<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended February 3, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____________________ to ____________________
Commission File No. 0-5648
OSHMAN'S SPORTING GOODS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 74-1031691
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
2302 Maxwell Lane 77023
Houston, Texas (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (713) 928-3171
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 29, 1996 (based upon the closing sales price as of such
date) was $26,616,480.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of February 3, 1996:
Common Stock, $1.00 par value 5,819,149
Documents incorporated by reference: Proxy Statement for the Registrant's Annual
Meeting of Stockholders to be held June 21, 1996 (to be filed within 120 days of
the close of Registrant's fiscal year) is incorporated by reference into Part
III.
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<PAGE>
PART I
ITEM 1. BUSINESS.
DEVELOPMENT OF BUSINESS
Oshman's Sporting Goods, Inc. ("Oshman's" or the "Company"), which operates
a chain of retail sporting goods specialty stores, primarily in the Sun Belt,
was incorporated in Delaware in 1946 as the successor to a proprietorship
founded by J. S. Oshman in 1931. Unless the context otherwise requires, the
terms "Oshman's" and the "Company" as used herein include the Company and its
subsidiaries, whether operating under the name "Oshman's," "SuperSports USA" or
"Honsport."
Since 1990, the Company 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 its efforts on
opening and operating SuperSports USA megastores occupying, on average,
approximately 60,000 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 an 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 February 3, 1996, 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 seven 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. 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 one store that
remains 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.
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The following table summarizes the contributions of the Company's stores
since 1991. The table does not include stores in the Company's restructure
group for fiscal 1994 or fiscal 1995. Traditional store data include results
from the Company's three clearance stores and occasional off-premises sales:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
STORES OPEN AT END OF PERIOD:
Megastores.............................. 24 12 8 5 2
Traditional stores...................... 105 113 153 165 181
-------- -------- -------- -------- --------
Total stores.......................... 129 125 161 170 183
NET RETAIL SALES:
Megastores.............................. $164,523 $ 95,711 $ 64,616 $ 41,018 $ 21,083
Traditional stores...................... 162,323 185,993 235,100 264,872 270,401
-------- -------- -------- -------- --------
Total net retail sales................ $326,846 $281,704 $299,716 $305,890 $291,484
======== ======== ======== ======== ========
WEIGHTED AVERAGE NET SALES PER STORE(1):
Megastores..................................... $ 10,244 $ 9,970 $ 9,850 $ 11,958 $ 10,542
Traditional stores............................. 1,499 1,600 1,460 1,529 1,466
PERCENTAGE OF NET RETAIL SALES:
Megastores..................................... 50.3% 34.0% 21.6% 13.4% 7.2%
Traditional stores............................. 49.7% 66.0% 78.4% 86.6% 92.8%
DIRECT STORE CONTRIBUTIONS(2):
Megastores..................................... $ 17,492 $ 9,655 $ 5,577 $ 4,189 $ 1,576
Traditional stores............................. 10,566 14,931 10,062 19,749 19,567
-------- -------- -------- -------- --------
Total......................................... $ 28,058 $ 24,586 $ 15,639 $ 23,938 $ 21,143
======== ======== ======== ======== ========
WEIGHTED AVERAGE DIRECT STORE CONTRIBUTION
PER STORE(3):
Megastores..................................... $ 1,089 $ 1,006 $ 850 $ 1,221 $ 788
Traditional stores............................. 98 128 62 114 106
PERCENTAGE OF TOTAL DIRECT STORE CONTRIBUTIONS:
Megastores..................................... 62.3% 39.3% 35.7% 17.5% 7.5%
Traditional stores............................. 37.7% 60.7% 64.3% 82.5% 92.5%
CONTRIBUTION MARGIN(4):..........................
Megastores..................................... 10.6% 10.1% 8.6% 10.2% 7.5%
Traditional stores............................. 6.5% 8.0% 4.3% 7.5% 7.2%
Total...................................... 8.6% 8.7% 5.2% 7.8% 7.3%
</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.
Fiscal 1995 included 53 weeks compared to 52 weeks in fiscal 1994. On a
comparable 52 week basis, Oshman's experienced a 12.3% same store sales increase
for SuperSports USA megastores and a (5.1%) same store sales decrease for
traditional stores during the fiscal year ended February 3, 1996. The same
store sales increase for megastores included a megastore converted from a
traditional store in October 1994; if such store were excluded, the increase
would be 5.0%.
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
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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. Sales of
sporting apparel accounted for approximately 28-31% and footwear accounted for
approximately 17-22% of net retail sales during the last three fiscal years.
The remaining approximately 50-52% of net retail sales during these years was
attributable to sporting good equipment.
COMPETITION
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.
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 is and will be taking steps to improve operating results
at five of the stores in the restructure group and has removed such stores from
the restructure group. As of February 3, 1996, Oshman's was operating 133
stores, 109 of
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which were traditional stores and 24 of which were SuperSports USA megastores.
Changes in the number of stores and square footage during the last six fiscal
years are summarized below:
<TABLE>
<CAPTION>
NUMBER OF STORES SQUARE FOOTAGE (AT END OF PERIOD)
-------------------------------------------------------- ---------------------------------------
SUPERSPORTS
TRADITIONAL USA TRADITIONAL OPERATED SUPERSPORTS
STORES MEGASTORES STORES AT TRADITIONAL USA(R)
FISCAL YEAR OPENED OPENED CLOSED YEAR 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......... 0 12(b) 20 133(b) 1,196,000 1,439,000 2,635,000
-- -- --
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 seven 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 one store that remains in the restructure
group at the end of fiscal 1995. 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 a 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.
4
<PAGE>
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 continue its
reconfiguration of these stores during fiscal 1996.
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 14.2%, 10.4% and 9.0% of the Company's total purchases in
fiscal 1995, 1994 and 1993, respectively. No other supplier accounted for more
than 10% of the Company's purchases in any of the last three years.
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 89% of the Company's inventory
is shipped through these distribution centers. 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 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.
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 virtually all of its
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
5
<PAGE>
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.
SEASONAL FACTORS
Oshman's business is highly seasonal, with sales generally higher in the
fourth quarter, peaking in December due to holiday shopping and the purchase of
ski equipment. During fiscal 1995, 1994 and 1993, 34.2%, 31.7% and 31.1%,
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."
TRADEMARKS AND SERVICE MARKS; OTHER BUSINESS
As of February 3, 1996, Oshman's owned approximately 33 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.
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 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 1995, institutional sales accounted for 2.1% of net
sales. In February 1996 the Company announced plans to discontinue this
institutional sales division by June 1996. Neither area is material to its
business.
MISCELLANEOUS
Oshman's typically satisfies its working capital needs out of internally
generated funds from current operations and its credit facilities as addressed
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, below.
Inasmuch as Oshman's is a retailer, backlog is not relevant to its business.
Oshman's does not have contracts subject to renegotiation or termination and
does not carry on any material amount of research and development activities.
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Federal, state, and local environmental regulations have not had, and are
not expected to have, any material effect upon the expenditures, earnings or
competitive position of the Company.
As of February 3, 1996, Oshman's employed approximately 3,700 people
including part-time employees.
ITEM 2. 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 Houston and
San Antonio, Texas and in Los Angeles and Millbrae, California. Each of the
properties owned by the Company are subject to mortgage liens of certain of the
Company's lenders, including The CIT Group/Business Credit, Inc. ("CIT").
Substantially all of Oshman's retail stores occupy leased space in modern
structures. As of February 3, 1996, these retail stores occupied an aggregate
of approximately 2,536,000 square feet of floor space under leases expiring at
various dates from 1996 to 2017 (exclusive of renewal options). Traditional
stores on average are comprised of approximately 11,000 square feet, while the
average megastore occupies approximately 60,000 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 $17.0 million during the 1995 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.
ITEM 3. LEGAL PROCEEDINGS.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Oshman's did not submit any matters to a vote of security holders during the
fourth quarter of the fiscal year ended February 3, 1996.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name and age of each executive officer 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) 49 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
Richard G. Dennis 43 Vice President, Assistant Secretary and General Counsel
Steven U. Rath 40 Vice President
- ----------
</TABLE>
(1) Member of the Executive 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 advertising and promotional activities of the Company. From 1991 to 1996 he
was responsible for merchandising. 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.
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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.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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. 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 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 ENDED FEBRUARY 3, 1996
First Quarter ended April 29, 1995 $ 7.63 $5.75
Second Quarter ended July 29, 1995 9.38 5.75
Third Quarter ended October 28, 1995 15.13 9.38
Fourth Quarter ended February 3, 1996 13.88 9.75
</TABLE>
As of March 31, 1996, there were approximately 1258 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 March 29, 1996, was $10.00.
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 the Common Stock.
9
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ITEM 6. SELECTED FINANCIAL DATA.
The following table provides selected consolidated financial information for
the Company's last five fiscal years.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30, FEBRUARY 1,
OR AS OF THE YEAR END 1996 1995 1994 1993 1992
(53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Consolidated Sales $342,889 $311,419 $307,935 $313,253 $297,829
Net Earnings (Loss) 1,942 290 (19,494) (679) (4,050)*
Net Earnings (Loss) per Share .32 .05 (3.36) (.12) (.70)*
Dividends per Share -- -- -- -- --
Total Assets 162,923 135,077 126,432 138,341 143,384
Long-Term Debt 36,681 5,665 3,712 1,696 5,510
</TABLE>
- ----------------------
* Does not include a net gain of $2,150,000 arising from a non-recurring
change in accounting principle reflected in the Company's Statement of
Operations for the year ended February 1, 1992.
The two years ended January 30, 1993 were restated from originally issued
results to reflect a change in inventory valuation methods from the last-in,
first-out (LIFO) method to the first-in, first-out (FIFO) method during the
third quarter of 1993.
ITEM 7. 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 1990, the Company opened its first
two SuperSports USA megastores. The changing nature of retailing and the new
competitive challenges in the sporting goods sector had started to effect the
results of the Company's traditional stores. By the beginning of 1993, the
Company was operating five megastores and management determined that this format
offered the most profit potential for Oshman's. The Company is in the process
of transforming its business by focusing on opening and operating SuperSports
USA megastores occupying, on average, approximately 60,000 square feet, while
rationalizing its pre-existing base of traditional stores, which average
approximately 11,000 square feet. At the end of fiscal 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. 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 providing 62.3% of direct store contributions in fiscal 1995, an
increase from the 39.3% provided in fiscal 1994. The megastores also produced
50.3% of total retail sales, excluding sales from stores in the restructure
group, in fiscal 1995, an increase from 34.0% in fiscal 1994. SuperSports USA
megastores had comparable store sales growth of 5.0% and 3.8% for fiscal 1995
and fiscal 1994, respectively (excluding sales from megastores
10
<PAGE>
converted from traditional stores during the respective prior fiscal years), and
made weighted average direct store contributions of $1.1 million and $1.0
million per store for fiscal 1995 and fiscal 1994, 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 SuperSports USA
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
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.
At the end of fiscal 1995, 28 of the 34 stores in the restructure group had
been closed, an additional store was scheduled to be closed in May 1996 and five
stores had been removed from the restructure group. The Company removed two of
these stores from the group in fiscal 1994 as a result of their improved results
of operations. The other three stores were removed from the group at the end of
fiscal 1995 because the Company believes that it can take actions to cause these
stores to operate on a basis that is more economically attractive than incurring
the costs required to close such stores. As of the end of fiscal 1995, 26 of
the 28 leases for closed stores had been terminated and one closed store
location had been subleased. The remaining closed store lease was terminated in
March 1996.
At the end of fiscal 1995, the Company reevaluated and reduced the remaining
restructure reserve by crediting pretax income for $2.4 million in excess
reserve, leaving a balance in this reserve of $480,000 to cover costs of the
remaining restructure locations.
The following is a summary of the application of the restructuring reserve
through the end of fiscal 1995:
<TABLE>
<CAPTION>
NON-CASH
COSTS AND
PROVISION CASH COSTS ASSET RESERVE RESERVE
RECORDED INCURRED WRITE-DOWN TRANSFER REDUCTION BALANCE
--------- ---------- ---------- --------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Lease termination costs.... $ 3,650 $1,327 $ -- $ -- $2,043 $280
Fixed asset write-downs
and depreciation......... 3,500 -- 3,475 -- 25 --
Inventory liquidation
markdowns................ 3,033 5,204 -- (2,300) 54 75
Operating losses........... 3,710 1,203 -- 2,300 115 92
Other store closing costs.. 1,107 910 -- -- 164 33
------- ------ ------ ------- ------ ----
Total.................. $15,000 $8,644 $3,475 $ -- $2,401 $480
======= ====== ====== ======= ====== ====
</TABLE>
11
<PAGE>
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
--------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Net sales................................ 100.0 100.0 100.0
Cost of goods sold....................... 65.3 64.9 66.7
----- ----- -----
Gross profit......................... 34.7 35.1 33.3
Operating expenses:
Selling and administrative expenses.. 33.6 35.2 36.4
Pre-opening expenses................. .6 .3 .3
Corporate restructuring.............. (.7) -- 4.9
Store closing provision.............. .7 .2 .2
Miscellaneous income................. (.8) (1.1) (.5)
----- ----- -----
Operating income (loss)............ 1.4 .6 (7.9)
Interest expense, net.................... .7 .4 .4
----- ----- -----
Earnings (loss) before income taxes...... .7 .1 (8.4)
Income tax (benefit)..................... .1 -- (2.0)
----- ----- -----
Net earnings (loss)...................... .6 .1 (6.3)
===== ===== =====
</TABLE>
Fiscal 1995 Compared to Fiscal 1994
-----------------------------------
Net sales for fiscal 1995, which includes 53 weeks, increased $31.5 million,
or 10.1%, compared to fiscal 1994, a 52 week year. The additional week in
fiscal 1995 contributed approximately $5.4 million or 1.7% of the increased
sales for the year. The increase in sales is primarily attributable to a 63.3%
increase in sales from SuperSports USA megastores compared to fiscal 1994 after
giving consideration to the pre- and post-conversion sales of a traditional
store converted to a megastore in October 1994. The increase in megastore sales
was attributable to, among other things, (i) full year sales contributions from
four new SuperSports USA megastores opened in fiscal 1994, (ii) partial year
sales contributions from five new SuperSports USA megastores opened in fiscal
1995, (iii) sales contributions from the seven megastores opened in the fourth
quarter of fiscal 1995 at locations acquired from SportsTown, Inc. and (iv) same
store sales increases in existing megastores which, excluding the sales of a
12
<PAGE>
megastore converted from a traditional store in October 1994, increased 5.0% on
a comparable 52 week basis. Megastore sales represented 50.3% of total retail
sales (excluding sales from stores included in the restructure group) during
fiscal 1995 compared to 34.0% in fiscal 1994. The sales increases from
megastores 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 in
fiscal 1995 attributable to these store closures were $25.6 million. Excluding
sales from stores in the restructure group, net sales increased $44.0 million,
or 15.2%, in fiscal 1995 (53 weeks) compared to fiscal 1994 (52 weeks). Despite
an overall increase in sales for fiscal 1995, sales in the fourth quarter were
negatively impacted by poor snow ski conditions in the western United States and
by the relatively weak Christmas shopping season experienced nationwide.
Comparable same store sales, excluding sales from stores in the restructure
group, increased .8% on a comparable 52 week basis in fiscal 1995 compared to
fiscal 1994. At the end of fiscal 1995, the Company was operating 133 stores,
including 24 megastores, compared to 141 stores, including 12 megastores, at the
end of fiscal 1994.
Gross profit, as a percentage of net sales, decreased slightly to 34.7% in
fiscal 1995 compared to 35.1% in fiscal 1994. This decrease was primarily
attributable to poor snow ski related sales and gross profit contribution from
such sales in fiscal 1995 compared to fiscal 1994, which had the effect of
reducing total gross profit as a percentage of sales by approximately .5%. This
decrease was somewhat offset by increased gross profit contributions from the
Company's SuperSports USA megastores as the gross profit contributions from the
megastores comprised a greater portion of total gross profit. These stores, on
average, realized a slightly higher gross profit as a percentage of net sales
than the Company's traditional stores.
Selling and administrative expenses as a percentage of net sales was 33.6%
in fiscal 1995, compared to 35.2% in fiscal 1994. This improvement as a
percentage of sales is primarily related to two factors. First, an increase in
the proportionate number of SuperSports USA megastores in fiscal 1995 resulted
in the sales contribution of megastores increasing to 50.3% of total retail
sales (excluding sales from stores in the restructure group) in fiscal 1995
compared to 34.0% in fiscal 1994, thereby causing an overall reduction in
selling and administrative expenses as a percentage of net sales because
operating expenses of the megastores as a group in fiscal 1995 were
approximately 5% lower as a percentage of net sales than the operating expenses
of the traditional stores. Second, the leveraging effect of the increased level
of net sales produced a decline in corporate overhead expenses and other
relatively fixed expenses as a percentage of net sales in fiscal 1995 compared
to fiscal 1994. The above improvements were somewhat offset by a net credit in
fiscal 1995 of .2% as a percentage of net sales for the direct store losses of
stores in the restructure group, net of liquidation markdowns and lease
termination costs, compared to a net credit in fiscal 1994 of .5% as a
percentage of net sales.
Pre-opening expenses as a percentage of net sales were .6% and .3%,
respectively, in fiscal 1995 and fiscal 1994. Pre-opening expenses relate to
direct and incremental expenses incurred primarily in connection with store
preparation and sales associate training prior to the date of opening. The
Company's policy with regard to pre-opening expenses is that expenses related to
stores larger that 25,000 square feet in size (anticipated to be only
SuperSports USA megastores) are deferred and amortized over a one-year period
subsequent to the store opening.
13
<PAGE>
Pre-opening expenses for smaller stores are expensed as incurred. The Company
opened 12 megastores in fiscal 1995 compared to four in fiscal 1994.
At the end of fiscal 1995, the Company reevaluated its restructure reserve
and reduced the remaining balance by crediting pretax income for $2.4 million in
excess reserve. This excess amount related primarily to original estimates for
lease termination costs that were in excess of amounts actually incurred.
Store closing provision was .7% as a percentage of net sales in fiscal 1995
compared to .2% in fiscal 1994. These costs typically consist of fixed asset
write-offs and incremental costs related to the disposition of inventories and
other store closing costs incurred as leases expire. In addition to costs
incurred during fiscal 1995 in connection with the closing of eight traditional
stores in the normal course of business as compared to the closing of nine
stores in fiscal 1994, the Company at the end of fiscal 1995 recorded a charge
for an additional provision of $2.2 million to cover estimated costs of lease
terminations, inventory losses and write-off of fixed assets related to the
expected closing of seven traditional stores and the Company's athletic team
business in fiscal 1996. This additional provision covers larger-than-usual
estimates for lease termination costs and write-off of fixed assets as a result
of the Company's intention to close certain of these stores before the
expiration of their leases.
The major components of miscellaneous income for fiscal 1995 and fiscal 1994
are set out in the table below:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------
1995 1994
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Gain on sale of real estate and leasehold interests.. $ -- $1,633
Condemnation proceeds................................ 1,550 --
Fees from foreign licensees.......................... 1,087 1,418
Insurance recovery................................... -- 372
Recovery for earthquake loss......................... 229 164
Other, net........................................... (252) (53)
------ ------
Total............................................ $2,614 $3,534
====== ======
</TABLE>
Net interest expense for fiscal 1995 was $2.3 million, compared to $1.4
million in fiscal 1994. The increased net interest expense is primarily related
to increased average borrowings under the Company's credit facility and to
increases in the prime and LIBOR interest rates.
Pretax income in fiscal 1995 increased to $2.4 million from $422,000 in
fiscal 1994. The improved results are primarily due to increased sales volumes
and the related gross profit contribution produced by the higher sales levels.
Additionally, selling and administrative expenses (some of which are relatively
fixed) have been decreasing 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.
14
<PAGE>
The effective income tax rates for fiscal years 1995 and 1994 were 17.4% and
31.3%, respectively, and are related primarily to state income taxes. In both
fiscal 1995 and 1994, deferred tax benefits were utilized in the calculation of
income tax expense in accordance with SFAS 109, and accordingly no Federal
income tax expense was recognized. As the Company's pretax income increases,
state tax expense becomes proportionately less significant.
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 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 3.8% for fiscal 1994, while total sales
from all SuperSports USA megastores open at the end of fiscal 1994 (including
the two 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 34.0% of total net retail sales, excluding sales of
stores included in the restructure group, compared to 21.6% in the previous
year.
Gross profit as a percentage of net sales for fiscal 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 35.2%
in fiscal 1994 and 36.4% 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. In addition, selling and
administrative expenses were reduced in fiscal 1994 by a net credit equal to
.5%, as a percentage of sales, for the direct store losses of stores in the
restructure group, net of liquidation markdowns and lease termination costs.
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.
Pre-opening expenses were .3% as a percentage of net sales in both fiscal
1994 and fiscal 1993. These expenses were related primarily to the opening of
new SuperSports USA megastores in those years.
In fiscal 1993, the Company recorded a $15 million charge relating to a
restructuring plan to close 34 underperforming traditional stores as discussed
above under the heading "--Non-Recurring Items--Restructuring Charge."
15
<PAGE>
Store closing provision was .2% as a percentage of net sales in both fiscal
1994 and fiscal 1993 as a result of the closing of nine traditional stores in
fiscal 1994 and ten in fiscal 1993.
The major components of miscellaneous income for fiscal 1993 and fiscal 1994
are set out in the table below:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------
1994 1993
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Gain on sale of real estate and leasehold interests.. $1,633 $ 698
Fees from foreign licensees.......................... 1,418 1,303
Insurance recovery................................... 372 --
Recovery (provision) for earthquake loss............. 164 (500)
Other, net........................................... (53) 113
------ ------
Total............................................ $3,534 $1,614
====== ======
</TABLE>
Net interest expense was $1.4 million in each of fiscal 1994 and fiscal 1993
as the Company's average borrowings remained relatively constant between years.
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.
The effective 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.
LIQUIDITY AND CAPITAL RESOURCES
Activities in Fiscal Years 1995, 1994 and 1993
----------------------------------------------
In fiscal 1995, cash totaling $14.6 million was used in operating
activities. The primary use of cash during this period was related to a $12.3
million increase in merchandise inventories, a decrease in trade accounts
payable of $10.2 million, cash charges of $3.9 million to the Company's
restructuring reserve and a $2.9 million increase in prepaid expenses. These
amounts were partially offset by pretax earnings before depreciation and
amortization of $8.0 million, a $4.3 million increase in income taxes payable,
including the receipt of an income tax refund, and a $2.3 million increase in
accrued liabilities.
Cash totaling $17.0 million was used by investing activities in fiscal 1995,
primarily for the purchase of property, plant and equipment totaling $18.9
million, partially offset by developer provided funds of $1.8 million in excess
of such amounts applied to new store construction costs. The Company opened 12
SuperSports USA megastores during fiscal 1995, including seven megastores opened
at locations acquired from SportsTown, Inc. in October 1995.
16
<PAGE>
Financing activities provided cash of $31.7 million in fiscal 1995,
primarily as a result of the Company's utilization of its credit facility to
meet its working capital needs and to finance the purchase of property, plant
and equipment during fiscal 1995. In addition, in the fourth quarter of fiscal
1995, the Company entered into a $4.0 million mortgage loan collateralized by
land and a building in Houston, Texas where it operates one of its SuperSports
USA megastores.
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 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 was 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.
Inventories were $110.6 million at the end of fiscal 1995, $98.3 million at
the end of fiscal 1994 and $88.7 million at the end of fiscal 1993. Inventory
levels and trade accounts payable increased at the end of fiscal 1994, compared
to the end of fiscal 1993, 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. At
the end of fiscal 1995, average store inventories were somewhat lower than end
of fiscal 1994 levels and the net increase in inventory is primarily
attributable to the 12 new megastores opened during the year.
The increase in prepaid expenses in fiscal 1995 primarily resulted from pre-
opening costs related to the 12 new SuperSports USA megastores opened during
fiscal 1995.
Additions to property, plant and equipment during fiscal 1995 were $18.9
million. Approximately $14.3 million, over and above developer funding of $2.8
million, was used for the opening of five new SuperSports USA megastores and the
purchase, for approximately $5.1
17
<PAGE>
million, of seven store locations from SportsTown, Inc., where the Company
opened SuperSports USA megastores in November 1995. 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.
Approximately $3.5 million was used for computer hardware and software,
including approximately $2.4 million related to the installation of a new AS-400
computer and completion of an upgrade of the Company's point-of-sale information
systems. The remaining amount was used for renovation and refurbishment of
existing locations.
Additions to property, plant and equipment in fiscal 1994 and fiscal 1993
were $7.9 million and $4.5 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 purchase a tract of land in Houston, Texas where it opened a SuperSports USA
megastore in 1995. In fiscal 1994, the Company spent $750,000 on a two-year
program to upgrade its point of sale information systems which was completed in
fiscal 1995. Additionally, the Company spent approximately $850,000 to upgrade
its merchandising 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.
The decrease in trade accounts payable in fiscal 1995 was related to two
factors: (i) trade accounts payable at the end of fiscal 1994 were somewhat
higher than usual due to the early receipt of fiscal 1995 merchandise inventory
and, (ii) trade accounts payable were relatively low at the end of fiscal 1995
as a result of lower levels of merchandise inventory receipts in December and
January of fiscal 1995 caused by an acceleration of the receipt of Christmas
season merchandise in fiscal 1995 in order to be better prepared for the
Christmas shopping season.
The increase in accrued liabilities is primarily related to the $2.2 million
provision for 1996 store closings, typical fluctuations in items such as sales
and property taxes and payrolls, and amounts received from real estate
developers in connection with new stores.
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.
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 1995 and fiscal 1994, developer
funding of stores opened exceeded the
18
<PAGE>
respective real property construction costs by $1.8 million and $1.9 million,
respectively, 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. At
the end of fiscal 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 $3.2 million. The remaining portion of the unamortized balance is
included in accrued liabilities. In previous years, developer funding in excess
of real property construction costs has been immaterial.
Financing Arrangements and Liquidity
------------------------------------
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 fiscal 1995 was the Company's
credit facility, under which average borrowings during the year were $25.7
million. Because of the seasonal nature of its business and the build up in
inventory for the Christmas shopping season, the amount of outstanding
borrowings and letters of credit under the Company's credit facility is
typically highest in November and reached $43.7 million at November 6, 1995. At
February 3, 1996, the Company had recorded debt with respect to its credit
facility of $32.0 million and had outstanding letters of credit (used primarily
to purchase certain of the Company's imported inventory) of $2.4 million.
Additionally, in the fourth quarter of fiscal 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. In the
first quarter of fiscal 1995, the Company entered into a capital lease agreement
in the amount of $676,000 for the purchase of a new AS-400 computer.
The Company's primary source of liquidity for fiscal 1994 and 1993 was the
use of its credit facility, under which average borrowings were $13.8 million in
both years. In fiscal 1994 operating activities provided cash of $2.4 million as
an additional source of liquidity. The highest level of borrowings and
outstanding letters of credit in fiscal 1994 and fiscal 1993 was $27.4 million
at November 14, 1994 and $30.5 million at November 12, 1993, respectively. 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.
The Company had outstanding letters of credit totaling $2.8 million at the end
of fiscal 1994 and $3.4 million at the end of fiscal 1993.
19
<PAGE>
Capital Expenditures for Fiscal 1996
------------------------------------
Capital expenditures in fiscal 1996 are expected to be approximately $16.3
million. Currently the Company plans to open seven new megastores during fiscal
1996 at a capital cost of about $7.8 million, of which approximately $7.2
million is expected to be funded by construction allowances from developers.
Approximately $3.5 million is planned to be used for renovation of five of the
megastores opened at locations acquired from SportsTown, Inc., approximately
$2.7 million is planned to be used for computer hardware and software (including
about $1.0 million for replacement of the Company's financial, payroll and human
resources systems) and the balance is expected to be allocated to improvements
to existing stores, warehouses and administrative areas. During fiscal 1995,
the Company closed 20 traditional stores, 12 of which were in the restructure
group, thereby eliminating their working capital needs. The Company expects
that the closures of certain traditional stores and its athletic team business
in fiscal 1996 will require cash of approximately $2.7 million to cover
operating losses, lease termination costs, inventory liquidation and other
closing costs. However, these cash requirements are expected to be offset by
the reduced working capital requirements related to these locations plus
proceeds from an expected sale of real estate where the Company presently
operates a traditional retail store. The Company anticipates being able to
satisfy its capital needs during fiscal 1996 from the use of its credit
facility, developer funding, the sale of real estate mentioned above and from
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.
Sales in the fourth quarter of fiscal 1995 were negatively impacted by poor
snow ski conditions in the western United States and by the relatively weak
Christmas shopping season experienced nationwide, which had the effect of
reducing the Company's gross margin for the quarter to 33.6% as compared to
35.2% for the fourth quarter of fiscal 1994.
The following table sets forth certain unaudited financial information for
the Company for each of the quarterly periods in fiscal 1995 and fiscal 1994:
<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995
---------------------------------------- ----------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
--------- -------- --------- -------- --------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $66,125 $80,095 $66,472 $98,727 $69,407 $84,481 $71,739 $117,262
Gross profit.................. $24,611 $26,876 $23,085 $34,737 $26,139 $28,230 $25,383 $ 39,400
Gross margin.............. 37.2% 33.6% 34.7% 35.2% 37.7% 33.4% 35.4% 33.6%
Operating income (loss)....... $ (606) $ 1,482 $(3,249) $ 4,176 $ 32 $ 1,918 $(2,492) $ 5,201
Operating margin.......... (.9%) 1.9% (4.9%) 4.2% .1% 2.3% (3.5%) 4.4%
Net income (loss)............. $ (948) $ 1,048 $(3,690) $ 3,880 $ (478) $ 1,420 $(3,141) $ 4,141
Net income (loss) margin.. (1.4%) 1.3% (5.6%) 3.9% (.7%) 1.7% (4.4%) 3.5%
</TABLE>
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears on pages 23 through 46 of this
report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There is no incident required to be disclosed herein.
PART III
In accordance with paragraph (3) of General Instruction G to Form 10-K, Part
III of this Report is omitted because the Company will file with the Securities
and Exchange Commission not later than 120 days after the end of the fiscal year
ended February 3, 1996 a definitive proxy statement pursuant to Regulation 14A
involving the election of directors, which proxy statement is incorporated
herein by reference.
21
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
(a) 1. Financial Statements REFERENCE
-------------------- ---------
<S> <C> <C>
Report of independent certified public accountants.... 23
Consolidated balance sheets at February 3, 1996 and
January 28, 1995..................................... 25
Consolidated statements of operations for the years
ended February 3, 1996, January 28, 1995, and
January 29, 1994..................................... 26
Consolidated statements of stockholders' equity for
the years ended February 3, 1996, January 28, 1995,
and January 29, 1994................................. 27
Consolidated statements of cash flows for the years
ended February 3, 1996, January 28, 1995 and
January 29, 1994..................................... 28
Notes to consolidated financial statements............ 29
Selected quarterly financial data..................... 44
2. Financial Statement Schedules
Schedule II - Allowance for Doubtful Receivables -
Years ended February 3, 1996, January 28, 1995 and
January 29, 1994..................................... 45
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
3. List of Exhibits
----------------
See index to exhibits immediately following the signature page.
The Registrant will furnish to stockholders a copy of any exhibit upon
payment of $.20 per page to cover the expense of furnishing such copies.
Requests should be directed to Richard L. Bockart, Vice President, Oshman's
Sporting Goods, Inc., P.O. Box 230234, Houston, Texas 77223-0234.
(b) Reports on Form 8-K
-------------------
The Company filed no reports on Form 8-K during the last quarter of the
fiscal year ended February 3, 1996.
22
<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 February 3,
1996 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 February 3, 1996. 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.
23
<PAGE>
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 February 3, 1996 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 February 3, 1996, in conformity
with generally accepted accounting principles.
We have also audited Schedule II of Oshman's Sporting Goods, Inc. and
Subsidiaries for each of the three years in the period ended February 3, 1996.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
Houston, Texas
March 14, 1996
24
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 3, 1996 and January 28, 1995
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1995 1994
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 327 $ 254
Accounts receivable, less allowance of $386 in 1995
and $395 in 1994 3,452 3,437
Merchandise inventories 110,630 98,294
Prepaid expenses and other 7,819 4,976
-------- --------
Total current assets 122,228 106,961
PROPERTY, PLANT AND EQUIPMENT - AT COST 93,807 80,374
Less accumulated depreciation and amortization 53,701 52,964
-------- --------
40,106 27,410
OTHER ASSETS 589 706
-------- --------
$162,923 $135,077
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations $ 809 $ 186
Trade accounts payable 35,486 45,686
Accrued liabilities 18,231 13,458
Income taxes 4,382 128
Restructuring reserve 480 7,128
-------- --------
Total current liabilities 59,388 66,586
DEFERRED INCOME TAXES 504 302
DEFERRED RENTAL ALLOWANCES 3,180 1,738
LONG-TERM OBLIGATIONS 36,681 5,665
STOCKHOLDERS' EQUITY
Common stock 5,822 5,811
Additional capital 3,865 3,434
Retained earnings 53,504 51,562
Less Treasury stock, at cost (21) (21)
-------- --------
63,170 60,786
-------- --------
$162,923 $135,077
======== ========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended February 3, 1996, January 28, 1995, and January 29, 1994
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net sales $342,889 $311,419 $307,935
Cost of goods sold 223,737 202,110 205,250
-------- -------- --------
Gross profit 119,152 109,309 102,685
Operating expenses
Selling and administrative expenses 115,210 109,601 111,971
Pre-opening expenses 1,892 848 1,008
Corporate restructuring (2,401) - 15,000
Store closing provision 2,406 590 693
Miscellaneous income (2,614) (3,534) (1,614)
-------- -------- --------
Operating income (loss) 4,659 1,804 (24,373)
Interest expense, net 2,307 1,382 1,358
-------- -------- --------
Earnings (loss) before income taxes 2,352 422 (25,731)
Income tax (benefit) 410 132 (6,237)
-------- -------- --------
NET EARNINGS (LOSS) $ 1,942 $ 290 $(19,494)
======== ======== ========
Earnings (loss) per common and common
equivalent share $.32 $.05 $(3.36)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended January 29, 1994, January 28, 1995 and February 3, 1996
(In thousands)
<TABLE>
<CAPTION>
Common stock
-------------- Treasury Additional Retained
Shares Amount stock capital earnings
------ ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 31, 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 plan 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 stock bonus
plans - - - 351 -
Issuance of shares under stock
option plan 11 11 - 80 -
Net earnings for the year - - - - 1,942
----- ------ -------- ------ --------
Balance at February 3, 1996 5,822 $5,822 $(21) $3,865 $ 53,504
===== ====== ======== ====== ========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended February 3, 1996, January 28, 1995 and January 29, 1994
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
Cash flows of operating activities
Net earnings (loss) $ 1,942 $ 290 $(19,494)
Adjustments to reconcile net cash provided (used)
by operating activities
Depreciation and amortization 5,669 5,643 6,144
(Recoveries of) provision for losses on accounts receivable (9) 153 (2)
(Recovery) provision for corporate restructuring (2,401) - 15,000
Charge to reserve for corporate restructuring, net of
depreciation and amortization (3,871) (4,745) (207)
Provision for losses on store closings 2,406 590 693
Stock option and bonus plan expense, net of stock
retained for income taxes 351 155 -
Loss on disposition of fixed assets 99 131 26
Increase (decrease) in deferred income taxes 202 (11) (5,510)
Amortization of deferred rental allowance (205) (63) -
Gain on disposition of real estate and leaseholds - (1,633) (698)
Changes in assets and liabilities
(Increase) decrease in accounts receivable (6) (98) 100
(Increase) decrease in merchandise inventories (12,336) (9,595) 4,634
Increase in prepaid expenses and other (2,867) (108) (469)
(Decrease) increase in trade accounts payable (10,200) 12,820 (2,622)
Increase (decrease) in accrued liabilities 2,331 (1,107) (1,199)
Increase (decrease) in income taxes 4,254 (26) (858)
-------- ------- --------
Net cash (used) provided by operating activities (14,641) 2,396 (4,462)
Cash flows of investing activities
Proceeds from sale of fixed assets 26 42 132
Purchase of property, plant and equipment (18,854) (7,905) (4,497)
Proceeds from disposition of real estate and leaseholds 12 1,923 1,284
Proceeds from note receivable 47 45 46
Proceeds from rental allowances 1,753 1,931 56
-------- ------- --------
Net cash used by investing activities (17,016) (3,964) (2,979)
Cash flows of financing activities
Proceeds from stock issuance 91 33 -
Acquisition of Treasury stock - (21) -
Payment of loan acquisition costs - - (34)
Proceeds from issuance of long-term obligations 4,676 - 855
Payments of long-term obligations (472) (859) (765)
Proceeds from revolving credit facility, net 27,435 2,625 1,986
-------- ------- --------
Net cash provided by financing activities 31,730 1,778 2,042
-------- ------- --------
Net increase (decrease) in cash and cash equivalents 73 210 (5,399)
Cash and cash equivalents at beginning of period 254 44 5,443
-------- ------- --------
Cash and cash equivalents at end of period $ 327 $ 254 $ 44
======== ======= ========
Supplemental disclosures of cash flow information
Cash (received) paid during the year for
Income taxes $ (3,690) $ 139 $ 108
Interest 2,479 1,504 1,403
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 3, 1996, January 28, 1995
and January 29, 1994
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 49%
and 22%, respectively, of sales for the year ended February 3, 1996. 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 1995 (53 weeks), 1994 (52 weeks), and 1993 (52 weeks) ended on
February 3, 1996, January 28, 1995, and January 29, 1994, 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. USE OF ESTIMATES
----------------
In preparing the financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. Actual results could
differ from those estimates.
4. 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.
5. 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.
6. 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
29
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
leasehold improvements and 20 to 40 years for buildings. Estimated useful
lives of leasehold improvements represent the remaining term of the lease in
effect at the time the improvements are made.
7. AMORTIZATION OF OTHER ASSETS
----------------------------
Amortization is computed using the straight-line method. Excess of cost over
net assets of a business acquired is being amortized over 40 years. Loan
acquisition costs are being amortized over the term of the related debt.
8. 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.
9. 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.
10. PRE-OPENING EXPENSE
-------------------
Expenses (other than property, plant and equipment) associated with the opening
of new stores under 25,000 square feet are charged to expense as incurred.
Direct and incremental pre-opening expenses of stores larger than 25,000 square
feet are deferred and amortized over a one-year period subsequent to the store
opening.
11. STORE CLOSING PROVISION
-----------------------
The Company provides a provision for store closings when the decision to close
a store is made. The provision consists of the incremental costs which are
expected to be incurred, including the costs of non-recoverable investments in
fixed assets, future net lease obligations, other costs related to the
disposition of inventories and other direct store closing costs.
30
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
12. NEW PRONOUNCEMENTS
------------------
In 1995, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 121 Accounting for the Impairment of Long-
Lived Assets to Be Disposed Of (SFAS No. 121). SFAS No. 121 established
guidance for the recognition and measurement of impairment losses for long-
lived assets and certain intangibles and valuation of long-lived assets to be
disposed. This statement is effective for years beginning after December 15,
1995. The Company does not expect the effect of SFAS No. 121 to be material to
the financial statements taken as a whole.
In 1995, the FASB also issued SFAS No. 123 Accounting for Stock-Based
Compensation (SFAS No. 123). The SFAS allows entities to compute compensation
cost related to employee stock options by either using a fair-value-based
method or by continuing to use the method prescribed in APB No. 25 Accounting
for Stock Issued to Employees (APB No. 25). Even if entities plan to continue
to apply APB No. 25, they will be required to adopt the new disclosure
requirements of SFAS No. 123. The effective date of this statement is for
years beginning after December 15, 1995. The Company plans to continue to
apply APB No. 25.
13. RECLASSIFICATIONS
-----------------
Certain amounts in prior financial statements have been reclassified to conform
to the 1995 financial statement presentation.
NOTE B - PROPERTY, PLANT AND EQUIPMENT
The cost of property, plant and equipment at the end of the year consists of
the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
(In thousands)
<S> <C> <C>
Furniture, fixtures and equipment $57,673 $47,345
Leasehold improvements 27,284 25,755
Buildings 4,753 3,037
Land 2,927 2,927
Leasehold improvements under capital leases 1,170 1,310
------- -------
$93,807 $80,374
======= =======
</TABLE>
31
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE C - NOTE RECEIVABLE
The Company has a non-interest bearing note receivable from the Company's Chief
Executive Officer. At the end of 1995 and 1994, the balance of the note was
$464,000 and $511,000, 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.
NOTE D - LONG-TERM OBLIGATIONS
Long-term obligations at the end of the year consist of the following:
<TABLE>
<CAPTION>
1995 1994
------- ------
(In thousands)
<S> <C> <C>
Revolving credit facility due August 31, 1997, interest
payable monthly, collateralized by inventory, accounts
receivable and real estate $32,047 $4,610
Mortgage notes collateralized by land and buildings
(approximate cost $10,537,000) payable in aggregate
monthly installments of approximately $88,000,
including interest ranging from prime (8.25% at
February 3, 1996) plus 1% to 9.5% (fixed), maturing
through 2005 4,938 1,204
Capitalized lease obligations, interest at 8% to 9.5%,
maturing at various dates through 1998 505 37
------- ------
37,490 5,851
Less current maturities 809 186
------- ------
$36,681 $5,665
======= ======
</TABLE>
32
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE D - LONG-TERM OBLIGATIONS - CONTINUED
Following are maturities of long-term obligations for each of the next five
years and thereafter:
<TABLE>
<CAPTION>
Fiscal year Amount
- --------------- --------------
(In thousands)
<S> <C>
1996 $ 809
1997 32,801
1998 919
1999 430
2000 432
Thereafter 2,099
-------
$37,490
=======
</TABLE>
On August 31, 1992, the Company entered into an agreement providing for a
revolving credit facility. Currently, available credit under the facility is
$55,000,000, except for the mid-September to mid-December period when the
available amount is $70,000,000. Advances under the facility are based on a
borrowing base formula and subject to certain loan reserves, 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 January 1996.
Advances under the credit facility bear interest at the prime rate (8.25% at
February 3, 1996) plus .25% and any unused borrowing capacity is subject to a
line of credit fee of .5%. The Company may, under certain circumstances, elect
to have interest computed at a rate of the London Interbank Offered Rate
(LIBOR, 5.34% at February 3, 1996) plus 2.75%. The credit facility expires
August 31, 1997.
At the end of 1995 and 1994, outstanding letters of credit were $2,381,000 and
$2,786,000, respectively.
33
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE E - INCOME TAXES
The Company's tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- --------
(In thousands)
<S> <C> <C> <C>
Current
Federal $ - $ - $ (9)
Foreign 14 33 93
State 98 76 34
Deferred
Federal - - (5,731)
State 298 23 (624)
----- ----- -------
$ 410 $ 132 $(6,237)
===== ===== =======
</TABLE>
A reconciliation of income tax expenses (benefits) on net earnings (losses)
before cumulative effect of change in accounting principle computed at the
statutory Federal income tax rate and income taxes reported in the consolidated
statements of operations is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ --------
(In thousands)
<S> <C> <C> <C>
Income tax expense (benefit) at
statutory rate $ 800 $ 143 $(8,748)
Increases (reductions)
State income taxes (net of
Federal tax benefit) 65 50 22
Targeted jobs tax credit - net (81) (62) (15)
Other items - net 392 40 (446)
Change in valuation allowance (766) (39) 2,950
----- ----- -------
(390) (11) 2,511
----- ----- -------
Income tax expense (benefit) $ 410 $ 132 $(6,237)
===== ===== =======
</TABLE>
34
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE E - INCOME TAXES - CONTINUED
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
February 3, 1996 January 28, 1995
-------------------- --------------------
Current Long-Term Current Long-Term
-------- ---------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Assets
------
Accrued expenses $1,489 $ 380 $ 3,078 $ 654
Lease incentives 80 1,051 - -
Other 289 - 119 49
NOL carryforward 495 4,256 - 3,735
Business tax credits - 1,098 - 604
------ ------- ------- -------
2,353 6,785 3,197 5,042
------ ------- ------- -------
Liabilities
-----------
Depreciation of property and equipment - 3,678 - 2,239
Inventory capitalization 972 - 863 -
LIFO termination 481 963 489 1,495
Store opening costs 900 - 240 -
State taxes 126 377 29 175
Other 49 126 51 129
------ ------- ------- -------
2,528 5,144 1,672 4,038
------ ------- ------- -------
Net asset before valuation allowance (175) 1,641 1,525 1,004
Less valuation allowance - (2,145) (1,605) (1,306)
------ ------- ------- -------
NET LIABILITY $ 175 $ 504 $ 80 $ 302
====== ======= ======= =======
</TABLE>
Deferred income taxes of $175,000 and $80,000 were included in current
liabilities at the end of 1995 and 1994. The change in the method of
accounting for inventory which was made in the third 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 $2,145,000 and
$2,911,000 at February 3, 1996 and January 28, 1995, respectively, because the
Company does not believe that it is more likely than not that the deferred tax
asset will be realized in future years. Based upon financial income during
1995, the valuation allowance was reduced by $766,000.
35
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE E - INCOME TAXES - CONTINUED
The Company has net operating loss carryforwards of approximately $13,974,000.
The carryforwards expire as follows: $641,000 in 2008, $6,680,000 in 2009,
$3,317,000 in 2010 and $3,336,000 in 2011. Additionally, the Company has
foreign tax credit carryforwards of $292,000 expiring from 1996 to 2001, job
tax credit carryforwards of $754,000 expiring from 2008 to 2011 and alternative
minimum tax credit carryforwards of $61,000.
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 1995 are as
follows:
<TABLE>
<CAPTION>
Fiscal year Amount
- ----------- --------------
(In thousands)
<S> <C>
1996 $ 17,594
1997 29,240
1998 9,174
1999 17,480
2000 16,827
Thereafter to 2017 176,855
</TABLE>
Minimum payments have not been reduced by minimum sublease rental income of
$16,905,000 due in the future under noncancelable subleases.
36
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED
Total rental expense entering into the determination of net earnings (loss) is
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Leased facilities
Minimum rentals $14,302 $12,824 $13,798
Contingent rentals (based on a
percentage of sales) 2,686 2,767 2,649
------- ------- -------
16,988 15,591 16,447
Other rentals 521 673 461
------- ------- -------
$17,509 $16,264 $16,908
======= ======= =======
</TABLE>
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
1995, and the present value of such payments, are as follows:
<TABLE>
<CAPTION>
Fiscal year Amount
- ----------- --------------
(In thousands)
<S> <C>
1996 $277
1997 260
1998 21
----
Total minimum lease payments 558
Less amount representing interest 53
----
Present value of minimum obligations $505
====
</TABLE>
PROFIT SHARING PLAN
-------------------
The Company and its subsidiaries participate in a discretionary employee profit
sharing plan. No contributions were made in 1995, 1994 or 1993.
37
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED
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 $1,382,000, $1,088,000 and
$691,000 for 1995, 1994 and 1993, 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. The benefit payments will continue until the
face value of a purchased insurance policy from which the payments will be made
is reduced to the amount of the premiums paid by the Company. The Company will
receive the remaining face value upon the death of the executive. If the
executive dies before all payments are made, a lump-sum payment 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.
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 1995 and 1994, common stock shares issued were
5,822,000 and 5,811,000, respectively, and shares outstanding were 5,819,000
and 5,808,000, respectively. Common stock shares issued and outstanding at the
end of 1993 were 5,805,000.
38
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE G - STOCKHOLDERS' EQUITY - CONTINUED
COMMON STOCK OPTION PLANS
-------------------------
The Company's 1994 Omnibus Plan authorizes the grant of Incentive Awards for up
to 750,000 shares of common stock to key employees of the Company. 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 will continue to exist until they vest and are
exercised or expire. No awards are outstanding under the 1986 Stock Bonus Plan
at year end.
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 1995, 1994 or 1993. 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.
39
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE G - STOCKHOLDERS' EQUITY - CONTINUED
The following table reflects the activity under the Company's various plans
during the three-year period ended February 3, 1996:
<TABLE>
<CAPTION>
Shares Exercise Price Per Share
- ----------------------------------------------------------------------
<S> <C> <C>
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 262,500 $6.85 to $12.75
Cancelled (310,950) $5.00 to $14.56
Exercised (11,100) $5.00 to $ 6.68
Outstanding at February 3, 1996 682,800 $5.00 to $15.20
- ----------------------------------------------------------------------
</TABLE>
At February 3, 1996, options to purchase 402,150 shares of Common Stock under
the stock option plans were exercisable and options available for grant under
the plans were 351,500 shares.
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 grantee following a change in control of the Company,
termination of grantee by the Company without cause and termination by 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 for the grant was approximately
$517,000 and $187,000 in 1995 and 1994, respectively.
40
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
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, the Company implemented a restructuring
plan to close 34 of its underperforming traditional stores. A restructuring
charge of $15,000,000 before taxes was recorded which included provisions for
anticipated lease termination costs, abandonment of leasehold improvements,
liquidation markdowns on inventory, operating losses and other anticipated
costs associated with closing the stores. At the end of fiscal 1995, one store
remained in operation and will be closed in May 1996, five stores were
converted back to normal operation and the remaining 28 stores have been
closed. Twenty-six of the twenty-eight closed store leases have been
terminated, one has been subleased and the remaining lease will be terminated
in March 1996.
The following is a summary of activity in the restructuring reserve since
inception:
<TABLE>
<CAPTION>
Non-cash
Cash costs
Provision costs and asset Reserve Reserve
recorded incurred write-down Transfer reduction reduction
--------- -------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lease termination costs $ 3,650 $1,327 $ - $ - $2,043 $280
Fixed asset write-downs
and depreciation 3,500 - 3,475 - 25 -
Inventory liquidation
markdowns 3,033 5,204 - (2,300) 54 75
Operating losses 3,710 1,203 - 2,300 115 92
Other store closing costs 1,107 910 - - 164 33
------- ------ ------ ------- ------ ----
Total $15,000 $8,644 $3,475 $ - $2,401 $480
======= ====== ====== ======= ====== ====
</TABLE>
41
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 3, 1996, January 28, 1995
and January 29, 1994
NOTE J - MISCELLANEOUS INCOME (EXPENSE)
Miscellaneous income (expense) consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
(in thousands)
Gain on sale of real estate and
leasehold interests $ - $1,633 $ 698
Condemnation proceeds 1,550 - -
Fees from foreign licenses 1,087 1,418 1,303
Insurance recoveries - 372 -
(Recovery of) provision for earthquake 229 164 (500)
losses
Other, net (252) (53) 113
------ ------ ------
$2,614 $3,534 $1,614
====== ====== ======
</TABLE>
Fees from foreign licenses represent annual royalties from license agreements
which provide the licensee the ability to use the Company's name and to import
and sell the Company's products. Revenue under the license agreements include
annual royalties based on the greater of a minimum or a percentage of sales in
the licensee's stores and fees related to sales to the licensee. Revenue
recognized in 1993 includes a one time contract fee of $375,000.
42
<PAGE>
SUPPLEMENTAL INFORMATION
43
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
Years ended February 3, 1996 and January 28, 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995
Net sales $69,407 $84,481 $71,739 $117,262
======= ======= ======= ========
Gross profit $26,139 $28,230 $25,383 $ 39,400
======= ======= ======= ========
Net earnings (loss) $ (478) $ 1,420 $(3,141) $ 4,141
======= ======= ======= ========
Earnings (loss) per share $ (.08) $ .24 $ (.54) $ .67
======= ======= ======= ========
1994
Net sales $66,125 $80,095 $66,472 $ 98,727
======= ======= ======= ========
Gross profit $24,611 $26,876 $23,085 $ 34,737
======= ======= ======= ========
Net earnings (loss) $ (948) $ 1,048 $(3,690) $ 3,880
======= ======= ======= ========
Earnings (loss) per share $ (.16) $ .18 $ (.64) $ .64
======= ======= ======= ========
</TABLE>
44
<PAGE>
Schedule II
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
ALLOWANCE FOR DOUBTFUL RECEIVABLES
Years ended February 3, 1996, January 28, 1995
and January 29, 1994
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- ---------- ---------- -------------- ----------
Balance at Additions Balance at
beginning charged to end of
Description of period expense Deductions (A) period
- ----------------------------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Year ended February 3, 1996 $395 $ 33 $42 $386
Year ended January 28, 1995 $242 $170 $17 $395
Year ended January 29, 1994 $244 $ 17 $19 $242
</TABLE>
(A) Receivables charged off, net of recoveries.
Column C(2) - None.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: A. LYNN BOERNER
----------------
A. Lynn Boerner
Vice President and Chief Accounting Officer
Date: April 12, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 12, 1996 by the following persons on
behalf of the Registrant and in the capacities indicated.
ALVIN N. LUBETKIN
- ------------------------- ---------------------------------
Marilyn Oshman Alvin N. Lubetkin
Chairman of the Board of Vice Chairman of the Board of Directors,
Directors Chief Executive Officer
(Principal Executive Officer) and
Director
WILLIAM N. ANDERSON MORRIE K. ABRAMSON
- ---------------------------------- ---------------------------------
William N. Anderson Morrie K. Abramson
President, Chief Operating Officer Director
and Director
MARVIN ARONOWITZ
- ---------------------------------- ----------------------------------
Marvin Aronowitz Fred M. Gerson
Director Director
DOLPH B.H. SIMON
- ----------------------------------
Dolph B.H. Simon
Director
<PAGE>
INDEX TO EXHIBITS
-----------------
3.1 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).
3.2 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).
4.1 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).
4.1(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).
4.1(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).
4.1(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).
4.1(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 10-Q") and incorporated herein by
reference).
4.1(e) Amendment dated October 29, 1993 to the Financing Agreement (filed as
Exhibit 4.2 to the October 10-Q and incorporated herein by reference).
4.1(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).
4.1(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).
4.1(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).
4.1(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).
4.1(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).
Exhibits-1
<PAGE>
4.1(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).
4.1(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).
4.1(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).
4.1(n) + Amendment dated January 8, 1996 to the Financing Agreement.
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).
Exhibits-2
<PAGE>
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(b) 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(b) to the Company's October 1995 10-Q and incorporated
herein by reference).
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 1994
10-Q") and incorporated herein by reference).
Exhibits-3
<PAGE>
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 1994 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 October
1995 10-Q and incorporated herein by reference).
11.1 + Statement re computation of per share earnings.
21.1 + Subsidiaries of the Registrant.
23.1 + Consent of Grant Thornton LLP.
27.1 + Financial data schedule.
- -------------------
* Management contract or compensatory plan or arrangement.
+ Filed herewith.
Exhibits-4
<PAGE>
EXHIBIT 4.1(n)
[LETTERHEAD OF THE CIT GROUP/BUSINESS CREDIT, INC. APPEARS HERE]
January 8, 1996
Oshman's Sporting Goods, Inc.
2302 Maxwell Lane
Houston, Texas 77223
Gentlemen:
Reference is made to the Financing Agreement dated August 31, 1992, (as amended
or otherwise modified from time to time, the "Financing Agreement") among 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., 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., 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., Washington, Oshman's Ski Skool, Inc.,
Oshman's Sporting Goods, Inc. - Services (collectively the "Companies"), and THE
CIT GROUP/BUSINESS CREDIT, INC. ("CITBC"). Capitalized terms used and not
otherwise defined herein shall have the meanings assigned to them in the
Financing Agreement.
Pursuant to mutual understanding, paragraph 20 of Section 6 of the Financing
Agreement is hereby amended by deleting the first sentence in its entirety and
substituting the following in lieu thereof:
"Each Company shall conduct or cause to be conducted, an actual physical
count of its Inventory as follows:
(i) not less than twice in any calendar year for all warehouses and
"megastores" (i.e., all stores having a tradename of "Oshman's
Supersports" or "Supersports U.S.A."); and
(ii) not less than once in any calendar year for all traditional stores
(i.e. all stores other than the stores described in the foregoing
subparagraph (i)."
<PAGE>
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.
/s/ Pamela Wozniak
By ____________________________
Title: Assistant Secretary
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, 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, 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, WASHINGTON
OSHMAN'S SKI SKOOL, INC.
OSHMAN SPORTING GOODS, INC. - SERVICES
/s/ A. Lynn Boerner
By ________________________________
Title: Vice President and
Chief Accounting Officer
<PAGE>
Exhibit 11.1
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Year ended February 3, Year ended January 28, Year ended January 29,
1996 1995 1994
---------------------- ---------------------- ----------------------
Fully Fully Fully
Primary diluted Primary diluted Primary diluted
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET EARNINGS (LOSS) $1,942 $1,942 $ 290 $ 290 $(19,494) $(19,494)
====== ====== ====== ====== ======== ========
Weighted average number of common shares
outstanding 5,815 5,815 5,807 5,807 5,805 5,805
Excess of shares issuable upon exercise of stock
options over shares deemed retired under the
"treasury stock" method 204 244 155 172 - -
------ ------ ------ ------ -------- --------
Weighted average number of common and dilutive
common equivalent shares outstanding 6,019 6,059 5,962 5,979 5,805 5,805
====== ====== ====== ====== ======== ========
Earnings (loss) per common and
common equivalent share $ . 32 $ . 32 $ .05 $ .05 $ (3.36) $ (3.36)
====== ====== ====== ====== ======== ========
</TABLE>
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
All of the Company's subsidiaries are incorporated under the laws of the State
of Texas and operate under the name Oshman's unless otherwise indicated in
parentheses. Each is qualified to do business in the state mentioned in its
name. All are 100% owned by Oshman's Sporting Goods, Inc.
Oshman Sporting Goods Co., Alabama*
Oshman Sporting Goods Co., Arizona
Oshman Sporting Goods Co., Arkansas
Oshman Sporting Goods Co., California (also operates as SuperSports USA)
Oshman Sporting Goods Co., Connecticut*
Oshman Sporting Goods Co., Florida
Oshman Sporting Goods Co., Georgia
Oshman Sporting Goods Co., Hawaii (operates as Honsport)
Oshman Sporting Goods Co., Kansas (will operate as SuperSports USA)
Oshman Sporting Goods Co., Louisiana
Oshman Sporting Goods Co., Michigan (will operate as SuperSports USA)
Oshman Sporting Goods Co., Minnesota (operates as SuperSports USA)
Oshman Sporting Goods Co., Missouri (operates as SuperSports USA)
Oshman Sporting Goods Co., Nevada
Oshman Sporting Goods Co., New Jersey (operates as SuperSports USA)
Oshman Sporting Goods Co., New Mexico (also operates as SuperSports USA)
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 (operates as SuperSports USA)
Oshman Sporting Goods Co., Tennessee
Oshman Sporting Goods Co., Texas (Delaware) (also operates as SuperSports USA)
Oshman Sporting Goods Co., Utah (will operate as SuperSports USA)
Oshman Sporting Goods Co., Washington (operates as SuperSports USA)
Oshman Sporting Goods, Inc. - Service (Delaware)
Oshman Ski Skool, Inc.
J.S. Oshman and Co., Inc.
Oshitch Company*
The Best of Oshitch, District of Columbia*
Oshitch Company of Maryland, Inc.*
Oshitch Company of Virginia, Inc.*
Oshitch at Home, Inc.*
URAFAN Corp. (operates as URAFAN Corp.)*
__________
* Indicates a currently inactive subsidiary.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 14, 1996, accompanying the consolidated
financial statements and schedules of Oshman's Sporting Goods, Inc. and
subsidiaries included in the Annual Report on Form 10-K for the year ended
February 3, 1996. We hereby consent to the incorporation by reference of said
reports in the Registration Statements of Oshman's Sporting Goods, Inc. on Form
S-8, File No. 33-14665, File No. 33-41404, File No. 33-28357,
File No. 33-53451, File No. 33-54221 and File No. 33-64515.
GRANT THORNTON
Houston, Texas
April 27, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> FEB-03-1996
<CASH> 327
<SECURITIES> 0
<RECEIVABLES> 3,452
<ALLOWANCES> 386
<INVENTORY> 110,630
<CURRENT-ASSETS> 122,228
<PP&E> 93,807
<DEPRECIATION> 53,701
<TOTAL-ASSETS> 162,923
<CURRENT-LIABILITIES> 59,388
<BONDS> 0
0
0
<COMMON> 5,822
<OTHER-SE> 56,348
<TOTAL-LIABILITY-AND-EQUITY> 162,923
<SALES> 342,889
<TOTAL-REVENUES> 342,889
<CGS> 223,737
<TOTAL-COSTS> 223,737
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,307
<INCOME-PRETAX> 2,352
<INCOME-TAX> 410
<INCOME-CONTINUING> 1,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,942
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
