<PAGE>
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-5648
OSHMAN'S SPORTING GOODS, INC.
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 74-1031691
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2302 MAXWELL LANE, HOUSTON, TEXAS
77023
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(713) 928-3171
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO_____
---------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $1.00 par value 5,827,249
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<PAGE>
PART I -- FINANCIAL INFORMATION
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
NOVEMBER 2, 1996, FEBRUARY 3, 1996 AND OCTOBER 28, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 2, FEBRUARY 3, OCTOBER 28,
1996 1996 1995
----------- ---------- -----------
ASSETS (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 493 $ 327 $ 408
ACCOUNTS RECEIVABLE, LESS ALLOWANCE
OF $393 NOV 96, $386 FEB 96 AND
$395 OCT 95 1,777 3,452 2,742
MERCHANDISE INVENTORIES 143,163 110,630 129,699
PREPAID EXPENSES AND OTHER 7,869 7,819 7,281
----------- ---------- -----------
TOTAL CURRENT ASSETS 153,302 122,228 140,130
PROPERTY, PLANT AND EQUIPMENT, AT COST 100,128 93,807 90,892
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION 55,766 53,701 52,757
----------- ---------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 44,362 40,106 38,135
OTHER ASSETS 527 589 581
----------- ---------- -----------
$ 198,191 $ 162,923 $ 178,846
=========== ========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
CURRENT MATURITIES OF LONG-TERM
OBLIGATIONS $ 874 $ 809 $ 403
TRADE ACCOUNTS PAYABLE 55,746 35,486 55,138
ACCRUED LIABILITIES 19,380 18,231 16,802
INCOME TAXES 4,347 4,382 4,641
RESTRUCTURING RESERVE 246 480 3,210
----------- ---------- -----------
TOTAL CURRENT LIABILITIES 80,593 59,388 80,194
DEFERRED FEDERAL INCOME TAXES 504 504 290
DEFERRED RENTAL ALLOWANCES 3,004 3,180 1,725
LONG-TERM OBLIGATIONS 62,902 36,681 37,704
STOCKHOLDERS' EQUITY
COMMON STOCK 5,830 5,822 5,821
ADDITIONAL CAPITAL 4,032 3,865 3,770
RETAINED EARNINGS 41,347 53,504 49,363
LESS TREASURY STOCK, AT COST (21) (21) (21)
----------- ---------- -----------
STOCKHOLDERS' EQUITY 51,188 63,170 58,933
----------- ---------- -----------
$ 198,191 $ 162,923 $ 178,846
=========== ========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
NOVEMBER 2, 1996 AND OCTOBER 28, 1995
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 78,859 $ 71,739 $ 253,578 $ 225,627
COST OF GOODS SOLD 49,660 46,356 167,847 145,875
----------- ---------- ----------- -----------
GROSS PROFIT 29,199 25,383 85,731 79,752
OPERATING EXPENSES
SELLING AND ADMINISTRATIVE EXPENSES 30,714 27,852 91,659 81,420
AMORTIZATION OF PRE-OPENING COSTS 1,018 424 2,998 1,001
STORE CLOSING PROVISION (185) 36 1,140 250
MISCELLANEOUS INCOME (420) (437) (820) (2,377)
----------- --------- ----------- -----------
OPERATING LOSS (1,928) (2,492) (9,246) (542)
INTEREST EXPENSE, NET 953 614 2,801 1,502
----------- ---------- ----------- -----------
LOSS BEFORE INCOME TAXES (2,881) (3,106) (12,047) (2,044)
INCOME TAXES 14 35 110 155
----------- ---------- ----------- -----------
NET LOSS $ (2,895) $ (3,141) $ (12,157) $ (2,199)
=========== ========== =========== ===========
EARNINGS(LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ (.50) $ (.54) $ (2.09) $ (.38)
=========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES 5,830 5,815 5,828 5,814
=========== ========== =========== ===========
DIVIDENDS PER SHARE $ -- $ -- $ -- $ --
=========== ========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 2, 1996 AND OCTOBER 28, 1995
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS OF OPERATING ACTIVITIES:
NET LOSS $(12,157) $ (2,199)
ADJUSTMENTS TO RECONCILE NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 4,979 4,111
RECOVERIES OF LOSSES ON ACCOUNTS RECEIVABLE (7) --
CHARGE TO RESERVE FOR CORPORATE RESTRUCTURING, NET OF
DEPRECIATION AND AMORTIZATION (234) (3,551)
PROVISION FOR LOSSES ON STORE CLOSINGS 861 442
STOCK OPTION AND BONUS PLAN EXPENSE 132 336
LOSS ON DISPOSITION OF FIXED ASSETS 126 94
DECREASE IN DEFERRED INCOME TAXES -- (12)
AMORTIZATION OF DEFERRED RENTAL ALLOWANCES (176) (106)
CHANGES IN ASSETS AND LIABILITIES:
DECREASE IN ACCOUNTS RECEIVABLE 1,682 695
INCREASE IN MERCHANDISE INVENTORIES (32,533) (31,405)
DECREASE (INCREASE) IN PREPAID EXPENSES AND OTHER 245 (2,210)
INCREASE IN TRADE ACCOUNTS PAYABLE 20,260 9,452
INCREASE IN ACCRUED LIABILITIES 409 3,337
(DECREASE) INCREASE IN INCOME TAXES (35) 4,513
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (16,448) (16,503)
CASH FLOWS OF INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF FIXED ASSETS 28 22
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (14,425) (17,623)
PROCEEDS FROM DISPOSITION OF REAL ESTATE AND LEASEHOLDS 1 10
PROCEEDS FROM NOTE RECEIVABLE 27 34
PROCEEDS FROM LANDLORDS 4,654 1,948
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (9,715) (15,609)
CASH FLOWS OF FINANCING ACTIVITIES:
PROCEEDS FROM STOCK ISSUANCE 43 10
PROCEEDS FROM ISSUANCE OF LONG-TERM OBLIGATIONS 258 676
PAYMENTS OF LONG-TERM OBLIGATIONS (644) (264)
PROCEEDS FROM REVOLVING CREDIT FACILITY, NET 26,672 31,844
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 26,329 32,266
NET INCREASE IN CASH AND CASH EQUIVALENTS 166 154
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 327 254
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 493 $ 408
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR
INCOME TAXES $ 122 $ 434
INTEREST 2,695 1,488
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 2, 1996 AND OCTOBER 28, 1995
(UNAUDITED)
NOTE A
The financial statements are condensed and should be read in conjunction with
the 1995 annual report. The financial information contained herein is
unaudited, but in the opinion of the management of the Company, includes all
adjustments (consisting of normal recurring adjustments) for a fair presentation
of the results of operations for the periods indicated. The results for the
three months and nine months ended November 2, 1996 are not necessarily
indicative of the results to be expected for the full year.
NOTE B
Efective November 18, 1996, the Company amended its financing agreement dated
August 31, 1992 between the Company and The CIT Group/Business Credit, Inc. The
amended agreement provides for an increase on the existing revolving line of
credit from $55,000,000 to $70,000,000 and extends the term of the agreement to
August 31, 1999.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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
--------------------------------
3RD QUARTER NINE MONTHS
---------------- -------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0 100.0 100.0 100.0
Cost of goods sold 63.0 64.6 66.2 64.7
----- ----- ----- -----
Gross profit 37.0 35.4 33.8 35.3
Operating expenses
Selling and administrative expenses 38.9 38.8 36.1 36.1
Pre-opening expenses 1.3 .6 1.2 .4
Store closing provision ( .2) .1 .4 .1
Miscellaneous income ( .5) ( .6) ( .3) (1.1)
----- ----- ----- -----
Operating income (loss) (2.4) (3.5) (3.6) ( .2)
Interest expense, net 1.2 .9 1.1 .7
----- ----- ----- -----
Earnings (loss) before income taxes (3.7) (4.3) (4.8) ( .9)
Income taxes - .1 - .1
----- ----- ----- -----
Net earnings (loss) (3.7) (4.4) (4.8) (1.0)
===== ===== ===== =====
</TABLE>
Net sales for the third quarter and first nine months of fiscal 1996
increased 9.9% and 12.4% respectively compared to the same periods in fiscal
1995. The increase in sales is attributable to sales contributions from the 17
new SuperSports USA megastores opened since the beginning of fiscal 1995. Sales
from megastores during the first nine months of fiscal 1996 increased 64.9% over
the same period last year and represented 62.5% of total retail sales compared
to 43.4% in the first nine months of fiscal 1995. The increase in megastore
sales was partially offset by reduced sales from the Company's traditional
stores. The Company has closed 31 traditional stores since the beginning of
fiscal 1995, including 13 which were a part of the Company's restructure group.
Sales declines in fiscal 1996 attributable to closed stores totaled $14.9
million.
Comparable same store sales in the Company's SuperSports USA megastores
increased .5% in the third quarter of fiscal 1996 while sales in comparable
traditional stores decreased
<PAGE>
11.5% causing a 6.1% decline in overall same store sales compared to the same
period in 1995. During the first nine months of fiscal 1996, comparable same
store sales in the megastores decreased 2.3% while same store sales in
traditional stores decreased by 12.3% resulting in an overall 7.8% decline
compared to the same period in 1995.
Management attributes the decline in comparable traditional store sales
primarily to increased competition from megastores and secondly, to
cannibalization of sales resulting from the expansion of the Company's
megastores. Management believes that changing consumer preferences toward
sporting goods megastores have had a detrimental impact on the Company's
existing traditional stores and will continue to have a detrimental impact on
these stores in the future. Accordingly, the Company has accelerated the
closing of underperforming traditional stores and had closed 11 stores as of the
end of the fiscal 1996 third quarter and an additional six in November, 1996.
Cost of goods sold as a percentage of net sales was 63.0% and 66.2% respectively
in the quarter and nine months ended November 2, 1996 compared to 64.6% and
64.7% respectively for the same periods in fiscal 1995. Cost of goods sold as a
percentage of net sales for the first nine months of fiscal 1996 was negatively
affected by aggressive markdowns and other adjustments which reduced the
carrying value of inventories in the second quarter of fiscal 1996 as the
Company took additional markdowns in an effort to reduce excessive inventories
resulting from lower than planned sales and from stores closed and expected to
close. Additionally, the Company recorded additional adjustments to the
carrying value of inventory reflecting shrinkage in physical inventory.
Selling and administrative expenses as a percentage of net sales were 38.9% and
36.1% respectively for the quarter and nine months ended November 2, 1996
compared to 38.8% and 36.1% respectively in the same periods last year. Selling
and administrative expenses as a percentage of sales increased in stores as a
result of lower sales as discussed above and due to the addition of new stores
that have not yet grown to expected sales levels. However, the increased rate
of selling and administrative expenses in stores was offset by the leveraging
effect of increased sales volumes on corporate overhead and other relatively
fixed costs as a percentage of sales.
Pre-opening expenses of new SuperSports USA megastores are amortized over the
first 12 months of operation. Expenses of $1.0 million and $3.0 million in the
quarter and nine months ending November 2, 1996 compared to $424,000 and $1.0
million respectively in the same periods last year relate to the opening of 17
megastores in fiscal 1995 and during the first nine months of fiscal 1996
compared to only nine megastore openings in comparable periods in the prior
fiscal years.
Store closing provision expenses (income) were ($185,000) and $1.1 million
respectively in the third quarter and first nine months of fiscal 1996 compared
to $36,000 and $250,000 respectively in the same periods last year. The
provision was established primarily to cover lease termination costs, leasehold
and fixed asset write-offs and other incremental store closing costs. Management
intends to continue to evaluate underperforming stores and assess alternatives
with regard to these locations.
<PAGE>
Miscellaneous income was $420,000 and $820,000 respectively in the third quarter
and first nine months of fiscal 1996 compared to $437,000 and $2.4 million
respectively in the same periods of fiscal 1995. The fiscal 1995 results
include a gain of $1.6 million related to a condemnation award recorded in the
second quarter of fiscal 1995.
Net interest expense for the third quarter and first nine months of fiscal 1996
was $953,000 and $2.8 million respectively compared to $614,000 and $1.5 million
respectively for the same periods last year. The increased interest expense is
related to increased average borrowings under the Company's credit facility.
Income taxes in fiscal 1996 and 1995 are related primarily to state income
taxes. There was no income tax benefit in fiscal 1996 or 1995 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.
In the first nine months of fiscal 1996, the Company had a pretax loss of $12.0
million compared to a loss of $2.0 million before income taxes in the same
period last year. The decline in results in fiscal 1996 compared to fiscal 1995
is primarily attributable to reduced gross margin resulting from comparable
store sales declines and to increased markdowns and inventory adjustments as
discussed above. Additionally, the non-recurrence of the condemnation gain in
1995 and the provision in fiscal 1996 for additional store closings, along with
increased amortization of pre-opening expenses and interest expense further
contributed to the increased loss this year.
Liquidity and Capital Resources
Cash and equivalents at November 2, 1996 were $493,000 compared to $327,000 at
February 3, 1996. In the first nine months of fiscal 1996, cash totaling $16.4
million was used by operating activities. The primary use of cash during this
period was related to a $32.5 million increase in merchandise inventories
partially offset by an increase in trade accounts payable of $20.3 million. The
increase in merchandise inventories and corresponding increase in trade accounts
payable are related to normal seasonal fluctuations and to inventory buildup in
anticipation of the Christmas selling season. Additionally, a portion of the
increase was related to inventory for five new SuperSports USA megastores which
opened in the first nine months of fiscal 1996 and for two additional megastores
which opened in November.
Investing activities used cash totaling $9.7 million, primarily for the purchase
of property, plant and equipment, including the opening of five SuperSports USA
megastore in the first nine months of fiscal 1996 and the renovation of three of
the seven store locations acquired from SportsTown, Inc. in 1995. Two
additional SuperSports USA megastores opened in November, completing the
Company's new store program for fiscal 1996. Approximately $1.8 million was
used for the purchase of computer hardware and software primarily related to the
replacement of the Company's financial, payroll and human resources systems.
<PAGE>
Financing activities provided cash of $26.3 million as the Company utilized its
credit facility to meet its working capital needs during the first nine months
of fiscal 1996. Average borrowings under the Company's credit facility during
the first nine months of fiscal 1996 were $39.7 million, and the highest amount
of borrowings and outstanding letters of credit was $55.2 million at November 1,
1996. During the same period of fiscal 1995, average borrowings were $24.3
million, and the highest amount of borrowings and outstanding letters of credit
was $39.7 million at October 23, 1995. The increased level of borrowing in
fiscal 1996 is related primarily to the net inventory requirements and capital
expenditures related to the 17 SuperSports USA megastores opened since the
beginning of fiscal 1995 and additionally to the operating loss before
depreciation for the first nine months of fiscal 1996. The Company amended its
revolving credit facility with The CIT Group/Business Credit, Inc. effective
November 18, 1996. This amendment extended the term of the agreement to August
31, 1999 and increased the line of credit by $15.0 million to $70.0 million with
an additional seasonal increase to $85.0 million during the period between
September 15 and December 15 each year. In addition, the borrowing base formula
was modified to provided for increased advance rates during certain times of the
year. Other significant terms of the agreement remain unchanged.
As discussed above, the Company has accelerated the closure of underperforming
traditional stores and as of the end of November had closed 17 traditional
stores in fiscal 1996 and expects to close additional stores by the end of the
fiscal year. At the end of the third quarter of fiscal 1996, the Company had
available reserves totaling $3.6 million for lease termination costs, leasehold
and fixed asset write-offs and other incremental stores closing costs related to
store closures. The Company believes that this amount is adequate to cover
estimated future costs associated with the expected closing of certain stores.
<PAGE>
PART II -- OTHER INFORMATION
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act Of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OSHMAN'S SPORTING GOODS, INC.
December 17, 1996 /s/ TIMOTHY L. GRADY
Date: _____________________ By: ______________________________
Timothy L. Grady
Senior Vice President and
Chief Financial Officer
December 17, 1996 /s/ A. LYNN BOERNER
Date: _____________________ By: ______________________________
A. Lynn Boerner
Vice-President and
Chief Accounting Officer
<PAGE>
ITEM 6. EXHIBITS
Exhibit Index
4.1 Eighteenth Amendment Dated October 31, 1996 to the Financing Agreement
dated August 31, 1992 between the Company and The CIT Group/Business
Credit, Inc.
10.17 Employment Agreement between the Company and Timothy L. Grady, dated
June 6, 1996.
11.1 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE>
Exhibit 4.1
[LETTERHEAD OF THE CIT GROUP APPEARS HERE]
October 31, 1996
J.S. Oshman and Co., Inc.
Oshman Sporting Goods Co., Alabama
Oshman Sporting Goods Co., Arizona
Oshman Sporting Goods Co., Arkansas
Oshman Sporting Goods Co., California
Oshman Sporting Goods Co., Colorado
Oshman Sporting Goods Co., Florida
Oshman Sporting Goods Co., Georgia
Oshman Sporting Goods Co., Hawaii
Oshman Sporting Goods Co., Kansas
Oshman Sporting Goods Co., Louisiana
Oshman Sporting Goods Co., Michigan
Oshman Sporting Goods Co., Minnesota
Oshman Sporting Goods Co., Missouri
Oshman Sporting Goods Co., Nevada
Oshman Sporting Goods Co., New Jersey
Oshman Sporting Goods Co., New Mexico
Oshman Sporting Goods Co., New York
Oshman Sporting Goods Co., Ohio
Oshman Sporting Goods Co., Oklahoma
Oshman Sporting Goods Co., Oregon
Oshman Sporting Goods Co., South Carolina
Oshman Sporting Goods Co., Tennessee
Oshman Sporting Goods Co., Texas
Oshman Sporting Goods Co., Utah
Oshman Sporting Goods Co., Washington
Oshman's Ski Skool, Inc.
Oshman's Sporting Goods, Inc.-Services
2302 Maxwell Lane
Houston, TX
<PAGE>
Gentlemen:
Reference is made to the Financing Agreement among us dated August 31, 1992, as
amended (herein the "Financing Agreement"). Capitalized terms used herein but
not otherwise defined herein shall have the meanings ascribed to such terms in
the Financing Agreement.
Pursuant to mutual understanding, the Financing Agreement is hereby amended as
follows:
1. Paragraph 9 of Section 6 of the Agreement is hereby deleted in its
entirety, and the following is substituted in lieu thereof:
"9. The Parent and its Subsidiaries' shall maintain, on a consolidated
basis as of the end of each fiscal year, a Net Worth of not less than
$62,000,000.00, provided, however for the fiscal year ending February 1,
1997, they shall maintain a Net Worth of not less than $56,600,000.00
(herein the "1996 FYE Net Worth Minimum") provided, further that the
1996 FYE Net Worth Minimum shall be increased by the amount of gain from
the sale of Real Estate, if any, recorded during the second six months
of the fiscal year ending February 1, 1997."
2. Subparagraph I of Paragraph 10 of Section 6 of the Financing Agreement
is hereby amended by deleting it in its entirety and substituting the
following in lieu thereof:
"1. Permit EBITDA, on a consolidated and cumulative fiscal year to date
basis, for the Parent and its Subsidiaries, at the end of each fiscal
quarter below, to be:
FISCAL QUARTER ENDING EBITDA
--------------------- ------
For the last day in the first Less than $750,000.00
fiscal quarter of each fiscal
year;
For the last day in the second Less than $4,000,000.00
fiscal quarter of each fiscal
year;
November 2, 1996 More negative than negative
$4,000,000.00
2
<PAGE>
FISCAL QUARTER ENDING EBITDA
--------------------- ------
For the last day in the third Less than $1,500,000.00
fiscal quarter of each fiscal
year thereafter
February 1, 1997 Less than $5,000,000.00
For the last day in the fourth Less than $12,000,000.00"
fiscal quarter of each fiscal
year thereafter.
For purposes of the financial covenants set forth in subparagraph I
paragraph 10 of Section 6 of the Financing Agreement and solely for calculating
EBITDA for the third and fourth fiscal quarters of the fiscal year ended
February 1, 1997, EBITDA shall be defined as the following:
"EBITDA shall mean, in any period, all earnings of the Parent and its
Subsidiaries on a consolidated basis, before all Interest Expense, income tax
obligations (paid or accrued), miscellaneous income, depreciation expense and
amortization expense and the amount of any inventory markdowns or provisions for
markdowns related to stores closed or to be closed up to $250,000.00 for the
fiscal quarter ended November 2, 1996 or $500,000.00 for the fiscal quarter
ended February 1, 1997, on a cumulative basis, determined in accordance with
GAAP consistently applied."
Except as otherwise provided herein, no other change in any of the terms or
provisions of the Financing Agreement is intended or implied. If the foregoing
is in accordance with your understanding, please sign and return to us the
enclosed copy of this letter to so indicate.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By /s/ [SIGNATURE APPEARS HERE]
-----------------------------
Title: Assistant Secretary
3
<PAGE>
Read and Agreed to:
J.S. OSHMAN AND CO., INC.
OSHMAN SPORTING GOODS CO., ALABAMA
OSHMAN SPORTING GOODS CO., ARIZONA
OSHMAN SPORTING GOODS CO., ARKANSAS
OSHMAN SPORTING GOODS CO., CALIFORNIA
OSHMAN SPORTING GOODS CO., COLORADO
OSHMAN SPORTING GOODS CO., FLORIDA
OSHMAN SPORTING GOODS CO., GEORGIA
OSHMAN SPORTING GOODS CO., HAWAII
OSHMAN SPORTING GOODS CO., KANSAS
OSHMAN SPORTING GOODS CO., LOUISIANA
OSHMAN SPORTING GOODS CO., MICHIGAN
OSHMAN SPORTING GOODS CO., MINNESOTA
OSHMAN SPORTING GOODS CO., MISSOURI
OSHMAN SPORTING GOODS CO., NEVADA
OSHMAN SPORTING GOODS CO., NEW JERSEY
OSHMAN SPORTING GOODS CO., NEW MEXICO
OSHMAN SPORTING GOODS CO., NEW YORK
OSHMAN SPORTING GOODS CO., OHIO
OSHMAN SPORTING GOODS CO., OKLAHOMA
OSHMAN SPORTING GOODS CO., OREGON
OSHMAN SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
OSHMAN SPORTING GOODS CO., TEXAS
OSHMAN SPORTING GOODS CO., UTAH
OSHMAN SPORTING GOODS CO., WASHINGTON
OSHMAN'S SKI SKOOL, INC.
OSHMAN SPORTING GOODS, INC.-SERVICES
By /s/ [SIGNATURE APPEARS HERE]
------------------------------------
Title: VP--CAO
of each of the above Companies
4
<PAGE>
[LETTERHEAD OF OSHMAN'S APPEARS HERE]
EXHIBIT 10.17
June 6, 1996
Timothy L. Grady
Senior Vice President and
Chief Financial Officer
Oshman's Sporting Goods
2302 Maxwell Lane
Houston, Texas 77023
Dear Tim:
This letter agreement sets forth the terms and conditions under which
Oshman's Sporting Goods Inc.-Services (the "Company") will provide certain
payments to you in the event your employment is terminated by the Company other
than for Cause, as defined herein:
At all times during your employment with the Company you shall remain an at
will employee which means the Company may terminate you at any time without
notice of Cause. You expressly acknowledge by your execution of this letter
agreement that nothing in this letter agreement shall affect your at will
employment status.
If your employment is terminated by the Company within the first 24 months
of your employment for any reason other than Cause, as that term is defined
herein, you will be paid as follows:
(1) all current salary the Company owes you as of the date of your
termination; and
(2) an amount equal to 50% of your annual base salary at the rate in effect
at the time of your termination (the "Wage Continuation").
The Wage Continuation shall be paid in lieu of notice of termination, and
will be paid over the 6 month period following your termination, in equal, bi-
weekly payments, in accordance with the Company's typical payroll schedule and
policies. The Wage Continuation shall be offset by any compensation, salary
commission or other income earned by you, accrued on your behalf or attributable
to you during the 6 months following your termination. You shall furnish the
Company with such information as the
<PAGE>
Company may reasonably request regarding such other employment and compensation
received by you.
Your duties and responsibilities as Senior Vice President and Chief
Financial Officer shall continue and may be amended from time to time by the
Board of Directors of the Company or Chief Executive Officer.
As used in this letter agreement, Cause shall mean the occurrence of any
one or more of the following events:
(i) you have engaged in willful conduct, including embezzlement, fraud,
or malfeasance in the performance of your duties as prescribed from
time to time by the Board of Directors of the Company;
(ii) you have breached a policy or procedure of the Company which is
generally applicable to officers of the Company, which breach is
material and continues for a period of 3 days after being given
notice of such breach by the Company;
(iii) you have failed to perform your duties as prescribed and amended from
time to time by the Board of Directors of the Company (other than
scheduled vacation leave or sick leave taken in accordance with the
Company leave policy applicable to senior level executives) which
failure continues for a period of 5 days after being given notice of
such breach by the Company, unless this failure to perform relates to
a disability; in the event you become disabled the then existing
disability policies of the Company for senior level executives shall
be applicable;
(iv) you have violated any law, regulation, ordinance of a governmental
entity (other than traffic violations and similar minor offenses) or
you have violated any judicial decree applicable to the Company or to
you;
(v) you have materially breached any of the terms of this letter
agreement or any other written agreement between you and the Company
which breach continues for a period of 3 days after being given
notice of such breach by the Company; or
(vi) any representations made by you to the Company prove to be materially
false in any manner.
If the Company has Cause to terminate you, you may, at your option, submit your
immediate resignation which resignation shall be accepted by the Company and
the Company shall not disclose the reason for the resignation, unless required
by applicable regulation, subpoena, administrative process or court order to
make such disclosure.
2
<PAGE>
Additionally, the Company shall not be obligated to pay the Wage
Continuation upon your death. If you become disabled while an active employee
with the Company, the Company will not be obligated to pay the Wage
Continuation; however in that event, the Company shall be obligated to pay
disability benefits in accordance with the Company's then existing policies
regarding the payment of disability benefits for senior level executives. If
you are terminated without Cause and become disabled within 6 months of your
termination, the Company shall pay the Wage Continuation, subject to any offsets
allowable under this letter agreement.
As consideration for the promises provided for in this letter agreement,
you acknowledge that by reason of the nature of your duties, you will or may
have access to and become informed of confidential and secret or proprietary
information which is a competitive asset of the Company, including without
limitation (i) customer information such as names, addresses, sales histories,
purchasing habits, credit status, and pricing levels, (ii) certain prospective
customer information and lists, (iii) merchandise and product information, (iv)
merchandise and product suppliers, and prospective suppliers' names, addresses
and contacts, (v) future corporate planning data, (vi) marketing strategies,
(vii) the Company's financial results and business condition, and (viii) any of
the foregoing which belong to any other person or company but to which you had
access by reason of your employment with the Company (collectively,
"Confidential Information"). You agree to keep in strict confidence, and not,
either directly or indirectly, to make known, divulge, reveal, furnish, make
available or use (except for use in the regular course of your duties hereunder
or as necessary, as determined by you in good faith for you to perform your
duties hereunder) any Confidential Information. You acknowledge that all sales
manuals, instructions books, catalogs, price lists, information and records,
technical manuals and documentation, drafts or instructions, guides and manuals,
and other sales or technical information and aids relating to the Company's
business and any and all other documents containing Confidential Information
furnished you by any employee of the Company or otherwise acquired or developed
by you shall at all times be the property of the Company. Upon termination of
your employment with the Company, you shall return to the Company any materials
containing Confidential Information which are in your possession, custody or
control.
Your obligations under this paragraph shall survive such termination of
your employment with the Company, but shall not be applicable to (i) any such
Confidential Information which becomes, through no fault of yours, generally
known to the trade, (ii) information which you can demonstrate was known to you
prior to commencing your employment with the Company, (iii) information in the
public domain, (iv) information required to be disclosed under or by subpoena or
lawful court or by direction of the Chief Executive Officer or the Board of
Directors, and (v) information which you need to disclose to your personal
financial or legal advisors in connection with any litigation between the
parties regarding this letter agreement. Your obligations under this paragraph
are in addition to, and not in limitation or pre-emption of, all other
obligations of confidentiality which you may have to the Company under Company
policies or under general legal or equitable principles.
3
<PAGE>
For the purposes of this letter agreement, "Entity" shall include, without
limitation, a person, firm partnership, limited liability company, corporation
or any other form of business enterprise.
You also acknowledge that during the term of this letter agreement, your
access to the Confidential Information will enable you to benefit from the
Company's goodwill and know-how. To protect these vital interests of the
Company, you agree that during the term of this letter agreement and for a
period of twelve (12) months following your termination for any reason, you will
not, without the prior written consent of the Company, directly or indirectly,
whether as a director, officer, employee, agent, consultant, shareholder,
partner, inventor or otherwise:
(i) invest (except as a five percent (5%) or less shareholder of any
publicly traded corporation) or become employed by or associated with
any Entity which competes directly or indirectly with the Company or
accept employment with or render services to an Entity which competes
directly or indirectly with the Company; or
(ii) actively solicit the employment or hiring by any Entity or any
employee of the Company.
This covenant not to compete shall apply whether you act as an individual
or for your own account, or as a partner, employee, agent, salesman,
distributor, consultant or representative of any other Entity. For the purposes
of this letter agreement, an Entity which competes directly or indirectly with
the Company is any Entity primarily engaged in the business of selling sporting
goods, active sportswear and athletic shoes in Texas, Louisiana, California,
Arizona or New Mexico.
Your Wage Continuation shall be forfeited and all payments due under this
letter agreement shall cease, if any of the noncompete provisions of this letter
agreement are breached or violated. In that event, the Company will have no
obligation to pay you any further Wage Continuation under this letter agreement.
Should any dispute or controversy arise between the parties, including
without limitation, any dispute relating to this letter agreement, your
employment or termination of employment from the Company, the parties
specifically stipulate and agree to submit any such dispute to final and binding
arbitration. Such arbitration shall be conducted before a single arbitrator
pursuant to the Commercial Arbitration Rules then in effect of the American
Arbitration Association, except to the extent such rules are inconsistent with
this paragraph. Exclusive venue for such arbitration shall be in Houston, Harris
County, Texas. The arbitration shall apply the laws of the state of Texas
(without regard to conflict of law rules) in determining the substance of the
dispute, controversy or claim and shall decide same in accordance with the
applicable usages and terms of trade. Evidentiary questions shall be governed by
the Federal Rules of Evidence. The arbitrator's award shall be in writing and
set forth the findings and conclusions upon
4
<PAGE>
which the award is based, with the costs of such arbitration to be split equally
between the parties. Any award pursuant to such arbitration shall be final and
binding upon the parties, and judgment on the award may be entered in any
federal or state court in Harris County, Texas, or any other court having
jurisdiction. The terms of this paragraph shall survive the termination of this
letter agreement.
By execution of this letter agreement, you, with an adequate opportunity to
consult with legal counsel knowingly and voluntarily waive any right to trial by
jury of any dispute pertaining to or relating in any way to your employment with
or termination from the Company, including any matters relating to this letter
agreement, the provisions of any federal, state or local law, regulation or
ordinance notwithstanding. Notwithstanding the foregoing provisions, if you
breach any of the non-disclosure or non-competition provisions of this letter
agreement, the Company shall have the right to seek immediate injunctive relief
in the form of a temporary, preliminary or permanent mandatory or restraining
injunction, enjoining you from such further breach of those provisions of this
letter agreement.
No delay or omission by the Company or you in exercising any right or
remedy under any of the terms of this letter agreement shall operate as a waiver
of any rights or remedies which the Company or you may have under this letter
agreement, either at law or in equity, and no single or partial exercise of any
such right shall preclude any other or further exercise thereof or of the
exercise of any other right or remedy. All other terms and conditions of your
employment shall continue to be governed by the Company's policies and
procedures, as those may be amended from time to time.
If the terms and conditions of the foregoing agreement meet with your
approval, please indicate so by signing in the space provided for below and
returning this original to me.
Sincerely,
/s/ ALVIN N. LUBETKIN
Alvin N. Lubetkin
Agreed and Approved:
/s/ TIMOTHY L. GRADY
- -------------------------------
Timothy L. Grady
Date: July 1, 1996
--------------------------
<PAGE>
EXHIBIT 11.1
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
NOVEMBER 2, 1996 OCTOBER 28, 1995 NOVEMBER 2, 1996 OCTOBER 28, 1995
-------------------- --------------------- --------------------- --------------------
FULLY FULLY FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
-------- -------- -------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET LOSS $(2,895) $ (2,895) $ (3,141) $ (3,141) $(12,157) $ (12,157) $ (2,199) $ (2,199)
======= ======== ======== ======== ======== ========= ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,830 5,830 5,815 5,815 5,828 5,828 5,814 5,814
EXCESS OF SHARES ISSUABLE
UPON EXERCISE OF STOCK
OPTIONS OVER SHARES DEEMED
RETIRED UNDER THE "TREASURY
STOCK" METHOD -- -- -- -- -- -- -- --
======= ======== ======== ======== ======== ========= ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND DILUTIVE COMMON
EQUIVALENT SHARES OUTSTANDING 5,830 5,830 5,815 5,815 5,828 5,828 5,814 5,814
======= ======== ======== ======== ======== ========= ======== ========
EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARE $ (.50) $ (.50) $ (.54) $ (.54) $ (2.09) $ (2.09) $ (.38) $ (.38)
======= ======== ======== ======== ======== ========= ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 493
<SECURITIES> 0
<RECEIVABLES> 1,777
<ALLOWANCES> 0
<INVENTORY> 143,163
<CURRENT-ASSETS> 153,302
<PP&E> 100,128
<DEPRECIATION> 55,766
<TOTAL-ASSETS> 198,191
<CURRENT-LIABILITIES> 80,593
<BONDS> 62,902
0
0
<COMMON> 5,830
<OTHER-SE> 45,358
<TOTAL-LIABILITY-AND-EQUITY> 198,191
<SALES> 253,578
<TOTAL-REVENUES> 253,578
<CGS> 167,847
<TOTAL-COSTS> 167,847
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,801
<INCOME-PRETAX> (12,047)
<INCOME-TAX> 110
<INCOME-CONTINUING> (12,157)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,157)
<EPS-PRIMARY> (2.09)
<EPS-DILUTED> (2.09)
</TABLE>
