-7
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE A--BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
8. INCOME TAXES
Provision has been made for deferred income taxes applicable to the temporary
differences between earnings for financial reporting purposes and taxable
income. Principal temporary differences include differences in accounting for
depreciation and capitalization of certain inventory costs.
9. PRE-OPENING COSTS
Costs (other than property, plant and equipment) associated with the opening
of new stores under 25,000 square feet are charged to expense as incurred. Pre-
opening costs of stores larger than 25,000 square feet are deferred and
amortized over a one-year period subsequent to the store opening.
10. RECLASSIFICATIONS
Certain amounts in prior financial statements have been reclassified to
conform to the current financial statement presentation.
11. INTERIM FINANCIAL INFORMATION
Financial information as of October 28, 1995 and for the nine months ended
October 29, 1994 and October 28, 1995, included herein, is unaudited. Such
information includes all adjustments (consisting only of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
statement of the financial information for the interim periods. The results of
operations for the nine months ended October 28, 1995 are not necessarily
indicative of the results for the full fiscal year.
NOTE B--PROPERTY, PLANT AND EQUIPMENT
The cost of property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
OCTOBER 28,
1993 1994 1995
------- ------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Furniture, fixtures and equipment................ $44,397 $47,345 $55,485
Leasehold improvements........................... 29,329 25,755 26,557
Buildings........................................ 3,574 3,037 4,753
Land............................................. 1,917 2,927 2,927
Leasehold improvements under capital leases...... 1,594 1,310 1,170
------- ------- -------
$80,811 $80,374 $90,892
======= ======= =======
</TABLE>
NOTE C--NOTE RECEIVABLE
The Company has a non-interest bearing note receivable from the Company's
Chief Executive Officer. At the end of 1993 and 1994 and at October 28, 1995,
the balance of the note was $556,000, $511,000, and $477,000, respectively. The
note is payable in 228 bi-weekly installments of approximately $2,000 beginning
April 1, 1991, with the remainder due September 2000. The note is
collateralized by life insurance and Company stock options.
F-8
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE D--LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
OCTOBER 28,
1993 1994 1995
------ ------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Revolving credit facility due August 31, 1997,
interest payable monthly, collateralized by
inventory, accounts receivable and real estate..... $1,985 $4,610 $36,454
Mortgage notes collateralized by land, buildings and
equipment (approximate cost $4,971,000 at January
28, 1995 and $5,647,000 at October 28, 1995)
payable in aggregate monthly installments of
approximately $23,000 at January 28, 1995 and
$45,000 at October 28, 1995, including interest
ranging from prime (8.5% at January 28, 1995 and
8.75% at October 28, 1995) plus 1% to 9.5% (fixed),
maturing through 2005.............................. 1,876 1,204 1,622
Capitalized lease obligations, interest at an
average rate of 8%, maturing at various dates
through 1997....................................... 224 37 31
------ ------ -------
4,085 5,851 38,107
Less current maturities............................. 373 186 403
------ ------ -------
$3,712 $5,665 $37,704
====== ====== =======
</TABLE>
Following are maturities of long-term obligations at January 28, 1995 for
each of the next five years and thereafter:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- --------------
(IN THOUSANDS)
<S> <C>
1995...................................................... $ 186
1996...................................................... 187
1997...................................................... 4,720
1998...................................................... 497
1999...................................................... 30
Thereafter................................................. 231
------
$5,851
======
</TABLE>
On August 31, 1992, the Company entered into an agreement providing for a
revolving credit facility. At the end of fiscal 1994, available credit under
the facility was $40,000,000. Effective July 27, 1995, available credit under
the facility was increased to $50,000,000, except for the mid-October to mid-
December period when the available amount is $65,000,000. In conjunction with
the Company's acquisition of seven store locations from SportsTown, Inc., these
amounts were increased $5,000,000 effective October 27, 1995. Advances under
the facility are based on a borrowing base formula, and the facility is secured
primarily by inventory, accounts receivable and real estate. The credit
agreement includes various requirements, financial covenants and restrictions,
including a restriction on the payment of dividends. Such covenants have been
modified several times, most recently in October 1995. Advances under the
credit facility bear interest at the prime rate (8.5% at January 28, 1995 and
8.75% at October 28, 1995) plus .50% and .25% at January 28, 1995 and October
28, 1995, respectively, and any unused borrowing capacity is subject to a line
of credit fee
F-9
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE D--LONG-TERM OBLIGATIONS--(CONTINUED)
of .5%. The Company may, under certain circumstances, elect to have interest
computed at a rate of the London Interbank Offered Rate (LIBOR, 6% at January
28, 1995 and 5.88% at October 28, 1995) plus 3% and 2.75% at January 28, 1995
and October 28, 1995, respectively. Additionally, the Company's performance, as
measured by a defined ratio, will cause both the prime and LIBOR based rates to
be reduced or increased by one-quarter of one percent. Advances outstanding at
January 29, 1994, January 28, 1995 and at October 28, 1995 amounted to
$1,985,000, $4,610,000 and $36,454,000, respectively. The credit facility
expires August 31, 1997.
Subsequent to October 28, 1995, the Company entered into a $4,000,000
mortgage payable that is collateralized by land and buildings.
At the end of 1993 and 1994 and at October 28, 1995, outstanding letters of
credit were $3,439,000, $2,786,000 and $2,688,000, respectively.
NOTE E--INCOME TAXES
The Company's tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
-------------------- -----------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
----- ------- ---- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current
Federal.......................... $ -- $ (9) $ -- $-- $ --
Foreign.......................... 81 93 33 33 14
State............................ 233 34 76 54 127
Deferred
Federal.......................... (715) (5,731) -- -- --
State............................ (51) (624) 23 -- 14
----- ------- ---- --- ----
$(452) $(6,237) $132 $87 $155
===== ======= ==== === ====
</TABLE>
A reconciliation of income tax expense (benefit) on net earnings (losses)
computed at the statutory Federal income tax rate and income taxes reported in
the consolidated statements of operations is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
-------------------- -----------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
----- ------- ---- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Income tax expense (benefit) at
statutory rate.................. $(385) $(8,748) $143 $(1,221) $(748)
Increases (reductions)
State income taxes (net of
Federal tax benefit).......... 119 22 50 36 84
Targeted jobs tax credit--net.. (100) (15) (62) (99) --
Other items--net................. (86) (446) 40 38 181
Valuation allowance.............. -- 2,950 (39) 1,333 638
----- ------- ---- ------- -----
(67) 2,511 (11) 1,308 903
----- ------- ---- ------- -----
Income tax expense (benefit). $(452) $(6,237) $132 $ 87 $ 155
===== ======= ==== ======= =====
</TABLE>
F-10
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE E--INCOME TAXES--(CONTINUED)
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
OCTOBER 28,
1993 1994 1995
--------------- ---------------- ----------------
LONG- LONG- LONG-
CURRENT TERM CURRENT TERM CURRENT TERM
------- ------ ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Accrued expenses......... $ 3,660 $2,710 $ 3,078 $ 654 $1,904 $ 762
Other.................... 121 -- 119 49 155 524
NOL carryforward......... -- 2,469 -- 3,735 -- 5,172
Business tax credits..... -- 466 -- 604 -- 604
------- ------ ------- ------- ------ -------
3,781 5,645 3,197 5,042 2,059 7,062
------- ------ ------- ------- ------ -------
LIABILITIES
Depreciation of property
and equipment........... -- 2,984 -- 2,239 -- 2,557
Inventory capitalization. 776 -- 863 -- 941 --
LIFO termination......... 490 1,985 489 1,495 478 957
Store opening costs...... 159 -- 240 -- 638 --
State taxes.............. 4 179 29 175 56 163
Other.................... 53 213 51 129 51 126
------- ------ ------- ------- ------ -------
1,482 5,361 1,672 4,038 2,164 3,803
------- ------ ------- ------- ------ -------
Net asset (liability)
before valuation
allowance............. 2,299 284 1,525 1,004 (105) 3,259
Less valuation allowance. (2,353) (597) (1,605) (1,306) -- (3,549)
------- ------ ------- ------- ------ -------
NET LIABILITY.......... $ 54 $ 313 $ 80 $ 302 $ 105 $ 290
======= ====== ======= ======= ====== =======
</TABLE>
Deferred income taxes of $54,000, $80,000 and $105,000 were included in
current liabilities at the end of 1993 and 1994 and at October 28, 1995,
respectively. The change in the method of accounting for inventory which was
made in the first quarter of 1993 resulted in a $3,596,000 increase in the
deferred Federal tax liability and a $388,000 increase in deferred state tax
liability.
Deferred tax assets were reduced by valuation allowances of $2,950,000 and
$2,911,000 at January 29, 1994 and January 28, 1995, respectively. Based upon
the criterion of SFAS No. 109, recognition of a deferred tax asset is
prohibited if the Company cannot show that it is more likely than not that the
deferred tax asset will be realized in future years. Based upon financial
income and tax credits earned but not utilized during 1994, the valuation
allowance was reduced by $39,000.
The Company has net operating loss carryforwards at the end of 1994 of
approximately $10,985,000. The carryforwards expire as follows: $641,000 in
2008, $6,680,000 in 2009 and $3,664,000 in 2010. Additionally, the Company has
foreign tax credit carryforwards of $265,000 expiring from 1997 to 2000, job
tax credit carryforwards of $278,000 expiring from 2008 to 2010 and alternative
minimum tax credit carryforwards of $61,000.
F-11
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE E--INCOME TAXES--(CONTINUED)
In the third quarter of fiscal 1995, the Company received Federal income tax
refunds of $4,142,000 plus interest of $662,000 resulting from the application
of net operating loss carrybacks. Approximately $1,652,000 of the tax refunds
relate to the benefit of carrying back net operating losses to periods for
which the tax rates exceeded the current 34% Federal income tax rate. These
amounts will result in tax benefits recordable in the Company's statement of
operations at the earliest of the expiration of the statute of limitations (two
years) for review of the refunds, the notification of completion of the review
process or such date as the Company believes the net operating loss benefit
could be realized through the carryforward of the benefit should the carryback
be disallowed. Amounts recognized under the latter condition will be limited to
an amount exclusive of the interest and carryback rate difference benefit.
NOTE F--COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company conducts certain of its operations in owned facilities with its
remaining operations being conducted in facilities leased under noncancelable
operating leases. Rentals of the retail locations are based on minimum required
rentals and/or, in certain instances, contingent rentals based on a percentage
of sales. Some leases contain renewal options with provision for increased
rentals during the renewal term.
Future minimum rental payments under operating leases at the end of 1994 are
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- --------------
(IN THOUSANDS)
<S> <C>
1995...................................................... $13,346
1996...................................................... 13,118
1997...................................................... 12,663
1998...................................................... 12,077
1999...................................................... 11,017
Thereafter to 2017......................................... 86,874
</TABLE>
Minimum payments have not been reduced by minimum sublease rental income of
$18,057,000 due in the future under noncancelable subleases.
Total rental expense entering into the determination of net earnings (loss)
is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
----------------------- -----------------------
OCTOBER 29, OCTOBER 28,
1992 1993 1994 1994 1995
------- ------- ------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Leased facilities
Minimum rentals.............. $13,545 $13,798 $12,824 $ 9,693 $10,033
Contingent rentals (based on
a percentage of sales)...... 2,488 2,649 2,767 1,755 1,779
------- ------- ------- ------- -------
16,033 16,447 15,591 11,448 11,812
Other rentals.................. 448 461 673 482 332
------- ------- ------- ------- -------
$16,481 $16,908 $16,264 $11,930 $12,144
======= ======= ======= ======= =======
</TABLE>
F-12
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE F--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Certain leases between the Company and two trusts, which are for the benefit
of two shareholders, provide for total minimum annual rentals of $363,000
through 1998.
CAPITAL LEASES
Future minimum lease payments for assets under capital leases at the end of
1994, and the present value of such payments, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- --------------
(IN THOUSANDS)
<S> <C>
1995...................................................... $24
1996...................................................... 17
---
Total minimum lease payments............................... 41
Less amount representing interest......................... 4
---
Present value of minimum obligations....................... $37
===
</TABLE>
PROFIT SHARING PLAN
The Company and its subsidiaries participate in a discretionary employee
profit sharing plan. No contributions were made in 1992, 1993 or 1994 or for
the nine months ended October 29, 1994 and October 28, 1995.
EMPLOYEE MEDICAL PLAN
The Company has an employee medical plan available to all full-time regular
employees. The plan provides for payment of various medical expenses and is
funded by participating employees and the Company. The provision for the
Company's contribution to the plan amounted to $484,000, $691,000 and
$1,088,000 for 1992, 1993 and 1994, and $827,000 and $1,001,000 for the nine
months ended October 29, 1994 and October 28, 1995, respectively.
SEVERANCE PAY BONUS AGREEMENTS
The Company has employment agreements with certain executive officers that
become operative only upon a change in control of the Company. Compensation
which may be payable under these agreements has not been accrued in the
consolidated financial statements as a change in control, as defined, has not
occurred.
DEFERRED COMPENSATION AGREEMENT
The Company has a deferred compensation agreement with an executive officer
under which the officer will receive an estimated annual retirement benefit of
$152,000 after he attains age 65. Upon the executive's death, such payments
will be made to his designated beneficiary.
LITIGATION
Various legal claims have arisen in the normal course of business, which, in
the opinion of management, will not have a material adverse effect on the
Company's financial statements.
F-13
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE G--STOCKHOLDERS' EQUITY
CAPITAL STOCK
Authorized capital stock consists of 500,000 shares of $1 par value preferred
stock and 15,000,000 shares of $1 par value common stock. No preferred stock
has been issued. At the end of 1994 and at October 28, 1995, common stock
shares issued were 5,811,000 and 5,821,000, respectively, and shares
outstanding were 5,808,000 and 5,818,000, respectively. Common stock shares
issued and outstanding at the end of 1992 and 1993 were 5,805,000.
COMMON STOCK OPTION PLANS
The Company's 1994 Omnibus Plan authorizes the grant of Incentive Awards of
common stock to key employees of the Company. At January 28, 1995, 500,000
shares were authorized for grant; this amount has been subsequently increased
to 750,000 shares. Awards may be in the form of stock options, stock
appreciation rights, restricted stock, performance units, performance shares or
other stock based awards and certain additional payments in the amount of
Federal income taxes payable by a grantee and relating to an award, and are to
be determined by a committee of the Board of Directors.
Stock options granted may be either nonqualified options or incentive stock
options and may include reload options. Exercise price will be determined by
the committee; however, in the case of incentive stock options, the exercise
price shall not be less than 100% of the market value of the shares at the time
the options are granted. No option is exercisable after the expiration of ten
years from the date of grant.
The 1994 Omnibus Plan replaces the Company's 1991 Stock Option Plan, 1986
Stock Option Plan and 1986 Stock Bonus Plan. However, currently outstanding
options and grants under those plans and the Company's 1982 Incentive Stock
Option Plan will continue to exist until they vest and are exercised or expire.
No awards are outstanding under the 1986 Stock Bonus Plan.
Additionally, the Company's 1993 Non-Employee Director Stock Option Plan
provides for the issuance of options to non-employee directors of the Company
at an option price equal to the average of the closing prices of the last five
trading days preceding and including the date of grant. Unexercised options
expire no later than ten years from date of grant or three months after the
termination of the directorship, extended to one year if the termination of
directorship is caused by death or disability.
The Company records an expense based on the difference between the option
price and fair market value of the stock at date of grant, amortized over the
vesting period of the option. Selling and administrative expenses related to
the grant of stock options were not material in 1992, 1993 or 1994 or for the
nine months ended October 29, 1994 and October 28, 1995. Upon the exercise of
options, the proceeds are credited to the common stock account to the extent of
the par value of the shares issued, and the proceeds in excess of the par value
are credited to additional capital.
F-14
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE G--STOCKHOLDERS' EQUITY--(CONTINUED)
The following table reflects the activity under the Company's various plans
during the period February 2, 1992 through October 28, 1995:
<TABLE>
<CAPTION>
EXERCISE PRICE
SHARES PER SHARE
-------- ---------------
<S> <C> <C>
Outstanding at February 2, 1992...................... 509,622 $4.13 to $15.20
Granted............................................ -- --
Cancelled.......................................... (58,032) $5.00 to $14.88
Exercised.......................................... -- --
-------- ---------------
Outstanding at January 30, 1993...................... 451,590 $4.13 to $15.20
Granted............................................ 188,950 $5.00 to $ 6.80
Cancelled.......................................... (60,440) $5.00 to $14.00
Exercised.......................................... -- --
-------- ---------------
Outstanding at January 29, 1994...................... 580,100 $4.13 to $15.20
Granted............................................ 238,700 $6.16 to $ 9.00
Cancelled.......................................... (70,400) $4.13 to $10.00
Exercised.......................................... (6,050) $4.13 to $ 5.00
-------- ---------------
Outstanding at January 28, 1995...................... 742,350 $5.00 to $15.20
Granted (Unaudited)................................ 262,500 $6.85 to $12.75
Cancelled (Unaudited).............................. (306,950) $5.00 to $14.56
Exercised (Unaudited).............................. (10,000) $5.00 to $ 6.68
-------- ---------------
Outstanding at October 28, 1995 (Unaudited).......... 687,900 $5.00 to $15.20
======== ===============
</TABLE>
At January 28, 1995 and October 28, 1995, options to purchase 358,950 and
361,500 shares of Common Stock under the stock option plans were exercisable
and options available for grant under the plans were 360,000 and 351,500
shares, respectively.
RESTRICTED STOCK AWARD
The Company granted 100,000 restricted shares of the Company's common stock
to the Company's current Chief Executive Officer in 1994 pursuant to the 1994
Omnibus Plan. The grantee has no rights as a stockholder with respect to the
restricted shares, including no right to transfer or receive dividends in most
circumstances. Grantee becomes 100% vested in restricted shares if retirement
occurs at or after age 65, in the event of death or disability of the grantee,
termination by the grantee following a change in control of the Company,
termination of the grantee by the Company without cause and termination by the
grantee for good reason. Partial vesting occurs at the rate of 25% of the grant
per year if retirement occurs at or after the grantee reaches the age of 62.
Restrictions on the stock end on the vesting date. Additionally, the grant
provides that the Company will pay the grantee the Federal tax benefit (if any)
realized by the Company from the tax deduction for compensation resulting from
the restricted stock grant. Expense recorded in 1994 and for the nine months
ended October 28, 1995 for the grant was approximately $187,000 and $263,000,
respectively.
F-15
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF OCTOBER 28, 1995 AND RELATING TO THE
NINE MONTHS ENDED OCTOBER 29, 1994 AND
OCTOBER 28, 1995 IS UNAUDITED)
NOTE H--EARNINGS (LOSS) PER SHARE
Earnings (loss) per common and dilutive common equivalent share are based
upon the weighted average number of common shares outstanding during each year.
Outstanding options and bonus grants are included in periods where they have a
dilutive effect.
NOTE I--CORPORATE RESTRUCTURING
During the fourth quarter of 1993, as a result of the Company's review of its
operating strategies to become primarily a megastore sporting goods operator,
and in order to more aggressively redeploy its assets, the Company implemented
a restructuring plan to close 34 underperforming traditional stores. A
restructuring charge of $15,000,000 before taxes was recorded which includes
provisions for anticipated operating losses, liquidation markdowns on
inventory, leasehold improvement abandonments, lease termination costs and
other anticipated costs necessary to close the stores. At the end of 1994 and
at October 28, 1995, 16 and 4 stores remain to be closed, respectively.
F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM-
PANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPEC-
TUS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
Use of Proceeds........................................................... 12
Price Range of Common Stock and Dividend Policy........................... 12
Selected Consolidated Financial Data...................................... 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Business.................................................................. 24
Management................................................................ 38
Principal and Selling Stockholders........................................ 40
Certain Transactions...................................................... 42
Description of Capital Stock.............................................. 42
Underwriting.............................................................. 45
Certain Legal Matters..................................................... 46
Experts................................................................... 46
Other Information......................................................... 46
Index to Consolidated Financial Statements................................ F-1
</TABLE>
---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
975,000 SHARES
OSHMAN'S SPORTING GOODS, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
LADENBURG,
THALMANN & CO. INC.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION
The following is a statement of estimated expenses incurred in connection
with the shares of Common Stock being registered hereby, other than
underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee.................................................... $4,350
NASD Filing Fee......................................................... 1,762
Printing and Engraving Expenses......................................... *
Legal Fees and Expenses................................................. *
Accounting Fees and Expenses............................................ *
Transfer Agent and Registrar Fees and Expenses.......................... *
Blue Sky Fees and Expenses (including legal fees)....................... *
Miscellaneous........................................................... *
------
Total............................................................... $ *
======
</TABLE>
- --------
* To be filed by amendment
The Selling Stockholders have agreed to pay all of the expenses of the
offering other than the expenses incurred by the Company in connection with the
marketing of the Common Stock offered hereby; provided, however, that the
Company will pay for the portion of the SEC registration fee relating to the
146,250 shares of Common Stock subject to the over-allotment option and, if the
over-allotment option is exercised, the Underwriters will bear the expenses
incurred by the Company in connection with the marketing of the shares of
Common Stock being registered hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company will indemnify each of its
directors and officers to the full extent permitted by the laws of the State of
Delaware and may indemnify certain other persons as authorized by the Delaware
General Corporation Law for liabilities and expenses incurred in such
capacities. In general, directors and officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any
criminal proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful. Reference is made to the Company's Bylaws filed as
Exhibit 4.2 hereto.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. Reference is made
to the Company's Certificate of Incorporation filed as Exhibit 4.1 hereto.
The Underwriting Agreement contains reciprocal agreements of indemnity
between the Company and the Underwriters as to certain liabilities, including
liabilities under the Securities Act, and in certain circumstances provides for
indemnification of the Company's directors, officers and controlling persons.
The Company maintains directors' and officers' liability insurance.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1+ --Form of Underwriting Agreement
4.1 --Certificate of Incorporation of Oshman's Sporting Goods, Inc., as
amended to date (filed as Exhibit 3.1 to the Company's Form 10-K for
the fiscal year ended January 31, 1987 (the "1987 10-K") and
incorporated herein by reference).
4.2 --Bylaws of Oshman's Sporting Goods, Inc., as amended to date (filed
as Exhibit 3.2 to the 1987 10-K and incorporated herein by
reference).
4.3+ --Specimen Stock Certificate.
4.4 --Financing Agreement dated August 31, 1992 between the Company and
The CIT Group/Business Credit, Inc. (the "Financing Agreement")
(filed as Exhibit 4.1 to the Company's Form 10-Q for the quarterly
period ended August 1, 1992 and incorporated herein by reference).
4.4(a) --Amendment dated March 9, 1993 to the Financing Agreement (filed as
Exhibit 19.1 to the Company's Form 10-K for the fiscal year ended
January 30, 1993 (the "1993 10-K") and incorporated herein by
reference).
4.4(b) --Amendment dated March 22, 1993 to the Financing Agreement (filed as
Exhibit 19.2 to the 1993 10-K and incorporated herein by reference).
4.4(c) --Amendment dated June 3, 1993 to the Financing Agreement (filed as
Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter ended
May 1, 1993 and incorporated herein by reference).
4.4(d) --Amendment dated October 29, 1993 to the Financing Agreement (filed
as Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter
ended October 30, 1993 (the "October 1993 10-Q") and incorporated
herein by reference).
4.4(e) --Amendment dated October 29, 1993 to the Financing Agreement (filed
as Exhibit 4.2 to the October 1993 10-Q and incorporated herein by
reference).
4.4(f) --Amendment dated December 23, 1993 to the Financing Agreement (filed
as Exhibit 4.1 to the Company's Form 10-K for the fiscal year ended
January 29, 1994 (the "1994 10-K") and incorporated herein by
reference).
4.4(g) --Amendment dated December 23, 1993 to the Financing Agreement (filed
as Exhibit 4.1 to the 1994 10-K and incorporated herein by
reference).
4.4(h) --Amendment dated January 27, 1994 to the Financing Agreement (filed
as Exhibit 4.1 to the 1994 10-K and incorporated herein by
reference).
4.4(i) --Amendment dated April 6, 1994 to the Financing Agreement (filed as
Exhibit 4.1 to the 1994
10-K and incorporated herein by reference).
4.4(j) --Amendment dated November 4, 1994 to the Financing Agreement (filed
as Exhibit 4.1 to the Company's Form 10-Q for the quarter ended
October 29, 1994 and incorporated herein by reference).
4.4(k) --Amendment dated January 27, 1995 to the Financing Agreement (filed
as Exhibit 4.1 to the Company's Form 10-K for the fiscal year ended
January 28, 1995 (the "1995 10-K") and incorporated herein by
reference).
4.4(l) --Amendment dated April 28, 1995 to the Financing Agreement (filed as
Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter ended
April 29, 1995 and incorporated herein by reference).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.4(m) --Amendment dated October 27, 1995 to the Financing Agreement (filed
as Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter
ended October 28, 1995 (the "October 1995 10-Q") and incorporated
herein by reference).
5+ --Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.
10.1 --Split Dollar Agreement between the Company and Marvin Aronowitz,
dated October 1, 1976 (filed as Exhibit 10.3 to the Company's Form
10-K for the fiscal year ended January 29, 1983 (the "1983 10-K")
and incorporated herein by reference).
10.2 --Executive Salary Continuation Agreement between the Company and
Marvin Aronowitz, dated October 1, 1976 (filed as Exhibit 10.4 to
the 1983 10-K and incorporated herein by reference).
10.3 --Deferred Compensation Agreement between the Company and Alvin N.
Lubetkin, dated December 29, 1988 (filed as Exhibit 10.5 to the
Company's Form 10-K for the fiscal year ended January 28, 1989 (the
"1989 10-K") and incorporated herein by reference).
10.4 --Oshman's Sporting Goods, Inc. 1988 Statement of Policy Regarding
Key Employees Severance Pay Bonus Program (filed as Exhibit 10.7 to
the 1989 10-K and incorporated herein by reference).
10.4(a) --First Amendment to Oshman's Sporting Goods, Inc. Statement of
Policy Regarding Key Employees Severance Pay Bonus Program (filed as
Exhibit 19.3 to the 1993 10-K and incorporated herein by reference).
10.5 --Oshman's Sporting Goods, Inc. 1986 Stock Option Plan, as amended
(filed as Exhibit 10.9 to the 1987 10-K and incorporated herein by
reference).
10.5(a) --Second Amendment to Oshman's Sporting Goods, Inc. 1986 Stock Option
Plan (filed as Exhibit 19.4 to the 1993 10-K and incorporated herein
by reference).
10.5(b) --Third Amendment to Oshman's Sporting Goods, Inc. 1986 Stock Option
Plan (filed as Exhibit 19.5 to the 1993 10-K and incorporated herein
by reference).
10.6 --Oshman's Sporting Goods, Inc. 1986 Stock Bonus Plan (filed as
Exhibit 10.10 to the 1987 10-K and incorporated herein by
reference).
10.6(a) --First Amendment to Oshman's Sporting Goods, Inc. 1986 Stock Bonus
Plan (filed as Exhibit 10.9 to the Company's Form 10-K for the
fiscal year ended February 3, 1990 and incorporated herein by
reference).
10.7 --Employment Agreement dated October 3, 1990 between the Company and
Alvin N. Lubetkin (filed as Exhibit 10.8 to the 1994 10-K and
incorporated herein by reference).
10.8 --Loan Agreement dated October 3, 1990 between the Company and Alvin
N. Lubetkin (filed as Exhibit 10.9 to the Company's Form 10-K for
the fiscal year ended February 2, 1991 (the "1991 10-K") and
incorporated herein by reference).
10.9 --Oshman's Sporting Goods, Inc. 1991 Stock Option Plan (filed as
Exhibit 10.10 to the 1991 10-K and incorporated herein by
reference).
10.10 --Oshman Employees' Profit-Sharing Plan and Trust (filed as Exhibit
10.11 to the 1992 10-K and incorporated herein by reference).
10.10(a) --First Amendment to Oshman Employees' Profit-Sharing Plan (filed as
Exhibit 19.6 to the 1993 10-K and incorporated herein by reference).
10.10(b) --Second Amendment to Oshman Employees' Profit Sharing Plan (filed as
Exhibit 10.10 to the Company's October 1995 10-Q and incorporated
herein by reference).
10.10(c) --Third Amendment to Oshman Employees' Profit Sharing Plan (filed as
Exhibit 10.10 to the Company's October 1995 10-Q and incorporated
herein by reference).
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.11 --Separation Agreement between the Company and Charles Rosemond dated
February 22, 1993 (filed as Exhibit 10.13 to the 1993 10-K and
incorporated herein by reference).
10.12 --Oshman's Sporting Goods, Inc. 1993 Non-Employee Director Stock
Option Plan (filed as Exhibit 10.14 to the 1994 10-K and
incorporated herein by reference).
10.13 --Oshman's Sporting Goods, Inc. 1994 Omnibus Plan. (filed as Exhibit
10.13 to the 1995 10-K and incorporated herein by reference).
10.13(a) --First Amendment to the Oshman's Sporting Goods, Inc., 1994 Omnibus
Plan (filed as Exhibit 10.13 to the Company's Form 10-Q for the
fiscal quarter ended July 29, 1995 and incorporated herein by
reference).
10.14 --Restricted Stock Grant Agreement between the Company and Alvin N.
Lubetkin, dated
July 15, 1994 (filed as Exhibit 10.1 to the Company's Form 10-Q for
the quarterly period ended July 30, 1994 (the "July 10-Q") and
incorporated herein by reference).
10.14(a) --First Amendment to Restricted Stock Grant Agreement between the
Company and Alvin N. Lubetkin dated as of July 15, 1994 (filed as
Exhibit 10.14 to the 1995 10-K and incorporated herein by
reference).
10.15 --Employment Agreement between the Company and William N. Anderson,
dated June 20, 1994 (filed as Exhibit 10.2 to the July 10-Q and
incorporated herein by reference).
10.16 --Oshman's Sporting Goods, Inc. 1995 Incentive Compensation Plan for
Senior Management (filed as exhibit 10.16 to the Company's Form 10-Q
for the quarterly period ended October 28, 1995 and incorporated
herein by reference).
11.1 --Statement re Computation of per share earnings.
23.1* --Consent of Grant Thornton LLP.
23.2+ --Consent of Mayor, Day, Caldwell & Keeton, L.L.P. (included in
Exhibit 5)
24.1* --Powers of Attorney (included on signature page)
</TABLE>
- --------
*Filed herewith
+To be filed by amendment
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions set forth in Item 14
hereof, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on December 20, 1995.
Oshman's Sporting Goods, Inc.
Alvin N. Lubetkin
By___________________________________
Alvin N. Lubetkin
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose name appears below
constitutes and appoints Alvin N. Lubetkin (with full power to act alone) his
or her true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capabilities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact or
agent, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
The Power of Attorney may be executed in multiple counterparts, each of which
shall be deemed an original, but which taken together shall constitute one
instrument.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated. Oshman's Sporting Goods, Inc. does not have a Principal
Financial Officer.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Marilyn Oshman December 20, 1995
- ------------------------------------
Marilyn Oshman Chairman of the Board and
Director
Alvin N. Lubetkin December 20, 1995
- ------------------------------------
Alvin N. Lubetkin Vice Chairman of the Board,
Chief Executive Officer and
Director (Principal
Executive Officer)
William N. Anderson
- ------------------------------------
William N. Anderson President, Chief Operating
Officer and Director December 20, 1995
Morrie K. Abramson December 20, 1995
- ------------------------------------
Morrie K. Abramson Director
Marvin Aronowitz December 20, 1995
- ------------------------------------
Marvin Aronowitz Director
Fred M. Gerson December 20, 1995
- ------------------------------------
Fred M. Gerson Director
Dolph B. H. Simon December 20, 1995
- ------------------------------------
Dolph B. H. Simon Director
A. Lynn Boerner December 20, 1995
- ------------------------------------
A. Lynn Boerner Vice President and Chief
Accounting Officer
(Principal Accounting
Officer)
</TABLE>
II-6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated March 15, 1995, accompanying the
consolidated financial statements of Oshman's Sporting Goods, Inc. contained in
the Registration Statement and Prospectus and accompanying the financial
statements and schedule included in the Annual Report on Form 10-K for the year
ended January 28, 1995, which is incorporated by reference in the Registration
Statement and Prospectus. We consent to the use of the aforementioned reports
in the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts".
Grant Thornton LLP
Houston, Texas
December 21, 1995
