<PAGE>
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 1, 1997
[ ] 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of April 21, 1997 (based upon the closing sales price as of
such date) was $10,085,319.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of April 21, 1997:
Common Stock, $1.00 par value 5,827,249
Documents incorporated by reference: Proxy Statement for the Registrant's
Annual Meeting of Stockholders to be held June 20, 1997 (to be filed within 120
days of the close of Registrant's fiscal year) is incorporated by reference into
Part III.
<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, 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"(R) or "SuperSports USA"(R).
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 12,000 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 customer reception to the unique shopping
experience provided at the Company's SuperSports USA megastores, these stores
are becoming established shopping destinations.
At the end of fiscal 1996, the Company operated 31 megastores and 84
traditional stores located primarily in medium to large metropolitan areas
across the United States. Since the beginning of fiscal 1990, the Company has
reduced its traditional store base from 193 to 84. In the fourth quarter of
1996, the Company announced its intention to close an additional 53 traditional
stores in 1997 and recorded a store closing reserve. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Store Closing Reserve." The Company will continue to operate stores in Texas and
California as well as in Arizona, Florida, Louisiana, Minnesota, Missouri, New
Mexico, Oklahoma, South Carolina, Tennessee, Utah and Washington.
1
<PAGE>
The following table summarizes the contributions of the Company's stores
since 1992. Traditional store data include results from the Company's clearance
stores and occasional off-premises sales:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------------
1996 1995(1) 1994(1) 1993 1992
---------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STORES OPEN AT END OF PERIOD:
Megastores...................................... 31 24 12 8 5
Traditional stores.............................. 84 105 113 153 165
-------- -------- -------- -------- --------
Total stores.................................. 115 129 125 161 170
NET RETAIL SALES:
Megastores...................................... $235,123 $164,523 $ 95,711 $ 64,616 $ 41,018
Traditional stores.............................. 128,963 162,323 185,993 235,100 264,872
-------- -------- -------- -------- --------
Total net retail sales........................ $364,086 $326,846 $281,704 $299,716 $305,890
======== ======== ======== ======== ========
WEIGHTED AVERAGE NET SALES PER STORE(2):
Megastores..................................... $ 8,721 $ 10,244 $ 9,970 $ 9,850 $ 11,958
Traditional stores............................. 1,282 1,499 1,600 1,460 1,529
PERCENTAGE OF NET RETAIL SALES:
Megastores..................................... 64.6% 50.3% 34.0% 21.6% 13.4%
Traditional stores............................. 35.4% 49.7% 66.0% 78.4% 86.6%
DIRECT STORE CONTRIBUTIONS(3):
Megastores..................................... $ 20,951 $ 19,384 $ 10,418 $ 6,541 $ 4,546
Traditional stores (6)......................... (6,204) 10,566 15,016 10,106 19,752
-------- -------- -------- -------- --------
Total......................................... $ 14,747 $ 29,930 $ 25,434 $ 16,647 $ 24,298
======== ======== ======== ======== ========
WEIGHTED AVERAGE DIRECT STORE CONTRIBUTION
PER STORE(4):
Megastores..................................... $ 777 $ 1,207 $ 1,086 $ 997 $ 1,325
Traditional stores............................. (62) 98 129 62 114
PERCENTAGE OF TOTAL DIRECT STORE CONTRIBUTIONS:
Megastores..................................... 142.1% 64.7% 41.0% 39.3% 18.7%
Traditional stores............................. (42.1)% 35.3% 59.0% 60.7% 81.3%
CONTRIBUTION MARGIN(5):..........................
Megastores..................................... 7.4% 10.6% 10.1% 8.6% 10.2%
Traditional stores............................. 0% 6.5% 8.0% 4.3% 7.5%
Total...................................... 4.8% 8.6% 8.7% 5.2% 7.8%
</TABLE>
- ---------------
(1) Fiscal years 1994 and 1995 exclude results of stores included in the
Company's 1993 store closing restructure plan.
(2) Net retail sales for the period divided by the weighted average number of
stores operated during the period.
(3) Direct store contributions are presented for comparative purposes and do not
include charges for warehousing, buying, administrative or pre-opening
expenses. Prior year results have been restated to exclude pre-opening
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.
(4) Direct store contributions divided by the weighted average number of stores
operated during the period.
(5) Direct store contributions divided by net retail sales.
(6) Fiscal 1996 includes a $6.3 million inventory adjustment related to 53
stores expected to close in 1997.
Fiscal 1996 included 52 weeks compared to 53 weeks in fiscal 1995. On a
comparable 52 week basis, Oshman's experienced a 2.5% same store sales decrease
for SuperSports USA megastores and a 12.5% same store sales decrease for
traditional stores during the fiscal year ended February 1, 1997.
Oshman's offers a full line of sporting goods equipment, sportswear and
athletic footwear focusing on middle- to high-end products. Nationally
advertised brand name products are featured, along with the Company's own labels
in certain categories. While certain of the Company's primary megastore
competitors employ "every-day-low-price" strategies, the
2
<PAGE>
Company is a promotional retailer. As such, the Company seeks to attract
customers into its stores through advertised price reductions on selected
merchandise, while maintaining full markups on other merchandise. The following
table sets forth sales of sports apparel, footwear and sporting goods equipment
as a percentage of net sales during the last three fiscal years.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------
FISCAL YEAR
------------
1996 1995 1994
----- ---- -----
<S> <C> <C> <C>
Sporting goods equipment 49% 50% 52%
Sports apparel 28% 28% 29%
Footwear 23% 22% 19%
</TABLE>
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 effect
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 or warehouse-format retail business. This competition
could have a material adverse effect on the Company.
TRANSFORMATION PLAN
Management believes that changing consumer preferences toward sporting
goods megastores has had a detrimental impact on the Company's existing
traditional stores and will continue to have a detrimental impact on these
stores in the future. In response to this trend, the Company has been focusing
on opening and operating its SuperSports USA megastores. At the end of fiscal
1996, the Company operated 31 megastores and 84 traditional stores located
primarily in medium to large metropolitan areas across the United States. The
Company intends
3
<PAGE>
to continue to open additional SuperSports USA megastores in both its existing
and new markets and currently anticipates opening six additional megastores
during fiscal 1997. 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 closed 119 traditional
stores. In the fourth quarter of 1996, the Company announced its intention to
close an additional 53 traditional stores during 1997 and recorded a store
closing reserve. Changes in the number of stores and square footage during the
last seven 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
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
1996......... 0 7 25 115 948,000 1,847,000 2,795,000
-- -- ---
Total..... 10 31 119
== == ===
</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.
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. Eight 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 and intends to
continue to pursue this flexible strategy.
4
<PAGE>
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 15.1%, 14.2% and 10.4% of the Company's total purchases in
fiscal 1996, 1995 and 1994, 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 operated through
three distribution centers. Two are located in Houston, Texas, and the other is
located in Santa Ana, California. Approximately 84% of the Company's inventory
is shipped through these distribution centers. However, for certain items that
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,
Oklahoma and locations east of the Mississippi River 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, New
Mexico, Nevada, Utah and Washington.
MANAGEMENT INFORMATION SYSTEMS
During fiscal 1996, the Company completed the installation of new financial
reporting, payroll and human resources systems and is currently installing new
sales audit/loss prevention software. In addition, the Company intends to
update its merchandising information and management systems and has begun the
process of reviewing available software. Management expects these new systems
to be implemented by the beginning of fiscal 1998.
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. Any substantial decrease in sales during the fourth quarter
could adversely affect 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 and Quarterly Fluctuations."
5
<PAGE>
TRADEMARKS AND SERVICE MARKS; OTHER BUSINESS
As of February 1, 1997, Oshman's owned approximately 23 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. During fiscal 1996, Oshman's discontinued its
operations that made sales to certain institutional customers, including
scholastic, industrial and amateur sports teams.
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 conduct any material research and development
activities.
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 1, 1997, Oshman's employed approximately 3,800 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. 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
is subject to mortgage liens of certain of the Company's lenders, including The
CIT Group/Business Credit, Inc. ("CIT").
6
<PAGE>
Substantially all of Oshman's retail stores occupy leased space in modern
structures. As of February 1, 1997, these retail stores occupied an aggregate
of approximately 2,716,000 square feet of floor space under leases expiring at
various dates from 1997 to 2017 (exclusive of renewal options). Traditional
stores on average are comprised of approximately 12,000 square feet, while the
average megastore occupies approximately 60,000 square feet. One traditional
store and one megastore in locations owned by Oshman's occupied an aggregate of
approximately 79,000 square feet of floor space.
Aggregate rentals paid by the Company under all its leases amounted to
approximately $20.3 million during the 1996 fiscal year. Most store leases
provide for rentals that are the greater of a fixed minimum amount 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 1, 1997.
7
<PAGE>
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) 63 Vice Chairman of the Board, Chief Executive Officer,
President and Director
Marilyn Oshman(1) 57 Chairman of the Board and Director
Lindsay J. Rice 42 Executive Vice President
Timothy L. Grady 41 Senior Vice President and Chief Financial Officer
A. Lynn Boerner 56 Vice President, Chief Accounting Officer and Assistant
Secretary
Richard G. Dennis 44 Vice President, Secretary and General Counsel
Mark L. Groeneman 40 Vice President
Thomas J. McVey 45 Vice President
Ray Miller 50 Treasurer and Assistant Secretary
Steven U. Rath 42 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 has overall responsibility for the Company's
operations. 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. Rice was elected Executive Vice President in March 1991, and he oversees
all advertising, promotional and merchandising activities of the Company. Prior
to that time, he served as California Division Vice President from 1988 until
1991 and Divisional Merchandise Manager from 1986 through 1988.
Mr. Grady was elected Senior Vice President and Chief Financial Officer in
July 1996. Prior to that time, Mr. Grady was employed by Solo Serve Corporation
since 1984, where he served in various positions, including Chief Financial
Officer and Chief Operating Officer. In July 1994, Solo Serve Corporation filed
a voluntary petition under Chapter 11 of the Bankruptcy Code. In July 1995, the
Bankruptcy Court approved a plan of reorganization and Solo Serve emerged from
bankruptcy. From 1977 to 1984, Mr. Grady served in various positions in
accounting and auditing for W. R. Grace Home Centers and Deloitte, Haskins, and
Sells. Mr. Grady is a certified public accountant.
Mr. Boerner has been an officer of the Company since 1984 and was elected Vice
President in 1988. He was hired by the Company in 1971. Prior to joining the
Company, Mr. Boerner was employed by Arthur Andersen & Co. Mr. Boerner is a
certified public accountant.
8
<PAGE>
Mr. Dennis was elected Vice President in June 1994. Mr. Dennis has also
served as General Counsel of the Company since 1993. Prior to that, he was
employed as Managing Attorney, Banc One New Hampshire Asset Management Company
from 1992 to 1993 and Associate Attorney, Weil, Gotshal & Manges from 1986 until
1992.
Mr. Groeneman was elected Vice President of the Company in January 1997. He
is primarily responsible for the Human Resources Department and payroll. Prior
to becoming a Vice President of the Company, Mr. Groeneman served as a
divisional Vice President for Human Resources from 1994 through 1996. Prior to
that, he was employed as Manager of Human Resources/Distribution Centers for
Mervyn's from 1991 to 1994.
Mr. McVey was elected Vice President of the Company in March 1996. He is
primarily responsible for store operations. Since 1994, Mr. McVey has served as
divisional Senior Vice President and Regional Manager. Prior to that time, he
was regional Vice President from 1989 to 1994.
Mr. Miller was elected Treasurer in July 1996 and Assistant Secretary in
January 1997. He originally joined the Company in 1976, serving in various
accounting and treasury positions. In June of 1990, Mr. Miller left the Company
and joined Profit Recovery Group, a contingency audit firm, where he was
employed until September of 1993, at which time he rejoined the Company.
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.
9
<PAGE>
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 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
FISCAL YEAR ENDED FEBRUARY 1, 1997
First Quarter ended May 4,1996 $11.00 $9.38
Second Quarter ended August 3, 1996 9.63 7.88
Third Quarter ended November 2, 1996 7.88 5.00
Fourth Quarter ended February 1, 1997 5.69 4.75
FISCAL YEAR ENDED JANUARY 31, 1998
First Quarter ended May 3,1997 (through April 21) $ 5.19 $3.88
</TABLE>
As of April 21, 1997, there were approximately 1,025 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 April 21, 1997, was $4.50.
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.
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 1, FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30,
OR AS OF THE YEAR END 1997 1996 1995 1994 1993/*/
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Consolidated Sales $365,879 $342,889 $311,419 $307,935 $313,253
Net Earnings (Loss) (27,250) 1,942 290 (19,494) (679)
Net Earnings (Loss) per Share (4.67) .32 .05 (3.36) (.12)
Dividends per Share -- -- -- -- --
Total Assets 160,734 162,923 135,077 126,432 138,341
Long-Term Debt 42,397 36,681 5,665 3,712 1,696
</TABLE>
- --------------
* The year ended January 30, 1993 was 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.
10
<PAGE>
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 affect the
results of the Company's traditional stores. Since 1990, the Company has been
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 12,000 square feet.
At the end of fiscal 1996, the Company operated 31 megastores and 84
traditional stores located primarily in medium to large metropolitan areas
across the United States. In the fourth quarter of 1996, the Company announced
its intention to close an additional 53 traditional stores in 1997 and recorded
a store closing reserve. The Company will continue to operate stores in Texas
and California as well as stores in Arizona, Florida, Louisiana, Minnesota,
Missouri, New Mexico, Oklahoma, South Carolina, Tennessee, Utah and Washington.
STORE CLOSING RESERVE
In the fourth quarter of fiscal 1996, the Company announced its plan to
close 53 of its 84 traditional stores during fiscal 1997. The Company recorded a
store closing reserve of $13.6 million to cover inventory adjustments ($6.3
million), lease termination costs ($5.2 million), leasehold and other asset
write-offs ($1.3 million) and employee costs and other incremental store closing
costs ($839,000).
In association with the closing of these stores, the Company has
implemented expense reductions, effective as of the end of fiscal 1996, which
are designed to reduce store and overhead costs by approximately $4.0 million in
1997. These expense reductions are expected to result from personnel reductions
and other efficiencies, including a reduction in its corporate headquarters
staff commensurate with the reduction of the total stores in operation. Costs
associated with the corporate reduction in force were included in the store
closing reserve.
The 53 stores that are planned to close in 1997 contributed sales of $50.1
million and $63.1 million in fiscal 1996 and 1995, respectively, and incurred
direct store losses of $2.5 million in fiscal 1996 compared to direct store
profits of $2.3 million in fiscal 1995. At the end of April 1997 the Company had
closed 19 of these stores and expects an additional 17 to close by the end of
July 1997. However, there can be no assurance that the Company will be
successful in its efforts to negotiate lease terminations or that amounts
reserved are adequate to cover the cost of such terminations. The Company may
consider alternative uses for locations for which it may not be able to
negotiate acceptable lease termination arrangements.
11
<PAGE>
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
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net sales 100.0 100.0 100.0
Cost of goods sold 68.5 65.3 64.9
----- ----- -----
Gross profit 31.5 34.7 35.1
Operating expenses:
Selling and administrative expenses 35.1 33.6 35.2
Pre-opening expenses 1.0 .6 .3
Corporate restructuring - (.7) -
Store closing provision 2.1 .7 .2
Miscellaneous income (.2) (.8) (1.1)
----- ----- -----
Operating income (loss) (6.5) 1.4 .6
Interest expense, net 1.0 .7 .4
----- ----- -----
Earnings (loss) before income taxes (7.5) .7 .1
Income tax (benefit) (.1) .1 -
----- ----- -----
Net earnings (loss) (7.4) .6 .1
===== ===== =====
</TABLE>
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales for fiscal 1996, a 52 week period, increased 6.7% to $365.9
million from $342.9 million for fiscal 1995, a 53 week period. Management
attributes the increase in net sales to the full year sales from 12 megastores
opened in fiscal 1995 and to partial year sales from seven new megastores opened
in fiscal 1996. Megastore sales increased to $235.1 million compared to $164.5
million in fiscal 1995, a 42.3% increase. The increased sales from new
megastores were partially offset by decreased overall same store sales results
and the elimination of $26.9 million of sales from the combined impact of the
closing of 20 traditional stores during 1995 and 25 traditional stores during
1996 and the closing of the Company's athletic team business.
Same store sales, on a comparative 52 week basis, in the Company's
SuperSports USA megastores declined 2.5% while same store sales in traditional
stores decreased 12.5%, resulting in a 7.9% decline in overall same store sales.
The Company attributes the decline in comparable store sales primarily to
increased competition and, secondly, to cannibalization of sales resulting from
the opening of additional SuperSports USA megastores. As a result of the
Company's efforts to increase margins and improve inventory turnover rates, the
Company has reduced average store inventories. Although management believes
that this strategy will improve the Company's financial performance, sales may
be adversely impacted on an interim basis.
Gross profit, as a percentage of net sales, decreased to 31.5% in fiscal
1996 compared to 34.7% in fiscal 1995. Gross profit was negatively impacted by
an inventory adjustment of $6.3 million (1.7% as a percentage of sales) included
in the store closing reserve discussed above. Gross profit
12
<PAGE>
as a percentage of sales was also negatively impacted by additional markdowns
taken to reduce excessive inventories resulting from lower than planned sales
and from stores closed during the year.
Selling and administrative expenses as a percentage of net sales increased
to 35.1% in fiscal 1996, compared to 33.6% in fiscal 1995. Selling and
administrative expenses as a percentage of sales in stores increased as a result
of lower than expected sales in the existing stores and the impact of new stores
that have not yet grown to expected sales levels. Although corporate overhead
and distribution costs declined as a percentage of sales, this decrease was not
sufficient to offset the increase in selling and administrative expenses as a
percentage of sales in stores. The Company has implemented expense reductions at
the end of fiscal 1996 which are expected to reduce store and overhead costs in
fiscal 1997 by approximately $4.0 million.
Pre-opening expenses as a percentage of net sales increased to 1.0% in
fiscal 1996, compared to .6% in fiscal 1995. The increased rate in fiscal 1996
compared to fiscal 1995 is related primarily to costs associated with the 12
stores opened in 1995 and the seven stores opened in 1996. The Company's policy
with regard to the pre-opening expenses is that expenses related to stores
larger than 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.
Store closing provision as a percentage of net sales was 2.1% in fiscal
1996, compared to .7% in fiscal 1995. The increase in store closing provision
is related to the establishment of a store closing reserve of $7.3 million
(excluding the $6.3 million reserve for inventory adjustments included in cost
of goods sold for the 53 traditional stores that the Company plans to close in
fiscal 1997 (see "-- Store Closing Reserve").
The major components of miscellaneous income for fiscal 1996 and fiscal
1995 are set out in the table below:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------
1996 1995
------- --------
(IN THOUSANDS)
<S> <C> <C>
Condemnation proceeds $ -- $1,550
Fees from foreign licensees 1,238 1,087
Provision for earthquake loss -- 229
Other, net (465) (252)
------ ------
Total $ 773 $2,614
====== ======
</TABLE>
Net interest expense for fiscal 1996 was $3.8 million, compared to $2.3
million in fiscal 1995. The increased net interest expense is primarily related
to increased average borrowings under the Company's credit facility.
Income tax expense for each of fiscal 1996 and 1995 are related primarily
to state income taxes. In both fiscal 1996 and 1995, 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.
13
<PAGE>
In fiscal 1996, the Company incurred a pretax loss of $27.4 million
compared to earnings before income taxes of $2.4 million in fiscal 1995. The
significant factors in the reduced results for fiscal 1996 are the $13.6 million
store closing reserve, comparable store sales declines, increased markdowns
related to the lower sales and store closings, increased amortization of pre-
opening costs, increased borrowings and the non-recurrence of the fiscal 1995
gain on a condemnation. In addition to these factors, traditional stores closed
in 1996 and planned to close in 1997 recorded a $4.9 million loss in fiscal 1996
compared to a $2.5 million profit in fiscal 1995.
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 sales for
1995. The increase in sales is primarily attributable to a 63.3% increase in
sales from SuperSports USA megastore 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 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 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. 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 decreased
to 33.6% in fiscal 1995, compared to 35.2% in fiscal 1994. This decrease 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, which on
average have lower selling and administrative expenses as a percentage of sales
than traditional stores, caused selling and administrative expenses as a
percentage of net sales in stores to decrease compared to fiscal 1994. Second,
the leveraging
14
<PAGE>
effect of the increased 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.
Pre-opening expenses as a percentage of net sales increased to .6% in
fiscal 1995, compared to .3% in fiscal 1994 and relate to the opening of 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 as a percentage of net sales increased to .7% in
fiscal 1995 compared to .2% in fiscal 1994. 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 and
write-off of fixed assets related to the expected closing of traditional stores
and the Company's athletic team business in fiscal 1996.
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
------- --------
(IN THOUSANDS)
<S> <C> <C>
Gain on sale of real estate and
leasehold interests $ -- $1,633
Condemnation proceeds 1,500 --
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 increased to $2.3 million from $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.
15
<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.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The following table sets forth certain unaudited financial information for
the Company for each of the quarterly periods in fiscal 1996 and fiscal 1995:
<TABLE>
<CAPTION>
FISCAL 1996
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales $82,719 $92,000 $78,859 $112,301
Gross profit $30,179 $26,353 $29,199 $ 29,364
Gross margin 36.5% 28.6% 37.0% 26.2%
Operating income (loss) $ (225) $(7,094) $(1,928) $(14,371)
Operating margin (.3%) (7.7%) (2.4%) (12.8%)
Net income (loss) $(1,221) $(8,041) $(2,895) $(15,093)
Net income (loss) margin (1.5%) (8.7%) (3.7%) (13.4%)
FISCAL 1995
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- --------
(DOLLARS IN THOUSANDS)
Net sales $69,407 $84,481 $71,739 $117,262
Gross profit $26,139 $28,230 $25,383 $ 39,400
Gross margin 37.7% 33.4% 35.4% 33.6%
Operating income (loss) $ 32 $ 1,918 $(2,492) $ 5,201
Operating margin .1% 2.3% (3.5%) 4.4%
Net income (loss) $ (478) $ 1,420 $(3,141) $ 4,141
Net income (loss) margin (.7%) 1.7% (4.4%) 3.5%
</TABLE>
During fiscal 1996, 1995 and 1994, 30.7%, 34.2% and 31.7%, respectively, of
the Company's sales were generated during the fourth quarter. As a result of
the increased sales, the Company's operating results for the fourth quarter
generally exceed the operating income for any other quarter during these fiscal
years. However, this trend did not continue in fiscal 1996, primarily as a
result of the negative impact of the $13.6 million store closing provision
related to 53 traditional stores expected to be closed in fiscal 1997 and losses
associated with stores closed in 1996.
16
<PAGE>
COMPARABLE STORE SALES
The following table sets forth for the fiscal years 1996, 1995 and 1994
certain information regarding the percentage increase (decrease) in comparable
store sales for comparable 52 week periods.
<TABLE>
<CAPTION>
FISCAL 1996
-----------------------------------------------
FIRST SECOND THIRD FOURTH FISCAL FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR 1995 1994
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SuperSports USA Stores 1.4% (5.4)% .5% (3.1)% (2.5)% 5.0% 3.8%
Traditional Stores (7.2)% (13.4)% (11.5)% (13.2)% (12.5)% (5.0)% (.5)%
Total (3.4)% (9.7)% (6.1)% (8.2)% (7.9)% .8% 1.7%
</TABLE>
In the early part of fiscal 1996, sales were unfavorably impacted by weak
sales of snow ski and in-line skates as compared to the prior year. In
addition, comparable store sales in the second quarter of 1996 were unfavorably
impacted by increased second quarter 1995 sales associated with the Houston
Rockets winning the 1995 NBA championship. Sales during the fourth quarter of
the year were negatively impacted by the shorter Christmas selling season
compared to the previous year.
The Company attributes the decline in comparable store sales primarily to
increased competition and, secondly, to cannibalization of sales resulting from
the opening of additional SuperSports USA megastores. See "Business --
Transformation Plan" above.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1996, operating activities provided cash totaling $7.5 million.
Cash totaling $13.2 million was used primarily for the purchase of property,
plant and equipment totaling $19.2 million, partially offset by developer
provided funds of $6.8 million. Financing activities through the Company's
utilization of its credit facility provided cash of $5.7 million.
Merchandise inventories were $107.6 million at the end of fiscal 1996
compared to $110.6 million at the end of fiscal 1995. This decrease in inventory
was primarily a result of the $6.3 million reduction related to the store
closing reserve discussed above. In addition, the Company has taken steps to
improve inventory turnover rates and reduce average store inventory levels.
Additions to property, plant and equipment were $13.2 million in fiscal
1996, net of $6.0 million funded by developers. 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.
Approximately $11.0 million was used for the opening of seven new SuperSports
USA megastores. Approximately $2.9 million was used for renovation of certain
of the megastores at locations obtained from SportsTown, Inc. in the fourth
quarter of fiscal 1995, and $2.2 million was used for the refurbishment of other
stores, including the expansion of two of the Company's traditional stores.
Approximately $2.7 million was used for computer hardware and software including
the installation of new financial reporting, payroll and
17
<PAGE>
human resources systems. The remaining amount was used for renovation and
refurbishment of existing locations.
Capital expenditures in fiscal 1997 are expected to be approximately $8.0
million, net of developer provided funds of approximately $4.0 million. The
Company plans to open six new megastores during fiscal 1997 at a net capital
cost of about $2.3 million, including approximately $3.6 million expected to be
funded by construction allowances from developers. Approximately $4.2 million
is planned to be used for computer hardware and software (including about $1.5
million for new merchandising information and inventory management systems) and
the balance is expected to be allocated to improvements to existing stores,
warehouses and administrative areas.
Trade accounts payable were higher as of the end of fiscal 1996 compared to
the end of fiscal 1995 primarily as a result of two factors: (i) the Company's
success at negotiating generally longer trade terms with its vendors and (ii)
trade accounts payable were relatively low at the end of fiscal 1995 because 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 connection with the planned closing of 53 stores in 1997, the Company
has recorded a reserve for the lease termination and other costs totaling $6.0
million. As of the end of fiscal 1996, these stores had $10.6 million of
inventory, net of reserves. These inventories are expected to be liquidated
during fiscal 1997.
On August 31, 1992, the Company entered into an agreement providing for a
three-year, $32.5 million revolving credit facility with CIT. Advances under
the facility are based on a borrowing base formula and are 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. During 1996, the agreement was amended to
increase the revolving line of credit to $65.0 million, with a further seasonal
increase to $80.0 million during the period from mid-September through mid-
December each year and to extend the term of the facility through August 1999.
In addition, the Company may, at its option, increase the line of credit by an
additional $5.0 million. Subsequent to the end of fiscal 1996, the Company and
CIT modified the covenants in accordance with the Company's expected operating
results for fiscal 1997.
The Company's primary source of liquidity in fiscal 1996 was the Company's
credit facility, under which average borrowings during the year were $41.2
million. Operating activities also provided cash of $7.5 million. Because of
the seasonal nature of the Company's 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 $62.5 million in November 1996. At February 1, 1997, the Company
had recorded debt with respect to its credit facility of $38.4 million and had
outstanding letters of credit (used primarily to purchase certain of the
Company's imported inventory) of $1.2 million.
18
<PAGE>
The Company believes that its existing revolving credit facility together
with cash flow from operations will be adequate to meet anticipated capital
needs, including seasonal financing needs for fiscal 1997.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The information discussed herein includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included herein regarding planned
capital expenditures, store openings and closings, the Company's financial
position, business strategy and other plans and objectives for future operations
(typically using the words "expect," "plan," "anticipate," "believe," "intend"
or similar expressions), are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, they do involve certain assumptions, risks and uncertainties, and
the Company can give no assurance that such expectations will prove to have been
correct. The Company's actual results will differ, and could differ materially
from those anticipated by such forward-looking statements as a result of certain
factors, including: the Company's ability to manage its expansion efforts in
existing and new markets, availability of suitable new store locations at
acceptable terms, levels of discretionary consumer spending, availability of
merchandise to meet fluctuating consumer demands, customer response to the
Company's merchandise offerings, fluctuating sales margins, increasing
competition in sporting goods and apparel retailing, the results of financing
efforts and financial market conditions. Many of such factors are beyond the
Company's ability to control or predict. Readers are cautioned not to put undue
reliance on forward-looking statements. The Company disclaims any intent or
obligations to update these forward-looking statements, whether as a result of
new information, future events or otherwise. All subsequent written forward-
looking statements attributable to the Company and persons acting on its behalf
are qualified in their entirety by the cautionary statements contained in this
paragraph and elsewhere in this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears on pages 22 through 46 of
this report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There is no incident required to be disclosed herein.
19
<PAGE>
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 1, 1997 a definitive proxy statement pursuant to
Regulation 14A involving the election of directors, which proxy statement is
incorporated herein by reference.
20
<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>
Report of independent certified public accountants........................................... 22
Consolidated balance sheets at February 1, 1997 and February 3, 1996......................... 24
Consolidated statements of operations for the years ended February 1, 1997,
February 3, 1996 and January 28, 1995....................................................... 25
Consolidated statements of stockholders' equity for the years ended February 1, 1997,
February 3, 1996 and January 28, 1995....................................................... 26
Consolidated statements of cash flows for the years ended February 1, 1997,
February 3, 1996 and January 28, 1995....................................................... 27
Notes to consolidated financial statements................................................... 28
Selected quarterly financial data............................................................ 45
2. Financial Statement Schedules
-----------------------------
Schedule II - Allowance for Doubtful Receivables - Years ended
February 1, 1997, February 3, 1996 and January 28, 1995..................................... 46
</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 A. Lynn Boerner, 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 1, 1997.
21
<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 1,
1997 and February 3, 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended February 1, 1997. 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.
22
<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 1, 1997 and February 3, 1996, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended February 1, 1997, 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 1, 1997.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
GRANT THORNTON LLP
Houston, Texas
March 17, 1997
23
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 1, 1997 and February 3, 1996
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 437 $ 327
Accounts receivable, less allowance of $225 in 1996
and $386 in 1995 3,771 3,452
Merchandise inventories 107,609 110,630
Prepaid expenses and other 4,143 7,819
-------- --------
Total current assets 115,960 122,228
PROPERTY, PLANT AND EQUIPMENT - AT COST 98,446 93,807
Less accumulated depreciation and amortization 54,073 53,701
-------- --------
44,373 40,106
OTHER ASSETS 401 589
-------- --------
$160,734 $162,923
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations $ 776 $ 809
Trade accounts payable 45,704 35,486
Accrued liabilities 18,231 16,373
Income taxes 4,529 4,382
Store closing reserve 7,311 2,338
-------- --------
Total current liabilities 76,551 59,388
LONG-TERM OBLIGATIONS 42,397 36,681
OTHER NONCURRENT LIABILITIES 5,655 3,684
STOCKHOLDERS' EQUITY
Common stock 5,830 5,822
Additional capital 4,068 3,865
Retained earnings 26,254 53,504
Less Treasury stock, at cost (21) (21)
-------- --------
36,131 63,170
-------- --------
$160,734 $162,923
======== ========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended February 1, 1997, February 3, 1996 and January 28, 1995
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales $365,879 $342,889 $311,419
Cost of goods sold 250,784 223,737 202,110
-------- -------- --------
Gross profit 115,095 119,152 109,309
Operating expenses
Selling and administrative expenses 128,517 115,210 109,601
Pre-opening expenses 3,459 1,892 848
Corporate restructuring - (2,401) -
Store closing provision 7,510 2,406 590
Miscellaneous income (773) (2,614) (3,534)
-------- -------- --------
Operating income (loss) (23,618) 4,659 1,804
Interest expense, net 3,821 2,307 1,382
-------- -------- --------
Earnings (loss) before income taxes (27,439) 2,352 422
Income tax (benefit) (189) 410 132
-------- -------- --------
NET EARNINGS (LOSS) $(27,250) $ 1,942 $ 290
======== ======== ========
Earnings (loss) per common and common
equivalent share $ (4.67) $ .32 $ .05
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended January 28, 1995, February 3, 1996 and February 1, 1997
(In thousands)
<TABLE>
<CAPTION>
Common stock
-------------- Treasury Additional Retained
Shares Amount stock capital earnings
------ ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 30, 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
Compensation under stock
option and stock bonus
plans - - - 168 -
Issuance of shares under stock
option plan 8 8 - 35 -
Net loss for the year - - - - (27,250)
----- ------ -------- ------ --------
Balance at February 1, 1997 5,830 $5,830 $ (21) $4,068 $ 26,254
===== ====== ======== ====== ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended February 1, 1997, February 3, 1996 and January 28, 1995
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Cash flows of operating activities
Net earnings (loss) $(27,250) $ 1,942 $ 290
Adjustments to reconcile net cash provided (used)
by operating activities
Depreciation and amortization 6,942 5,669 5,643
(Recoveries of) provision for losses on accounts receivable (22) (9) 153
Recovery of corporate restructuring - (2,401) -
Charge to reserve for corporate restructuring, net of
depreciation and amortization (120) (3,871) (4,745)
Provision for losses on store closings 13,909 2,406 590
Stock option and bonus plan expense, net of stock
retained for income taxes 168 351 155
Loss on disposition of fixed assets 234 99 131
(Decrease) increase in deferred income taxes (250) 202 (11)
Amortization of deferred rental allowance (292) (205) (63)
Gain on disposition of real estate and leaseholds - - (1,633)
Changes in assets and liabilities
Increase in accounts receivable (297) (6) (98)
Increase in merchandise inventories (3,242) (12,336) (9,595)
Decrease(increase) in prepaid expenses and other 2,907 (1,914) (2,759)
Increase(decrease) in trade accounts payable 10,219 (10,200) 12,820
Increase (decrease) in accrued liabilities 2,093 2,331 (978)
Increase (decrease) in income taxes 147 4,254 (26)
Increase in noncurrent liabilities 2,397 1,753 1,802
-------- -------- --------
Net cash provided(used) by operating activities 7,543 (11,935) 1,676
Cash flows of investing activities
(Payment on) proceeds from disposal of fixed assets (753) 26 42
Purchase of property, plant and equipment (19,225) (21,655) (12,868)
Proceeds from disposition of real estate and leaseholds 1 12 1,923
Proceeds from note receivable 44 47 45
Proceeds from landlords 6,774 1,848 7,614
-------- -------- --------
Net cash used by investing activities (13,159) (19,722) (3,244)
Cash flows of financing activities
Proceeds from stock issuance 43 91 33
Acquisition of treasury stock - - (21)
Proceeds from issuance of long-term obligations 259 4,676 -
Payments of long-term obligations (883) (472) (859)
Proceeds from revolving credit facility, net 6,307 27,435 2,625
-------- -------- --------
Net cash provided by financing activities 5,726 31,730 1,778
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 110 73 210
Cash and cash equivalents at beginning of period 327 254 44
-------- -------- --------
Cash and cash equivalents at end of period $ 437 $ 327 $ 254
======== ======== ========
Supplemental disclosures of cash flow information
Cash (received) paid during the year for
Income taxes $ (297) $ (3,690) $ 139
Interest 3,679 2,479 1,504
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 1, 1997, February 3, 1996
and January 28, 1995
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. As of February 1, 1997, the Company operated 31
Supersports USA megastores and 84 traditional stores of the Company. Sales in
Texas and California accounted for 53% and 19% of retail sales. 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 1996 (52 weeks), 1995 (53 weeks), and 1994 (52 weeks) ended on
February 1, 1997, February 3, 1996, and January 28, 1995, respectively.
2. PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of Oshman's Sporting
Goods, Inc. and its subsidiaries, all wholly-owned. In consolidation, all
significant intercompany transactions have been eliminated.
3. 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.
28
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 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. 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.
29
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE A - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 inventory adjustments, non-
recoverable investments in fixed assets, future net lease obligations, employee
costs and other direct store closing costs.
12. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NOS. 121 AND 123
-------------------------------------------------------------------
Effective January 1, 1996, the Company adopted SFAS No. 121, Accounting for
Impairment of Long-Lived Assets to be Disposed Of. This standard requires that
long-lived assets that are held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. When it is determined that
an asset's estimated future net cash flows will not be sufficient to recover
its carrying amount, an impairment charge must be recorded to reduce the
carrying amount for the asset to its estimated fair value. The effect of the
adoption of SFAS 121 was not material to the Company.
During 1996, the Company chose to continue the use of APB No. 25 and related
Interpretations in accounting for stock-based compensation. As required by
SFAS No. 123, Accounting for Stock-Based Compensation, the Company has
disclosed in pro forma presentation the effects on earnings of calculating the
fair value of a stock option using the method prescribed in SFAS No. 123.
13. NEW PRONOUNCEMENTS
------------------
The FASB has issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements issued after
December 15, 1997. Early adoption of the new standard is not permitted. The
new standard eliminates primary and fully diluted earnings per share and
requires presentation of basic and diluted earnings per share together with
disclosure of how the per share amounts were computed. The adoption of this
new standard is not expected to have a material impact on the disclosure of
earnings per share in the financial statements.
14. RECLASSIFICATIONS
-----------------
Certain amounts in prior financial statements have been reclassified to conform
to the 1996 financial statement presentation.
30
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
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>
1996 1995
------- -------
(In thousands)
<S> <C> <C>
Furniture, fixtures and equipment $56,904 $51,549
Leasehold improvements 32,668 33,408
Buildings 4,840 4,753
Land 2,927 2,927
Leasehold improvements under capital leases 1,107 1,170
------- -------
$98,446 $93,807
======= =======
</TABLE>
NOTE C - NOTE RECEIVABLE
The Company has a non-interest bearing note receivable from the Company's Chief
Executive Officer. At the end of 1996 and 1995, the balance of the note was
$418,000 and $464,000, 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.
31
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE D - LONG-TERM OBLIGATIONS
Long-term obligations at the end of the year consist of the following:
<TABLE> 1996 1995
<CAPTION> ---- ----
(In thousands)
Revolving credit facility due August 31, 1999, interest
payable monthly, collateralized by inventory, accounts
receivable and real estate $38,353 $32,047
1996 1995
------- -------
(In thousands)
<S> <C> <C>
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 1, 1997) plus 1% to 9.5% (fixed), maturing
through 2005 $ 4,368 $ 4,938
Capitalized lease obligations, interest at 9.5%,
maturing in 1998 452 505
------- -------
43,173 37,490
Less current maturities 776 809
------- -------
$42,397 $36,681
======= =======
</TABLE>
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>
1997 $ 776
1998 698
1999 38,868
2000 518
2001 521
Thereafter 1,792
-------
$43,173
=======
</TABLE>
32
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE D - LONG-TERM OBLIGATIONS - CONTINUED
On August 31, 1992, the Company entered into an agreement providing for a
revolving credit facility with The CIT Group/Business Credit, Inc. (CIT).
Advances under the facility are based on a borrowing base formula and subject
to certain loan restrictions, 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. During 1996, the agreement was
amended to increase the revolving line of credit to $65,000,000, with a further
seasonal increase to $80,000,000 during the period from mid-September through
mid-December each year. In addition, the Company may, at its option, increase
the line of credit by an additional $5,000,000.
Advances under the credit facility bear interest at the prime rate (8.25% at
February 1, 1997) and any unused borrowing capacity is subject to a line of
credit fee of .375%. The Company may, under certain circumstances, elect to
have interest computed at a rate of the London Interbank Offered Rate (LIBOR,
5.4687% to 5.5937% at February 1, 1997) plus 2.50%. The credit facility
expires August 31, 1999.
At February 1, 1997 the Company was not in compliance with certain of its
covenants under the revolving credit facility. Subsequent to February 1, 1997,
this noncompliance was waived by CIT and the covenants were modified in
accordance with expected operating results for fiscal 1997.
At the end of 1996 and 1995, outstanding letters of credit were $1,152,000 and
$2,381,000, respectively.
NOTE E - INCOME TAXES
The Company's tax expense (benefit) consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ----- -----
(In thousands)
<S> <C> <C> <C>
Current
Federal $ - $ - $ -
Foreign 28 14 33
State 33 98 76
Deferred
Federal - - -
State (250) 298 23
----- ----- -----
$(189) $ 410 $ 132
===== ===== =====
</TABLE>
33
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE E - INCOME TAXES - CONTINUED
A reconciliation of income tax expenses (benefits) on net earnings (losses)
before income taxes computed at the statutory Federal income tax rate and
income taxes reported in the consolidated statements of operations is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Income tax expense (benefit) at
statutory rate $(9,329) $ 800 $ 143
Increases (reductions)
State income taxes (net of
Federal tax benefit) 22 65 50
Targeted jobs tax credit - net - (81) (62)
Other items - net (42) 392 40
Change in valuation allowance 9,160 (766) (39)
------- ------- ------
9,140 (390) (11)
------- ------- ------
Income tax expense (benefit) $ (189) $ 410 $ 132
======= ======= ======
</TABLE>
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
February 1, 1997 February 3, 1996
------------------- -------------------
Current Long-Term Current Long-Term
------- --------- ------- ---------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Assets
- -----------
Accrued expenses $ 721 $ 479 $1,489 $ 380
Lease incentives 122 1,606 80 1,051
Store closing reserve 4,760 - - -
Other 225 - 289 -
NOL carryforward - 8,959 495 4,256
Business tax credits - 1,072 - 1,098
------- ------- ------ -------
5,828 12,116 2,353 6,785
------- ------- ------ -------
Liabilities
- -----------------
Depreciation of property and equipment - 4,301 - 3,678
Inventory capitalization 886 - 972 -
LIFO termination 478 478 481 963
Store opening costs 442 - 900 -
State taxes 9 243 126 377
Other 104 127 49 126
------- ------- ------ -------
1,919 5,149 2,528 5,144
------- ------- ------ -------
Net asset before valuation allowance 3,909 6,967 (175) 1,641
Less valuation allowance (3,968) (7,337) - (2,145)
------- ------- ------ -------
NET LIABILITY $ 59 $ 370 $ 175 $ 504
======= ======= ====== =======
</TABLE>
34
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE E - INCOME TAXES - CONTINUED
Deferred income taxes of $59,000 and $175,000 were included in current accrued
liabilities at the end of 1996 and 1995.
Deferred tax assets were reduced by valuation allowances of $11,305,000 and
$2,145,000 at February 1, 1997 and February 3, 1996, respectively. Due to the
increased operating loss carryforwards generated during fiscal 1996 from the
Company's operations and store closing provision, management believes that
uncertainties exist such that it is unlikely that the Company's deferred tax
assets will be realized in the future and therefore have recorded a valuation
allowance equal to 100% of its existing net deferred tax asset. In fiscal
1996, in accordance with SFAS 109, the Company recorded an additional valuation
allowance of $9,160,000 for deferred tax assets generated in the current year.
The Company has net operating loss carryforwards of approximately $26,350,000.
The carryforwards expire as follows: $641,000 in 2008, $6,680,000 in 2009,
$3,317,000 in 2010 and $3,054,000 in 2011 and $12,658,000 in 2012.
Additionally, the Company has foreign tax credit carryforwards of $263,000
expiring from 1997 to 2002, job tax credit carryforwards of $748,000 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 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.
35
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED
Future minimum rental payments under operating leases at the end of 1996 are as
follows:
<TABLE>
<CAPTION>
Fiscal year Amount
- ----------- --------------
(In thousands)
<S> <C>
1997 $ 21,407
1998 20,220
1999 19,549
2000 18,747
2001 18,234
Thereafter to 2017 188,418
</TABLE>
Minimum payments have not been reduced by minimum sublease rental income of
$14,958,000 due in the future under noncancelable subleases.
Total rental expense entering into the determination of net earnings (loss) is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Leased facilities
Minimum rentals $18,479 $14,302 $12,824
Contingent rentals (based on a
percentage of sales) 1,813 2,686 2,767
------- ------- -------
20,292 16,988 15,591
Other rentals 388 521 673
------- ------- -------
$20,680 $17,509 $16,264
======= ======= =======
</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.
36
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED
CAPITAL LEASES
--------------
Future minimum lease payments for assets under capital leases at the end of
1996, and the present value of such payments, are as follows:
<TABLE>
<CAPTION>
Fiscal year Amount
- ----------- --------------
(In thousands)
<S> <C>
1997 $369
1998 123
----
Total minimum lease payments 492
Less amount representing interest 40
----
Present value of minimum obligations $452
====
</TABLE>
PROFIT SHARING PLAN
-------------------
The Company and its subsidiaries participate in a discretionary employee profit
sharing plan. Effective November 1, 1996, the Plan was converted to a 401(k)
Retirement Savings Plan covering all eligible employees. Under the Plan,
participating employees can allocate up to 15% of their salary. The Company
may make discretionary contributions to the Plan. The Company made no
contributions to the Plan in 1996, 1995 or 1994.
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 $1,781,000, $1,382,000 and
$1,088,000 for 1996, 1995 and 1994, respectively. The Plan was terminated
subsequent to year end. As of year end, the Company recorded an accrual to
cover anticipated remaining obligations of the Plan.
As of February 1, 1997, the Company began offering a fully insured Medical Plan
to its employees.
37
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE F - COMMITMENTS AND CONTINGENCIES - CONTINUED
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
$100,000 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. At February 1, 1997, the cash surrender value of
the insurance policy was $744,000 and the Company had recorded a deferred
compensation liability of $531,000.
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 1996, 1995 and 1994, common stock shares issued
were 5,830,000, 5,822,000, and 5,811,000, respectively, and shares outstanding
were 5,827,000, 5,819,000 and 5,808,000, respectively.
38
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
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 1996, 1995 or 1994. 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 1, 1997, February 3, 1996
and January 28, 1995
NOTE G - STOCKHOLDERS' EQUITY - CONTINUED
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
$181,000, $517,000 and $187,000 in 1996, 1995, and 1994, respectively.
FASB STATEMENT 123 DISCLOSURE
-----------------------------
The Company applies APB 25 and related Interpretations in accounting for stock-
based compensation. Had compensation costs been determined based on the fair
value at the grant dates for awards consistent with the method of FASB
Statement 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
--------- ---------------
(in thousands except per
share amounts)
<S> <C> <C>
Net (loss) income
As reported (27,250) 1,942
Pro forma (27,271) 737
Earnings per share
As reported (4.67) .32
Pro forma (4.67) .13
</TABLE>
40
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE G - STOCKHOLDERS' EQUITY - CONTINUED
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for the grants issued in 1995 and 1996:
Expected volatility 41.37% to 52.04%
Risk free rate 5.9% to 7.05%
Expected life of options 1 to 10 years
Expected dividend yield 0%
A summary of the Company's stock options and warrants of 1996 and 1995 and
changes during the years ending on those dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
Weighted-average Weighted-average Weighted average
Shares exercise price Shares exercise price Shares exercise price
---------------- ---------------- ---------------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 682,800 $5.98 742,350 $6.56 580,100 $7.56
Granted 30,000 7.77 262,500 7.14 238,700 4.22
Exercised 8,100 5.97 11,100 6.72 6,050 4.13
Forfeited 145,650 7.56 23,083 6.69 52,166 6.17
Expired 47,600 5.37 287,867 7.97 18,234 9.25
------- ------- -------
Outstanding at
end of year 511,450 5.38 682,800 5.98 742,350 6.56
======= ======= =======
Options exercisable
at end of year 335,838 7.03 402,150 7.02 333,267 8.14
======= ======= =======
</TABLE>
The weighted-average fair value of compensatory options granted during 1996 and
1995 was $5.62 and $5.02 per option.
41
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE G - STOCKHOLDERS' EQUITY - CONTINUED
The following table summaries information about options and warrants
outstanding at February 1, 1997:
<TABLE>
<CAPTION>
Options/awards outstanding Options exercisable
----------------------------------------------- --------------------------------
Weighted-average
Range of Number remaining Weighted-average Number Weighted-average
exercise prices outstanding contractual life exercise price outstanding exercise price
- ------------------ ----------- ---------------- ---------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
$0 - $1 100,000 1.84 years - - -
$5 - $7.50 393,450 3.53 years 6.93 333,671 7.01
$7.51 - $11 17,500 6.59 years 8.71 1,667 8.50
$11.01-$15.20 500 .48 years 15.20 500 15.20
------- -------
511,450 335,838
======= =======
</TABLE>
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 - STORE CLOSING RESERVE
In the fourth quarter of fiscal 1996, the Company announced its plan to close
53 of its traditional stores during fiscal 1997. The Company recorded a store
closing reserve of $13,640,000 to cover inventory adjustments ($6,263,000),
lease termination costs ($5,240,000), leasehold and other asset write-offs
($1,298,000) and employee costs and other incremental store closing costs
($839,000).
In fiscal 1996, 1995 and 1994, the 53 stores that are planned to close in 1997,
had sales of $50,100,000, $63,100,000 and $67,100,000, and incurred direct
store losses of $2,500,000 in fiscal 1996 compared to direct store profits of
$2,300,000 in fiscal 1995 and $4,100,000 in fiscal 1994.
42
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997, February 3, 1996
and January 28, 1995
NOTE J - MISCELLANEOUS INCOME (EXPENSE)
Miscellaneous income (expense) consist of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
(in thousands)
Gain on sale of real estate and
leasehold interests $ - $ - $1,633
Condemnation proceeds - 1,550 -
Fees from foreign licenses 1,238 1,087 1,418
Insurance recoveries - - 372
Recovery of provision for earthquake
losses - 229 164
Other, net (465) (252) (53)
------ ------ ------
$ 773 $2,614 $3,534
====== ====== ======
</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.
43
<PAGE>
SUPPLEMENTAL INFORMATION
44
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
(Unaudited)
Years ended February 1, 1997 and February 3, 1996
(In thousands except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
1996
Net sales $82,719 $92,000 $78,859 $112,301
======= ======= ======= ========
Gross profit $30,179 $26,353 $29,199 $ 29,364
======= ======= ======= ========
Net earnings (loss) $(1,221) $(8,041) $(2,895) $(15,093)
======= ======= ======= ========
Earnings (loss) per share $ (.21) $ (1.38) $ (.50) $ (2.59)
======= ======= ======= ========
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
======= ======= ======= ========
</TABLE>
45
<PAGE>
Schedule II
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
ALLOWANCE FOR DOUBTFUL RECEIVABLES
Years ended February 1, 1997, February 3, 1996
and January 28, 1995
(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 1, 1997 $386 $ 7 $168 $255
Year ended February 3, 1996 $395 $ 33 $ 42 $386
Year ended January 28, 1995 $242 $170 $ 17 $395
</TABLE>
(A) Receivables charged off, net of recoveries.
Column C(2) - None.
46
<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: TIMOTHY L. GRADY
-----------------
Timothy L. Grady
Senior Vice President and Chief Financial Officer
Date: April 30, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 30, 1997 by the following persons on
behalf of the Registrant and in the capacities indicated.
MARILYN OSHMAN ALVIN N. LUBETKIN
-------------- -----------------
Marilyn Oshman Alvin N. Lubetkin
Chairman of the Board of Directors Vice Chairman of the Board of
Directors, Chief Executive
Officer, President (Principal
Executive Officer) and Director
MARVIN ARONOWITZ MANUEL A. SANCHEZ, III
---------------- ----------------------
Marvin Aronowitz Manuel A. Sanchez, III
Director Director
DOLPH B.H. SIMON TIMOTHY L. GRADY
---------------- ----------------
Dolph B.H. Simon Timothy L. Grady
Director Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
A. LYNN BOERNER
---------------
A. Lynn Boerner
Vice President,
Chief Accounting Officer and
Assistant Secretary
(Principal Accounting Officer)
<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 + Amended and Restated Bylaws of Oshman's Sporting Goods, Inc. as of
January 30, 1997.
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 1993 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 1993 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).
Exhibits - 1
<PAGE>
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).
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 (filed as
Exhibit 4.1 to the Company's Form 10-K for the fiscal year ended
February 3, 1996 and incorporation herein by reference).
4.1(o) Amendment dated April 12, 1996 to the Financing Agreement (filed as
Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter ended May
4, 1996 and incorporated herein by reference).
4.1(p) Amendment dated July 18, 1996 to the Financing Agreement (filed as
Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter ended
August 3, 1996 (the "August 1996 10-Q") and incorporated herein by
reference).
4.1(q) Amendment dated August 2, 1996 to the Financing Agreement (filed as
Exhibit 4.1 to the Company's August 1996 10-Q and incorporated herein
by reference).
4.1(r) Amendment dated October 31, 1996 to the Financing Agreement (filed as
Exhibit 4.1 to the Company's Form 10-Q for the fiscal quarter ended
November 2, 1996 (the "November 1996 10-Q") and incorporated herein by
reference).
4.1(s) + Amendment dated November 18, 1996 to the Financing Agreement.
4.1(t) + Amendment dated March 18, 1997 to the Financing Agreement.
4.1(u) + Amendment dated April 25, 1997 to the Financing Agreement.
Exhibits - 2
<PAGE>
10.1 * 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).
10.2 * 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).
10.3 * 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).
10.3(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).
10.4 * 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).
10.4(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).
10.4(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).
10.5 * Oshman's Sporting Goods, Inc. 1986 Stock Bonus Plan (filed as Exhibit
10.10 to the 1987 10-K and incorporated herein by reference).
10.5(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).
10.6 * 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).
10.7 * 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).
Exhibits - 3
<PAGE>
PAGE>
10.8 * Oshman's Sporting Goods, Inc. 1991 Stock Option Plan (filed as Exhibit
10.10 to the 1991 10-K and incorporated herein by reference).
10.9 * 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).
10.10 * Oshman's Sporting Goods, Inc. 1994 Omnibus Plan (filed as Exhibit 10.13
to the 1995 10-K and incorporated herein by reference).
10.10(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).
10.11 * 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 and incorporated
herein by reference).
10.11(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).
10.12 * 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).
10.13 * Employment Agreement between the Company and Timothy L. Grady, dated
June 6, 1996 (filed as Exhibit 10.17 to the Company's November 1996 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 3.2
OSHMAN'S SPORTING GOODS, INC.
(the "Corporation")
AMENDED AND RESTATED BYLAWS
AS OF JANUARY 30, 1997
ARTICLE I
OFFICES
Section 1. Registered Office in Delaware. The registered office shall be
in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Section 1. Meetings of Stockholders: Place. All meetings of the
stockholders for the election of directors shall be held in the City of Houston,
State of Texas, at such place as may be fixed from time to time by the board of
directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the board of directors and stated in
the notice of the meeting. Meetings of stockholders, for any other purpose, may
be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders, commencing
with the year 1971, shall be held at 10:00 am., on the fourth Friday of June if
not a legal holiday, and if a legal holiday, then on the next secular day
following, or at such other date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting. At such
meeting, the stockholders shall elect, by a plurality vote of the shares of the
stock present or represented, a board of directors, and transact such other
business as may be properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
fifty days before the date of the meeting.
Section 4. List of Stockholders. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of
<PAGE>
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the vice chairman of the board of
directors and chief executive officer or the president and shall be called by
the president or secretary at the request in writing of a majority of the board
of directors or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Notice of Special Meeting. Written notice of a special meeting
stating the place, date and hour of the meeting and the purposes for which the
meeting is called, shall be given not less than ten nor more than fifty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business at Special Meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice, unless by unanimous consent of the stockholders present and entitled to
vote thereat, it shall be determined otherwise, and in such case any other
business may be transacted.
Section 8. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been trans acted at the meeting as originally
notified If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. Vote Required. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
2
<PAGE>
Section 10. Manner of Voting; Proxies. Each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or by proxy for
each share of the capital stock having voting power held by such stockholder,
but no proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period.
Section 11. Shareholder Action Without Meeting. Any action required by
law to be taken at any annual or special meeting of the stockholders or any
action which may be taken at any annual or special meeting of the stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voting. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. Number. The number of directors which shall constitute the
whole board shall be determined from time to time by resolution of the board of
directors or by the stockholders at their annual meeting. The directors shall
be elected at the annual meeting of the stockholders, except as provided in
section 2 of this article, and each director elected shall hold office until his
successor is elected and qualified or until his earlier resignation or removal.
Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless they shall sooner resign or be removed. If at any time there
are no directors in office, then an election of directors may be held in the
manner provided by statute. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent of the total number of the shares at
the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships or to replace the directors chosen by the directors then in
office.
Section 3. Powers. The business of the Corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and
3
<PAGE>
things as are not by statute or by the certificate of incorporation or by these
bylaws directed or required to be exercised or done by the stockholders.
Section 4. Resignation. Any director, member of a committee or other
officer may resign at any time. Such resignation shall be made in writing, and
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
Section 5. Removal. Any director or directors may be removed either for
or without cause at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote at any
special meeting of the stockholders called for the purpose.
Section 6. Meetings. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 7. First Meeting. The first meeting of each newly elected board
of directors shall be held at such time and place as shall be fixed by the vote
of the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 8. Regular Meeting. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board.
Section 9. Special Meetings. Special meetings of the board may be called
by the vice chairman of the board of directors and chief executive officer or by
the president on one day's notice to each director, either personally or by mail
or by telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of any three directors.
Section 10. Quorum. At all meetings of the board one-third of the
directors, but in no case less than two directors, shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting
of the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
4
<PAGE>
Section 11. Action by Director without Meeting. Unless otherwise
restricted by the certificate of incorporation or these bylaws, any action
required or permitted to be taken at any meeting of the board of directors or of
any committee thereof may be taken without a meeting, if all members of the
board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
Section 12. Committees. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of two or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution and
considered with law, shall have and may exercise the powers of the board of
directors in the management of the business and affairs of the corporation and
may authorize the seal of the corporation to be affixed to all papers which may
require it. In the absence or disqualification of any member of such committee
or committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the board of directors.
Section 13. Minutes of Committees. Each committee shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
Section 14. Compensation of Directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Requirement of Notice. Whenever, under the provisions of the
statutes or of the certificate of incorporation or of these bylaws, notice is
required to be given to any director or stockholder it shall not be construed to
mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram.
5
<PAGE>
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of incorporation or
of these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether signed before or after the time stated therein,
shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen
by the board of directors and shall consist of a chairman of the board of
directors, a vice chairman of the board and chief executive officer, a
president, one or more vice-presidents, a secretary, and a treasurer. The board
of directors may also choose one or more assistant secretaries and assistant
treasurers. Any number of offices may be held by the same person, unless the
certificate of incorporation, these bylaws or the laws of the State of Delaware
otherwise provide
Section 2. Election. The board of directors at its first meeting after
each annual meeting of stockholders shall elect a chairman of the board, a
president, one or more vice presidents, a secretary and a treasurer.
Section 3. Other Officers. The board of directors may appoint such other
officers and agents as it shall deem necessary, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. Term. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancies occurring in any office of
the Corporation shall be filled by the board of directors.
Section 6. Chairman of the Board of Directors. The chairman of the board
of directors shall preside at all meetings of the board of directors and
stockholders and he shall have and perform such other duties as from time to
time may be assigned to him by the board of directors or by the executive
committee.
Section 6a. Vice Chairman of the Board and Chief Executive Officer. The
vice chairman of the board and chief executive officer shall be the principal
executive officer of the corporation and subject to the board of directors,
shall have general executive charge, management and control of the properties
and operations of the Corporation in the ordinary course of its business with
all such powers with respect to such properties and operations as may be
reasonably incident to such responsibilities. The vice chairman of the board and
chief executive
6
<PAGE>
officer shall, in the absence or at the direction, of the chairman of the board,
preside at all meetings of the stockholders and the board of directors.
Section 7. President. The president, subject to the board of directors
and the vice chairman of the board and chief executive officer, shall have the
general executive charge and management of the operations of the Corporation,
with all such powers with respect to such operations as may be reasonably
incident to such responsibilities; he may agree upon and execute all division
and transfer orders, bonds, contracts and other obligations in the name of the
Corporation; he may sign all certificates for shares of capital stock of the
Corporation. He shall exercise the powers of the chief executive officer during
that officer's absence or inability or refusal to act.
Section 8. Vice-Presidents. In the absence of the chief executive officer
and the president or at their direction or in the event of the inability or
refusal of both of them to act, the vice-president (or in the event there be
more than one vice-president, the vice-presidents in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the chief executive officer and the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the chief executive officer and the president. The vice-presidents shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
Section 9. Secretary. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committee when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and shall have authority to
affix the same to any instrument requiring it; and when so affixed, such seal
may be attested by his signature. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest such affixing by his signature.
Section 10. Assistant Secretary. The assistant secretary or if there be
more than one, the assistant secretaries in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 11. Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name
7
<PAGE>
and to the credit of the corporation in such depositories as may be designated
by the board of directors.
He shall disburse the funds of the corporation as may be ordered by the
board of directors, taking proper vouchers for such disbursements, and shall
render to the president, and to the board of directors at its regular meetings,
or when the board of directors shall so require an account of all his
transactions as treasurer and of the financial condition of the Corporation.
If required by the board of directors, he shall give the Corporation a bond
(which shall be renewed every six years) in such sum and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation.
Section 12. Assistant Treasurer. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exer cise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Requirements. Every holder of stock in the corporation shall
be entitled to have a certificate signed by, or in the name of, the Corporation
by the chief executive officer or the president or a vice-president and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of the Corporation, certifying the number of shares owned by him in the
Corporation. If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the Corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such pre
ferences and/or rights.
8
<PAGE>
Section 2. Facsimile Signature. Where a certificate is countersigned (1)
by a transfer agent other than the Corporation or its employee, or (2) by a
registrar other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 5. Fixing Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
Section 6. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
9
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Before payment of any dividend, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the directors from
time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2. Annual Statement. The board of directors shall present at each
annual meeting, and at any special meeting of the stockholders, when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the Corporation.
Section 3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such person or persons as the board of directors
may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the board of directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the word "Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 6. [DELETED]
ARTICLE VII
AMENDMENTS
Section 1. Amendments. These bylaws may be altered, amended or repealed
or new bylaws may be adopted by the stockholders or by the board of directors,
when such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting.
10
<PAGE>
ARTICLE IX
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article IX, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of a
subsidiary of the Corporation or serving as a trustee of an employee benefit
plan, against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that such person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article IX, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer, of the Corporation, or is
or was serving at the request of the Corporation as a director or officer of a
subsidiary of the Corporation or serving as a trustee of an employee benefit
plan against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article IX (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
11
<PAGE>
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article IX, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders.
To the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article IX, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on the records or books of
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 of this Article IX shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 of this
Article IX shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 1 or Section 2 of this Article IX, as
the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article IX, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article IX. The basis of such indemnification by the Court of Chancery
shall be a determination by such court that indemnification of the director or
officer is proper in the circumstances because such person has met the
applicable standards of conduct set forth in Section 1 or Section 2 of this
Article IX, as the case may be. Neither a contrary determination in the
specific case under Section 3 of this Article IX nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the director or officer seeking indemnification has not met any
applicable standard of conduct. Notice of any application for indemnification
pursuant to this Section 5 of this Article IX shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the director or officer seeking indemnification shall also be entitled to
be paid the expense of prosecuting such application.
12
<PAGE>
Section 6. Expenses Payable in Advance. Expenses (including attorneys'
fees) incurred by a director or officer in defending or investigating a
threatened or pending action, suit or proceeding may be required by the Board of
Directors to be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article IX.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article IX shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in a person's
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article IX shall be made to the
fullest extent permitted by law. The provisions of this Article IX shall not be
deemed to preclude the indemnification of any person who is not specified in
Section 1 or Section 2 of this Article IX but whom the Corporation has the power
or obligation to indemnify under the provisions of the General Corporation Law
of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any liability
asserted against such person and incurred by him in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power or the obligation to indemnify such person against such
liability under the provisions of this Article IX.
Section 9. Certain Definitions. For the purposes of this Article IX,
the term "officer" shall mean any officer of the Corporation (as such term is
used in Article IV hereof) who has been duly elected and qualified by the Board
of Directors of the Corporation as provided in Section 2 of Article IV hereof
or, where applicable, any officer of a subsidiary of the Corporation (as such
term is defined in such subsidiary's by-laws) who has been duly elected and
qualified by the Board of Directors of such subsidiary. For purposes of this
Article IX, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article IX with respect to the
resulting or surviving corporation as such indemnification relates to such
person's acts while serving in any of the foregoing capacities, of such
constituent
13
<PAGE>
corporation, as such person would have with respect to such constituent
corporation if its separate existence had continued. For purposes of this
Article IX, references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article IX shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person. Furthermore, any repeal or modification of this Article IX shall not
in any way diminish any rights of a director or officer to indemnification under
this Article IX arising out of events occurring prior to such repeal or
modification.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article IX to the contrary, except for proceedings to enforce
rights to indemnification (which shall be governed by Section 5 of this Article
IX), the Corporation shall not be obligated to indemnify any director or officer
in connection with a proceeding (or part thereof) initiated by such person
unless such proceeding (or part thereof) was authorized or consented to by the
Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article IX to directors and officers of the Corporation.
14
<PAGE>
EXHIBIT 4.1(s)
[LETTERHEAD OF THE CIT GROUP APPEARS HERE]
November 18, 1996
J.S. Oshman and Co., Inc.
Oshman Sporting Goods Co., Alabama
Oshman Sporting Goods Co., Arizona
Oshman Sporting Goods Co., Arkansas
Oshman Sporting Goods Co., California
Oshman Sporting Goods Co., Colorado
Oshman Sporting Goods Co., Florida
Oshman Sporting Goods Co., Georgia
Oshman Sporting Goods Co., Hawaii
Oshman Sporting Goods Co., Kansas
Oshman Sporting Goods Co., Louisiana
Oshman Sporting Goods Co., Michigan
Oshman Sporting Goods Co., Minnesota
Oshman Sporting Goods Co., Missouri
Oshman Sporting Goods Co., Nevada
Oshman Sporting Goods Co., New Jersey
Oshman Sporting Goods Co., New Mexico
Oshman Sporting Goods Co., New York
Oshman Sporting Goods Co., Ohio
Oshman Sporting Goods Co., Oklahoma
Oshman Sporting Goods Co., Oregon
Oshman Sporting Goods Co., South Carolina
Oshman Sporting Goods Co., Tennessee
Oshman Sporting Goods Co., Texas
Oshman Sporting Goods Co., Utah
Oshman Sporting Goods Co., Washington
Oshman's Ski Skool, Inc.
Oshman's Sporting Goods, Inc.-Services
2302 Maxwell Lane
Houston, TX
Gentlemen:
<PAGE>
Reference is made to the (a) Financing Agreement among us, dated August 31, 1992
as amended, modified and supplemented from time to time (herein "the Financing
Agreement"), inter alia, by that (b) letter among us, dated as of October 27,
1995 (the "October 1995 Amendment") and (c) letter among us dated November 4,
1994 (the "November 1994 Amendment"). Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Financing Agreement.
Pursuant to mutual understanding, the Financing Agreement is hereby amended as
follows:
1. The definition of "Revolving Line of Credit" appearing in Section 1 of the
Financing Agreement is hereby amended by deleting it in its entirety and
substituting the following in lieu thereof:
"REVOLVING LINE OF CREDIT shall mean the commitment of CITBC to make loans
and advances and issue Letter of Credit Guaranties, all pursuant to and in
accordance with Sections 3 and 4 of this Financing Agreement, to each of the
Companies in the aggregate amount of $55,000,000 (the "Old Revolving Line of
Credit"), but subject to CITBC's discretion to make Overadvances, provided,
however, that the Old Revolving Line of Credit may be increased by three
separate increments of $5,000,000.00 each (each an "Increment") at the
election of the Companies, provided further that in any instance that the
Companies so elect an Increment, the effectiveness of such Increment is
conditioned upon: (i) no Default is then in existence or no Event of Default
has occurred which has not been waived; (ii) the Companies shall have given
CITBC fifteen (15) days prior written notice of its request to increase the
Revolving Line of Credit by such Increment; (iii) in no event shall the
Revolving Line of Credit exceed the amount of $70,000,000.00 in the
aggregate."
Notwithstanding any such increase in the Revolving Line of Credit, all
loans, advances and extensions of credit to you pursuant to Section 3 and 4
of the Financing Agreement shall be within the Borrowing Base.
2. The figure "$55,000,000.00" as it appears in the definition of Availability
is hereby amended to read the "Old Revolving Line of Credit plus any
Increments thereto".
-2-
<PAGE>
3. The definition of "Availability Reserve" appearing in Section 1 of the
Financing Agreement is hereby amended by deleting it in its entirety and
substituting the following in lieu thereof: "Availability Reserve shall mean
at any time of determination an amount equal to the sum of the then undrawn
amount of all outstanding Letters of Credit".
4. The definition of "Eligible Inventory" appearing in Section 1 of the
Financing Agreement is hereby amended by deleting the period and adding the
following to the end of the first sentence:"; and (p) a reserve in the
amount of (i) $4,166,667.00 when the Inventory advance rate is sixty percent
(60%) and (ii) $3,846,154.00 when the Inventory advance rate is sixty-five
per cent (65%), on a continuing basis in lieu of landlord waivers in favor
of CITBC for leased retail stores."
5. At your request, we have as an accommodation granted to the Companies a
seasonal advance rate of sixty-five percent (65%) of the aggregate value of
each of the Companies respective Eligible Inventory determined at cost as
set forth in subparagraph a of paragraph 1 of Section 3 of the Financing
Agreement (herein the "Seasonal Inventory Advance Rate") which is five
percent (5%) greater than the advance rate set forth in such subparagraph
effective for the periods: (a) June 15th through August 15th commencing June
15, 1997 and (b) September 15th through December 15th commencing the date of
this amendment, so long as the Financing Agreement is in full force and
effect subject to the absence of any Default or Event of Default which has
not been waived (herein each a "Seasonal Inventory Advance Rate Period").
In furtherance of the foregoing, effective immediately, the percentage which
appears as "sixty percent (60%)" in subparagraph a) of paragraph 1 of
Section 3 of the Financing Agreement is amended to read "sixty-five percent
(65%)" solely and exclusively from the date of this amendment through
December 15, 1996, and for each Seasonal Inventory Advance Rate Period
thereafter, provided that:
(i) notwithstanding such increase in the inventory advance rate for such
period, all loans advances and extensions of credit to you pursuant to
Sections 3 and 4 of the Financing Agreement shall be within the
Borrowing Base, as herein amended;
-3-
<PAGE>
(ii) effective (a) August 16th of each year through and including the
following September 14th and (b) December 16th of each year through
and including the following June 14th, such Seasonal Inventory Advance
Rate shall automatically revert back to sixty percent (60%); and
(iii) such Seasonal Inventory Advance Rate shall only be effective absent
the occurrence of a Default or an Event of Default which has not been
waived.
6. Paragraph 4 appearing in the November 1994 Amendment is hereby amended by
deleting it in its entirety and substituting the following in lieu thereof:
"At your request, we have, as an accommodation to the Companies, granted to
the Companies a seasonal overline facility (herein the "Seasonal Overline")
in excess of the limitations set forth under the Financing Agreement
effective September 15th through December 15th of each year so long as the
Financing Agreement is in full force and effect, subject to the absence of
any Default or Event of Default which has not been waived (herein "Seasonal
Overline Period"). During such Seasonal Overline Period, the Seasonal
Overline shall not exceed $15,000,000 in the aggregate at any one time."
In furtherance of the foregoing, effective immediately the dollar amount
equal to the Old Revolving Line of Credit plus any Increment (herein the
"Current Revolving Line of Credit") as it appears in the definitions of
Revolving Line of Credit and Availability is amended to read the Current
Revolving Line of Credit plus $15,000,000 solely and exclusively from the
date of this amendment, through December 15, 1996, and for each Seasonal
Overline Period in each year thereafter, provided that:
(i) notwithstanding such increase in the Current Revolving Line of Credit
for such period, all loans, advances and extensions of credit to you
pursuant to Section 3 and 4 of the Financing Agreement shall be within
the Borrowing Base;
(ii) effective December 16, 1996 and December 16th of each year thereafter
through and including the following September 14th such dollar amounts
in the definitions of Revolving Line of Credit and
-4-
<PAGE>
Availability shall automatically revert back to the Current Revolving
Line of Credit;
(iii) such Seasonal Overline facility shall (a) be made subject to, and
in accordance with, all of the terms, provisions and conditions of the
Financing Agreement; (b) bear interest at the rate set forth in
Paragraph 1 of Section 7 of the Financing Agreement; (c) be secured by
all liens upon, and security interest in, all Accounts and other
Collateral under the Financing Agreement and any other of the Companies'
assets or property now or hereafter subject to a lien or security
interest in our favor or for our benefit, including without limitation
the assets pledged to us by the Guarantors; and (d) be made available
absent the occurrence of a Default or an Event of Default which has not
been waived.
It is hereby understood and agreed that if said Seasonal Overline facility
is not paid in full on or prior to December 16th following such Seasonal
Overline Period it will be deemed an Event of Default as defined in the
Financing Agreement.
7. Effective August 31, 1996, the figure "$70,000" in the definition of
"Collateral Management Fee" in Section 1 of the Financing Agreement is
hereby deleted, and the figure "$90,000" is hereby substituted in lieu
thereof.
8. The definition of "Chemical Bank Rate" appearing in Section 1 is hereby
amended by deleting it in its entirety and substituting the following in
lieu thereof:
"THE CHASE MANHATTAN BANK RATE shall mean the rate of interest per annum
announced by The Chase Manhattan Bank from time to time as its prime rate
in effect at its principal office in the City of New York. (The prime rate
is not intended to be the lowest rate of interest charged by The Chase
Manhattan Bank to its borrowers)."
9. The definition of "Line of Credit Fee" appearing in Section 1 of the
Financing Agreement is hereby amended by deleting it in its entirety and
substituting the following in lieu thereof:
"LINE OF CREDIT FEE shall: i) mean the fee due CITBC at the end of each
month
-5-
<PAGE>
for the Current Revolving Line of Credit plus the Seasonal Overline
during the Seasonal Overline Period, and ii) be determined by
multiplying x) the difference between the Revolving Line of Credit less
the sum of a) the average daily Revolving Loans outstanding during such
month and b) the average daily undrawn face amount of all outstanding
Letters of Credit, for said month by y) three hundred and seventy-five
thousandths of one percent (.375%) per annum for the number of days in
said month during which this Financing Agreement was in effect."
10. The definition of "Anniversary Date" is hereby amended by deleting it in
its entirety, and the following is substituted in lieu thereof:
"ANNIVERSARY DATE shall mean the date occurring seven (7) years from
August 31, 1992 and the same date in every year thereafter, provided
however, that if the Companies give notice, in accordance with Section
10 of this Financing Agreement, to terminate, on an Anniversary Date,
and such date is not a business day, then the Anniversary Date shall be
the next succeeding business day. "
11. The definition of "Early Termination Fee" appearing in Section 1 of the
Financing Agreement is hereby amended by deleting it in its entirety and
substituting the following in lieu thereof:
"EARLY TERMINATION FEE shall: i) mean the fee CITBC is entitled to
charge the Company in the event the Companies or any one of them
terminate the Revolving Line of Credit or this Financing Agreement on a
date prior to (but not on) the initial or any subsequent Anniversary
Date; and ii) be determined by calculating the sum of (a) the average
daily balance of the Revolving Loans for the period from the date of
this Financing Agreement to the Early Termination Date and (b) the
average daily undrawn face amount of the Letters of Credit outstanding
for the period from the date of the Financing Agreement to the Early
Termination Date and multiplying that sum by (i) three percent (3%) per
annum for the number of days from the Early Termination Date to August
31, 1999 (the "Next Anniversary Date") if the Early Termination Date is
on or prior to August 31, 1997, or (ii) two percent (2%) per annum for
the number of days from the Early Termination Date to the Next
Anniversary Date if the Early Termination Date is subsequent to August
31, 197 and on or prior to August 31, 1998, and (iii) one percent (1%)
per annum for the number of days from the
-6-
<PAGE>
Early Termination Date to the Next Anniversary Date if the Early
Termination Date is subsequent to August 31, 1998 but on a date which is
prior to the Next Anniversary Date."
12. Section 7 of the Financing Agreement is hereby amended by deleting
paragraph 1(A) and 1(B) in its entirety and substituting the following in
lieu thereof:
"1. Interest on the Revolving Loans shall be payable monthly as of the end
of each month and shall be an amount equal to a) the sum of zero percent (.0%)
and The Chase Manhattan Bank Rate, on a per annum basis, on the average of the
net balances owing by all of the Companies to CITBC in the Collective Account at
the close of each day during such month on balances other than Libor Loans and
b) two and one half percent (2 1/2%) plus Libor on any Libor Loan as to any then
outstanding Revolving Loans which are Libor Loans, on a per annum basis, on the
average of the net balances of such Libor Loans owing by the Companies to CITBC
in the Collective Account at the close of each day during such month for the
Libor Period; but in no event shall the interest charged hereunder exceed the
Maximum Legal Rate. The Companies may elect to use Libor as to any then
outstanding Revolving Loans provided x) there is then no Event of Default, y)
the Companies have so advised CITBC of their election to use Libor and the Libor
Period is selected no later than two (2) business days preceding the first day
of a Libor Period and z) the election and Libor shall be effective, provided,
there is then no Event of Default, on the third business day following said
notice. The Libor elections must be for integral multiples of $1,000,000.00 and
the Companies shall pay CITBC a non-refundable Libor Processing Fee upon the
effective date of each Libor Loan provided however that there shall be no Libor
Processing Fee for the first four (4) Libor Loans in any calendar year which
have a three (3) month Libor Period. If no such election is timely made or can
be made or Libor can not be determined, then CITBC shall use The Chase Manhattan
Bank Rate to compute interest. In the event of any change in said The Chase
Manhattan Bank Rate, the rate under clause "a)" above shall change, as of the
first of the month following any change, so as to remain zero percent (.0%)
above The Chase Manhattan Bank Rate. The rates hereunder shall be calculated
based on a 360 day year for actual days elapsed. CITBC shall be entitled to
charge the Companies Collective Account at the rate provided for herein when due
until all Obligations have been paid in full."
-7-
<PAGE>
It is hereby understood and agreed that if the loans, advances and
extensions of credit are not within the Borrowing Base set forth in the
Financing Agreement following such Seasonal Inventory Advance Rate
Period, it shall be deemed an Event of Default hereunder. Any
Obligations in excess of the limitations set forth herein which remain
outstanding upon the expiration of any Seasonal Inventory Advance Rate
Period are payable on demand.
13. Paragraph 5 of Section 12 of the Financing Agreement is hereby amended
by deleting "fifty-one percent (51%)" appearing in line 12 of such
paragraph and substituting "forty-one percent (41%)" in lieu thereof.
14. Prior to the effective date of this amendment, the Collateral Management
Fee was $70,000.00. If the Companies have paid CITBC the old Collateral
Management Fee on August 31st, the Companies shall, upon the date
the initial Increment is made pursuant to the definition of Revolving
Line of Credit as stated in Section 1 of this Financing Agreement, pay
to CITBC the sum of $20,000.00.
15. The effectiveness of the amendment of the "Line of Credit Fee" in
paragraph 9 above shall be upon the date the initial increment is made
pursuant to the definition of Revolving Line of Credit as stated in
Section 1 of this Financing Agreement.
Except as otherwise provided herein, no other change in any of the terms or
provisions of the Financing Agreement is intended or implied. If the foregoing
is in accordance with your understanding, please sign and return to us the
enclosed copy of this letter to so indicate.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
By /s/ [Signature Appears Here]
--------------------------------
Title: Assistant Secretary
-8-
<PAGE>
Read and Agreed to:
J.S. OSHMAN AND CO., INC.
OSHMAN SPORTING GOODS CO., ALABAMA
OSHMAN SPORTING GOODS CO., ARIZONA
OSHMAN SPORTING GOODS CO., ARKANSAS
OSHMAN SPORTING GOODS CO., CALIFORNIA
OSHMAN SPORTING GOODS CO., COLORADO
OSHMAN SPORTING GOODS CO., FLORIDA
OSHMAN SPORTING GOODS CO., GEORGIA
OSHMAN SPORTING GOODS CO., HAWAII
OSHMAN SPORTING GOODS CO., KANSAS
OSHMAN SPORTING GOODS CO., LOUISIANA
OSHMAN SPORTING GOODS CO., MICHIGAN
OSHMAN SPORTING GOODS CO., MINNESOTA
OSHMAN SPORTING GOODS CO., MISSOURI
OSHMAN SPORTING GOODS CO., NEVADA
OSHMAN SPORTING GOODS CO., NEW JERSEY
OSHMAN SPORTING GOODS CO., NEW MEXICO
OSHMAN SPORTING GOODS CO., NEW YORK
OSHMAN SPORTING GOODS CO., OHIO
OSHMAN SPORTING GOODS CO., OKLAHOMA
OSHMAN SPORTING GOODS CO., OREGON
OSHMAN SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
OSHMAN SPORTING GOODS CO., TEXAS
OSHMAN SPORTING GOODS CO., UTAH
OSHMAN SPORTING GOODS CO., WASHINGTON
OSHMAN'S SKI SKOOL, INC.
OSHMAN'S SPORTING GOODS, INC.-SERVICES
By /s/ [Signature Appears Here]
----------------------------------------------
Title: Vice President-Chief Accounting Officer
of each of the above Companies
-9-
<PAGE>
EXHIBIT 4.1(t)
[LETTERHEAD OF THE CIT GROUP APPEARS HERE]
March 18, 1997
J.S. OSHMAN AND CO., INC.
OSHMAN SPORTING GOODS CO., ALABAMA
OSHMAN SPORTING GOODS CO., ARIZONA
OSHMAN SPORTING GOODS CO., ARKANSAS
OSHMAN SPORTING GOODS CO., CALIFORNIA
OSHMAN SPORTING GOODS CO., COLORADO
OSHMAN SPORTING GOODS CO., FLORIDA
OSHMAN SPORTING GOODS CO., GEORGIA
OSHMAN SPORTING GOODS CO., HAWAII
OSHMAN SPORTING GOODS CO., KANSAS
OSHMAN SPORTING GOODS CO., LOUISIANA
OSHMAN SPORTING GOODS CO., MICHIGAN
OSHMAN SPORTING GOODS CO., MINNESOTA
OSHMAN SPORTING GOODS CO., MISSOURI
OSHMAN SPORTING GOODS CO., NEVADA
OSHMAN SPORTING GOODS CO., NEW JERSEY
OSHMAN SPORTING GOODS CO., NEW MEXICO
OSHMAN SPORTING GOODS CO., NEW YORK
OSHMAN SPORTING GOODS CO., OHIO
OSHMAN SPORTING GOODS CO., OKLAHOMA
OSHMAN SPORTING GOODS CO., OREGON
OSHMAN SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
OSHMAN SPORTING GOODS CO., TEXAS
OSHMAN SPORTING GOODS CO., UTAH
OSHMAN SPORTING GOODS CO., WASHINGTON
OSHMAN'S SKI SKOOL, INC.
OSHMAN'S SPORTING GOODS, INC. - SERVICES
(collectively, the "Companies")
2302 Maxwell Lane
Houston, Texas 77023
Attn: Chief Financial Officer
and Vice President
Re: Financing Agreement dated as of August 31, 1992, by and among the
Companies and The CIT Group/Business Credit, Inc. ("CITBC"), as
amended from time to time
Gentlemen:
Reference is made to that certain Financing Agreement dated as of August
31, 1992, by and among the Companies and CITBC, as amended from time to time (as
amended, the "Agreement"). All capitalized terms used but not defined herein
shall have the meanings assigned to them in the Agreement.
<PAGE>
The Parent and Companies have informed CITBC that the Companies are in
violation of (i) Paragraph 9 of Section 6 of the Agreement by failing to
maintain a Net Worth, for the Parent and Subsidiaries on a consolidated basis,
of at least $56,600,000 for the fiscal year ended February 1, 1997, and (ii)
Paragraph 10(I) of Section 6 of the Agreement by permitting EBITDA, for the
Parent and its Subsidiaries on a consolidated basis, to be less than $5,000,000
on a cumulative year-to-date basis as of the fiscal quarter ended February 1,
1997, and have requested that CITBC waive these violations.
CITBC hereby waives the violation of Paragraph 9 of Section 6 of the
Agreement resulting from the Parent's and the Companies' failure to maintain a
Net Worth of at least $56,600,000 for the fiscal year ended February 1, 1997,
and the violation of Paragraph 10(I) of Section 6 of the Agreement resulting
from Parent's and the Companies' permitting EBITDA on a cumulative year-to-date
basis as of the fiscal quarter ended February 1, 1997 to be less than $5,000,000
(together, the "Violations"). The waiver contained in this letter applies only
to the Violations to the extent described above and nothing contained in this
letter or any other communication between CITBC and the Companies shall be a
waiver of any other present or future violation, Default or Event of Default
under the Agreement or any other Loan Document (collectively, "Other
Violations").
Additionally, effective upon execution of this letter by CITBC and the
Companies, the Agreement is hereby amended as follows:
(1) The definition of "Availability Reserve" set forth in the Agreement is
hereby amended and restated to read in its entirety as follows:
"AVAILABILITY RESERVE shall mean at any time of determination an
amount equal to the sum of (i) the then undrawn amount of all
outstanding Letters of Credit, plus (ii) a thirty-two and one-half
percent (32.5%) reserve against the cost of inventory located in the
traditional stores (i.e., stores other than those having a tradename
of "Oshman's Supersports" or "Supersports U.S.A.") scheduled to be
closed during the fiscal year 1997, such reserve to remain in place
until the liquidation process is complete."
(2) Paragraph 1 of Section 7 of the Agreement is hereby amended by (i)
deleting the words "zero percent (0%)" from clause (a) of the first
sentence of said Paragraph and inserting the words "three-eighths of one
percent (.375%)" in their place, and (ii) deleting the words "two and one-
half percent (2.50%)" from clause (b) of the first sentence of said
Paragraph and inserting the words "two and seven-eighths percent (2.875%)"
in their place.
Nothing contained in this letter shall directly or indirectly in any way
whatsoever either: (i) impair, prejudice or otherwise adversely affect CITBC's
right at any time to exercise any right, privilege or remedy in connection with
the Agreement or any other Loan Document with respect to any Other Violations,
(ii) amend or alter any provision of the Agreement or any other Loan Document or
any other contract or instrument, or (iii) constitute any course of dealing or
other basis for altering any obligation of the Companies under the Loan
Documents or any right, privilege or remedy of CITBC under the Agreement or any
other Loan Documents or any other contract or instrument with respect to Other
Violations. Nothing in this letter shall be construed to be a consent by CITBC
to any Other Violations.
<PAGE>
This letter may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute one and the same instrument.
This letter is executed as of the 18th day of March, 1997.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ PAMELA WOZNIAK
_________________________
Name: Pamela Wozniak
_________________________
Title: AVP
_________________________
<PAGE>
AGREED AND ACKNOWLEDGED:
J.S. OSHMAN AND CO., INC.
OSHMAN SPORTING GOODS CO., ALABAMA
OSHMAN SPORTING GOODS CO., ARIZONA
OSHMAN SPORTING GOODS CO., ARKANSAS
OSHMAN SPORTING GOODS CO., CALIFORNIA
OSHMAN SPORTING GOODS CO., COLORADO
OSHMAN SPORTING GOODS CO., FLORIDA
OSHMAN SPORTING GOODS CO., GEORGIA
OSHMAN SPORTING GOODS CO., HAWAII
OSHMAN SPORTING GOODS CO., KANSAS
OSHMAN SPORTING GOODS CO., LOUISIANA
OSHMAN SPORTING GOODS CO., MICHIGAN
OSHMAN SPORTING GOODS CO., MINNESOTA
OSHMAN SPORTING GOODS CO., MISSOURI
OSHMAN SPORTING GOODS CO., NEVADA
OSHMAN SPORTING GOODS CO., NEW JERSEY
OSHMAN SPORTING GOODS CO., NEW MEXICO
OSHMAN SPORTING GOODS CO., NEW YORK
OSHMAN SPORTING GOODS CO., OHIO
OSHMAN SPORTING GOODS CO., OKLAHOMA
OSHMAN SPORTING GOODS CO., OREGON
OSHMAN SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
OSHMAN SPORTING GOODS CO., TEXAS
OSHMAN SPORTING GOODS CO., UTAH
OSHMAN SPORTING GOODS CO., WASHINGTON
OSHMAN'S SKI SKOOL, INC.
OSHMAN'S SPORTING GOODS, INC. - SERVICES
By: /s/ A. Lynn Boerner
-----------------------
Name: A Lynn Boerner
-----------------------
Title: VP. CAO
-----------------------
OSHMAN'S SPORTING GOODS, INC., in its capacity as Guarantor, hereby acknowledges
and consents to the foregoing.
By: /s/ A. Lynn Boerner
-----------------------
Name: A Lynn Boerner
-----------------------
Title: VP. CAO
-----------------------
<PAGE>
EXHIBIT 4.1U
APRIL 25, 1997
J.S. Oshman and Co., Inc.
Oshman Sporting Goods Co., Alabama
Oshman Sporting Goods Co., Arizona
Oshman Sporting Goods Co., Arkansas
Oshman Sporting Goods Co., California
Oshman Sporting Goods Co., Colorado
Oshman Sporting Goods Co., Florida
Oshman Sporting Goods Co., Georgia
Oshman Sporting Goods Co., Hawaii
Oshman Sporting Goods Co., Kansas
Oshman Sporting Goods Co., Louisiana
Oshman Sporting Goods Co., Michigan
Oshman Sporting Goods Co., Minnesota
Oshman Sporting Goods Co., Missouri
Oshman Sporting Goods Co., Nevada
Oshman Sporting Goods Co., New Jersey
Oshman Sporting Goods Co., New Mexico
Oshman Sporting Goods Co., New York
Oshman Sporting Goods Co., Ohio
Oshman Sporting Goods Co., Oklahoma
Oshman Sporting Goods Co., Oregon
Oshman Sporting Goods Co., South Carolina
Oshman Sporting Goods Co., Tennessee
Oshman Sporting Goods Co., Texas
Oshman Sporting Goods Co., Utah
Oshman Sporting Goods Co., Washington
Oshman's Ski Skool, Inc.
Oshman's Sporting Goods, Inc.- Services
2302 Maxwell Lane
Houston, TX
Gentlemen:
Reference is made to the (a) Financing Agreement among us, dated August 31, 1992
as amended, modified and supplemented from time to time (herein "the Financing
Agreement"). Capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to such terms in the Financing Agreement.
Pursuant to mutual understanding, the Financing Agreement is hereby amended as
follows;
1. Paragraph 9 of Section 6 of the Financing Agreement is hereby amended and
restated to read in its entirety as follows:
1
<PAGE>
"9. The Parent and its Subsidiaries shall maintain, on a consolidated
basis and as of the end of each fiscal year set forth below, a Net Worth of not
less than the corresponding amount set forth below:
Fiscal Year Ending Amount
------------------ ------
January 31, 1998 The sum of $37,500,000 plus the
1995 Tax Benefit (as defined below)
January 30, 1999 The sum of $40,500,000 plus the
1995 Tax Benefit
January 29, 2000 and each fiscal The sum of $43,500,000 plus the
year ending after such date 1995 Tax Benefit
As used herein, "1995 Tax Benefit" means any increase to Net Worth of the
Parent and its Subsidiaries which is related to the recognition of the net
benefit, as determined under generally accepted accounting principles, of
the Federal Income tax refund described in Note E - Income Taxes of the
Parent's 1995 Annual Report. However, in the event that the net operating
loss benefit can only be realized through the carry forward of the benefit
to future years, the amount of the 1995 Tax Benefit as described herein
will be zero.
For the parties' reference, attached to this letter as Annex I is a true,
correct and complete copy of Note E - Income Taxes of the Parent's 1995 Annual
Report, as provided to CITBC by the Companies.
2. Subpart I of Paragraph 10 of Section 6 of the Financing Agreement is hereby
amended and restated to read in its entirety as follows:
"I Permit EBITA, on a consolidated and cumulative fiscal year to date
basis, for the Parent and its Subsidiaries, at the end of each fiscal
quarter below, to be:
<TABLE>
<CAPTION>
Fiscal Quarter Ending EBITDA
----------------------------------------------- ---------------------
<S> <C>
For the last day in the first fiscal quarter of Less than $950,000.00
each fiscal year
For the last day in the second fiscal quarter of Less than $2,900,000.00
each fiscal year
For the last day in the third fiscal quarter of Less than $3,000,000.00
each fiscal year
For the last day in the fourth fiscal quarter of Less than $9,250,000.00
each fiscal year thereafter
</TABLE>
3. Paragraph 11 of Section 6 of the Financing Agreement is hereby amended and
restated to read in its entirety as follows:
<PAGE>
"11. Without the prior written consent of CITBC, the Companies, on a
consolidated basis, will not contract for, purchase, make expenditures for,
lease pursuant to a Capital Lease or otherwise incur obligations with
respect to Capital Expenditures (whether subject to a security interest or
otherwise) during any fiscal year in the aggregate amount in excess of
$8,400,000.00."
4. Paragraph 1 of Section 7 of the Financing Agreement is hereby amended and
restated to read in its entirety as follows:
"1. (A) interest on the Revolving Loans shall be payable monthly as of the
end of each month and shall be an amount equal to (a) the sum of three-
eighths of one percent (.375%) plus The Chase Manhattan Bank Rate, on a per
annum basis, on the average of the net balances owing by all of the
Companies to CITBC in the Collective Account at the close of each day
during such month on balances other than Libor Loans and (b) two and seven-
eighths percent (2.875%) plus Libor on any Libor Loan as to any then
outstanding Revolving Loans which are Libor Loans, on a per annum basis,
on the average of the net balances of such Libor Loans owing by the
Companies to CITBC in the Collective Account at the close of each day
during such month for the Libor Period; but in no event shall the interest
charged hereunder exceed the Maximum Legal Rate. The Companies may elect to
use Libor as to any then outstanding Revolving Loans provided (i) there is
then no Event of Default, (ii) the Companies have so advised CITBC of their
election to use Libor and the Libor Period is selected no later than two
(2) business days preceding the first day of a Libor Period and (iii) the
election and Libor shall be effective, provided, there is then no Event of
Default, on the third business day following said notice. The Libor
elections must be for integral multiples of $1,000,000.00 and the Companies
shall pay CITBC a non-refundable Libor Processing Fee upon the effective
date of each Libor Loan, provided, however, that there shall be no Libor
Processing Fee for the first four (4) Libor Loans in any calendar year
which have a three (3) month Libor Period. If no such election is timely
made or can be made or Libor can not be determined, then CITBC shall use
The Chase Manhattan Bank Rate to compute interest. In the event of any
change in said The Chase Manhattan Bank Rate, the rate under clause (a)
above shall change, as of the first of the month following any change, so
as to remain equal to the sum of three-eighths of one percent (.375%) plus
The Chase Manhattan Bank Rate. The rates hereunder shall be calculated
based on a three hundred sixty (360) day year for actual days elapsed.
CITBC shall be entitled to charge the Collective Account at the rate
provided for herein when due until all Obligations have been paid in full.
(B) Subject to compliance with the conditions set forth in this
subparagraph (B), the Companies shall be entitled to interest rate
reductions (each an "Interest Rate Reduction") as outlined below;
If the ratio of all of the Companies' Average Loan Balances to EBITDA meets
or exceeds the Companies' financial projections dated March 27, 1997, with
respect thereto for a fiscal year as indicated in such projections
delivered to CITBC, which projections must
3
<PAGE>
be satisfactory to CITBC (herein "Financial Projections") then the spread
over the (a) The Chase Manhattan Bank Rate shall be reduced by three-
eighths of one percent (.375%) and (b) Libor rate shall be reduced by
three-eighths of one percent (.375%). If the Companies fail to meet their
Financial Projections for a fiscal year then the spread over the (a) The
Chase Manhattan Bank Rate shall be increased by three-eighths of one
percent (.375%) and (b) Libor rate shall be increased by three-eighths of
one percent (.375%) (each an "Interest Rate Increase"). "Average Loan
Balances" as used herein shall mean the average of the net balances owing
by all the Companies to CITBC in the Collective Account as of the last day
of each month for the twelve (12) months in the fiscal year then ended.
In addition to the foregoing requirements, each Interest Rate Reduction is
subject to the Companies compliance with each of the following conditions
(i) through (v) below and the effective date of each Interest Rate Increase
is governed by (iii) and (iv) below:
(i) Timely receipt by CITBC of the Companies' audited Consolidated
Balance Sheet and income statement (the "Financial Statements") in
accordance with the provisions of paragraph 7 of Section 6;
(ii) The absence of any Default or Event of Default;
(iii) As to the spread over The Chase Manhattan Bank Rate, and any
Interest Rate Reduction or the Interest Rate Increase with respect
as the case may, be any such decreases or increases, will be
effective on the first day of the month following CITBC's receipt
of the Financial Statements with respect to the fiscal year which
the Companies are determined to be eligible for such Interest Rate
Reduction or such Interest Rate Increase; and
(iv) As to the spread over the Libor rate, and any Interest Rate
Reduction or Interest Rate Increase with respect thereto, as the
case may be, any such decreases or increases will be effective on
the first day of a Libor Period and shall only be applicable to a
Libor Period commencing on or after CITBC's receipt of the
applicable Financial Statements; and
(v) In no event shall the total of all Interest Rate Reductions or
Interest Rate Increases hereunder on the Revolving Loan reduce or
increase the applicable rates by more than three-eighths of one
percent (.375%) from those rates in effect on the date hereof.
(Notwithstanding the foregoing nothing contained in this
subparagraph (v) is intended to modify the provisions of paragraph
2 of Section 9 providing for the right of CITBC to charge the
Default Rate of Interest as set forth therein.)"
4
<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.
By /s/ PAM WOZNIAK
-------------------------
Pam Wozniak
Assistant Vice President
5
<PAGE>
Read and Agreed to:
J.S. OSHMAN AND CO., INC.
OSHMAN SPORTING GOODS CO., ALABAMA
OSHMAN SPORTING GOODS CO., ARIZONA
OSHMAN SPORTING GOODS CO., ARKANSAS
OSHMAN SPORTING GOODS CO., CALIFORNIA
OSHMAN SPORTING GOODS CO., COLORADO
OSHMAN SPORTING GOODS CO., FLORIDA
OSHMAN SPORTING GOODS CO., GEORGIA
OSHMAN SPORTING GOODS CO., HAWAII
OSHMAN SPORTING GOODS CO., KANSAS
OSHMAN SPORTING GOODS CO., LOUISIANA
OSHMAN SPORTING GOODS CO., MICHIGAN
OSHMAN SPORTING GOODS CO., MINNESOTA
OSHMAN SPORTING GOODS CO., MISSOURI
OSHMAN SPORTING GOODS CO., NEVADA
OSHMAN SPORTING GOODS CO., NEW JERSEY
OSHMAN SPORTING GOODS CO., NEW MEXICO
OSHMAN SPORTING GOODS CO., NEW YORK
OSHMAN SPORTING GOODS CO., OHIO
OSHMAN SPORTING GOODS CO., OKLAHOMA
OSHMAN SPORTING GOODS CO., OREGON
OSHMAN SPORTING GOODS CO., SOUTH CAROLINA
OSHMAN SPORTING GOODS CO., TENNESSEE
OSHMAN SPORTING GOODS CO., TEXAS
OSHMAN SPORTING GOODS CO., UTAH
OSHMAN SPORTING GOODS CO., WASHINGTON
OSHMAN'S SKI SKOOL, INC.
OSHMAN'S SPORTING GOODS, INC.- SERVICES
By [SIGNATURE APPEARS HERE]
-----------------------------
Title: VP-CAO
of each of the above Companies
6
<PAGE>
ANNEX I
NOTE E
TO
PARENT'S 1995 ANNUAL REPORT
[See attached.]
7
<PAGE>
Deferred tax assets and liabilities consist of the following:
February 3, 1996 January 28, 1995
--------------------------------------------------
Current Long-Term Current Long-Term
--------------------------------------------------
(In thousands) (In thousands)
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 5,024
--------------------------------------------------
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 -
Store 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
==================================================
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.
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.
NOTE E: **
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
of 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.
<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 1, Year ended February 3, Year ended January 28,
1997 1996 1995
----------------------- ----------------------- -----------------------
Fully Fully Fully
Primary diluted Primary diluted Primary diluted
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET EARNINGS (LOSS) $(27,250) $(27,250) $1,942 $1,942 $ 290 $ 290
======== ======== ====== ====== ====== ======
Weighted average number of common shares
outstanding 5,830 5,830 5,815 5,815 5,807 5,807
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 5,830 5,830 6,019 6,059 5,962 5,979
======== ======== ====== ====== ====== ======
Earnings (loss) per common and
common equivalent share $ (4.67) $ (4.67) $ .32 $ .32 $ .05 $ .05
======== ======== ====== ====== ====== ======
</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 (also operates as SuperSports USA)
Oshman Sporting Goods Co., Arkansas
Oshman Sporting Goods Co., California (also operates as SuperSports USA)
Oshman Sporting Goods Co., Colorado*
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 (also operates as SuperSports USA)
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 (operates as SuperSports USA)
Oshman Sporting Goods Co., Washington (operates as SuperSports USA)
Oshman's Sporting Goods, Inc. - Services (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 17, 1997, 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 1, 1997. 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 LLP
Houston, Texas
April 30, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES FINANCIAL DATA SCHEDULE FOR THE
YEAR ENDED FEBRUARY 1, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 437
<SECURITIES> 0
<RECEIVABLES> 3,771
<ALLOWANCES> 0
<INVENTORY> 107,609
<CURRENT-ASSETS> 115,960
<PP&E> 98,446
<DEPRECIATION> 54,073
<TOTAL-ASSETS> 160,734
<CURRENT-LIABILITIES> 76,551
<BONDS> 42,397
0
0
<COMMON> 5,830
<OTHER-SE> 30,301
<TOTAL-LIABILITY-AND-EQUITY> 160,734
<SALES> 365,879
<TOTAL-REVENUES> 365,879
<CGS> 250,784
<TOTAL-COSTS> 138,713
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,821
<INCOME-PRETAX> (27,439)
<INCOME-TAX> (189)
<INCOME-CONTINUING> (27,250)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,250)
<EPS-PRIMARY> (4.67)
<EPS-DILUTED> (4.67)
</TABLE>
