<PAGE>
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 3, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-5648
OSHMAN'S SPORTING GOODS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 74-1031691
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2302 MAXWELL LANE, HOUSTON, TEXAS
77023
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(Address of principal executive offices)
(Zip Code)
(713) 928-3171
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(Registrant's telephone number, including area code)
NO CHANGE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $1.00 par value 5,827,249
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PART I -- FINANCIAL INFORMATION
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 3, 1997, FEBRUARY 1, 1997 AND MAY 4, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 3, FEBRUARY 1, MAY 4,
1997 1997 1996
------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 467 $ 437 $ 361
ACCOUNTS RECEIVABLE, LESS ALLOWANCE OF
$225 MAY 97, $225 FEB 97 AND $388 MAY 96 2,058 3,771 2,878
MERCHANDISE INVENTORIES 102,789 107,609 129,234
PREPAID EXPENSES AND OTHER 5,622 4,143 7,516
---------- ---------- ----------
TOTAL CURRENT ASSETS 110,936 115,960 139,989
PROPERTY, PLANT AND EQUIPMENT, AT COST 94,623 98,446 94,356
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION 50,771 54,073 54,639
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NET PROPERTY, PLANT AND EQUIPMENT 43,852 44,373 39,717
OTHER ASSETS 388 401 564
---------- ---------- ----------
$ 155,176 $ 160,734 $ 180,270
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
CURRENT MATURITIES OF LONG-TERM OBLIGATIONS $ 784 $ 776 $ 800
TRADE ACCOUNTS PAYABLE 35,667 45,704 48,909
ACCRUED LIABILITIES 15,245 18,231 14,439
INCOME TAXES 4,529 4,529 4,422
STORE CLOSING RESERVE 6,601 7,311 2,422
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 62,826 76,551 70,992
LONG-TERM OBLIGATIONS 50,083 42,397 43,642
OTHER NONCURRENT LIABILITIES 5,566 5,655 3,625
STOCKHOLDERS' EQUITY
COMMON STOCK 5,830 5,830 5,827
ADDITIONAL CAPITAL 4,097 4,068 3,922
RETAINED EARNINGS 26,795 26,254 52,283
LESS TREASURY STOCK, AT COST (21) (21) (21)
---------- ---------- ----------
STOCKHOLDERS' EQUITY 36,701 36,131 62,011
---------- ---------- ----------
$ 155,176 $ 160,734 $ 180,270
========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
OSHMAN'S SPORTING GOODS, INC, AND SUSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED
MAY 3, 1997 AND MAY 4, 1996
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
NET SALES $88,432 $82,719
COST OF GOODS SOLD 58,470 52,540
------------- -------------
GROSS PROFIT 29,962 30,179
OPERATING EXPENSES
SELLING AND ADMINISTRATIVE EXPENSES 30,054 29,640
PRE-OPENING EXPENSES 548 966
STORE CLOSING PROVISION 25 93
MISCELLANEOUS INCOME (2,258) (295)
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OPERATING INCOME(LOSS) 1,593 (225)
INTEREST EXPENSE, NET 1,029 934
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EARNINGS(LOSS) BEFORE INCOME TAXES 564 (1,159)
INCOME TAXES 23 62
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NET EARNINGS(LOSS) $ 541 $(1,221)
============= =============
BASIC EARNINGS(LOSS) PER SHARE $ .09 $ (.21)
============= =============
DILUTED EARNINGS(LOSS) PER SHARE $ .09 $ (.21)
============= =============
WEIGHTED AVERAGE SHARES 5,830 5,827
DILUTIVE EFFECT OF STOCK OPTIONS 69 -
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DILUTED WEIGHTED AVERAGE SHARES 5,899 5,827
============= =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED MAY 3, 1997 AND MAY 4, 1996
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS OF OPERATING ACTIVITIES:
NET EARNINGS(LOSS) $ 541 $ (1,221)
ADJUSTMENTS TO RECONCILE NET CASH (USED)PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 1,737 1,619
RECOVERIES OF LOSSES ON ACCOUNTS RECEIVABLE - (2)
CHARGE TO RESERVE FOR CORPORATE RESTRUCTURING, NET OF
DEPRECIATION AND AMORTIZATION - (81)
CHARGE TO RESERVE FOR STORE CLOSINGS (4,086) -
PROVISION FOR LOSSES ON STORE CLOSINGS 25 93
STOCK OPTION AND BONUS PLAN EXPENSE 29 26
GAIN ON DISPOSITION OF FIXED ASSETS (1,922) (2)
AMORTIZATION OF DEFERRED RENTAL ALLOWANCES (89) (59)
CHANGES IN ASSETS AND LIABILITIES:
DECREASE IN ACCOUNTS RECEIVABLE 1,713 576
DECREASE(INCREASE) IN MERCHANDISE INVENTORIES 8,106 (18,604)
(INCREASE)DECREASE IN PREPAID EXPENSES AND OTHER (1,441) 1,622
(DECREASE)INCREASE IN TRADE ACCOUNTS PAYABLE (10,037) 13,423
DECREASE IN ACCRUED LIABILITIES (2,986) (1,849)
INCREASE IN INCOME TAXES - 40
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NET CASH USED BY OPERATING ACTIVITIES (8,410) (4,419)
CASH FLOWS OF INVESTING ACTIVITIES:
PROCEEDS FROM SALE OF FIXED ASSETS 9 15
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT (1,280) (3,089)
PROCEEDS FROM DISPOSITION OF REAL ESTATE AND LEASEHOLDS 2,006 1
PROCEEDS FROM NOTE RECEIVABLE 11 13
PROCEEDS FROM LANDLORDS - 525
--------- ---------
NET CASH PROVIDED(USED) BY INVESTING ACTIVITIES 746 (2,535)
CASH FLOWS OF FINANCING ACTIVITIES:
PROCEEDS FROM STOCK ISSUANCE - 36
PAYMENTS OF LONG-TERM OBLIGATIONS (210) (195)
PROCEEDS FROM REVOLVING CREDIT FACILITY, NET 7,904 7,147
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,694 6,988
NET INCREASE IN CASH AND CASH EQUIVALENTS 30 34
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 437 327
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 467 $ 361
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH (RECEIVED)PAID DURING THE YEAR FOR
INCOME TAXES $ (12) $ 7
INTEREST 1,041 642
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
OSHMAN'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 3, 1997 AND MAY 4, 1996
(UNAUDITED)
NOTE A
The financial statements are condensed and should be read in conjunction with
the 1996 annual report. The financial information contained herein is
unaudited, but in the opinion of the management of the Company, includes all
adjustments (consisting of normal recurring adjustments) for a fair presentation
of the results of operations for the periods indicated. The results for the
thirteen weeks ended May 3, 1997 are not necessarily indicative of the results
to be expected for the full year.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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
------------------------
1ST QUARTER
------------------------
1997 1996
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<S> <C> <C>
Net sales 100.0 100.0
Cost of goods sold 66.1 63.5
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Gross profit 33.9 36.5
Operating expenses
Selling and administrative expenses 34.0 35.8
Pre-opening expenses .6 1.2
Store closing provision -- .1
Miscellaneous income (2.6) ( .4)
--------- ---------
Operating income (loss) 1.8 ( .3)
Interest expense, net 1.2 1.1
--------- ---------
Earnings (loss) before income taxes .6 (1.4)
Income taxes - .1
--------- ---------
Net earnings (loss) .6 (1.5)
========= =========
</TABLE>
Net sales for the quarter increased 6.9% to $88.4 million compared to $82.7
million in the first quarter of fiscal 1996. Sales from continuing stores
increased 12.0% to $69.3 million in the first quarter of fiscal 1997 from $61.9
million in the first quarter of fiscal 1996. The increase was attributable to
sales contributions of $11.0 million from eight new megastores opened since the
beginning of fiscal 1996 offset by a same store sales decease of $3.6 million,
or 5.8%. Management attributes the decline in same store sales to several
factors including, the impact of the Company's liquidation sales in closing
stores, lower inventory levels, reduced advertising expenditures and to some
extent, increased competitive pressures.
<PAGE>
As previously announced, the Company intends to close approximately 53 of its 84
traditional stores in fiscal 1997. At the end of the first quarter of 1997, 20
of these stores had been closed and an additional 11 were closed by the end of
May. Net sales from discontinued stores, stores closed or targeted to close,
decreased $1.7 million in the first quarter of fiscal 1997 compared to the first
quarter of fiscal 1996. During the first quarter of fiscal 1997, comparable
sales from discontinued stores, some of which were in liquidation, increased
$5.3 million over the same period in the prior year. This increase was offset
by the elimination of $7.0 million of sales from stores closed.
Cost of goods sold as a percentage of net sales was 66.1% in the first quarter
of fiscal 1997 compared to 63.5% in the same period of fiscal 1996. The
increase in cost of goods sold as a percentage of net sales in the first quarter
of fiscal 1997 was due primarily to increased markdowns compared to the first
quarter of the previous year and the nonrecurrance of a favorable physical
inventory result recorded in the first quarter of fiscal 1996.
Selling and administrative expenses as a percentage of net sales were 34.0% for
the quarter ended May 3, 1997 compared to 35.8% in the first quarter of fiscal
1996. The reduction in selling and administrative expenses as a percentage of
sales is primarily attributable to the increased sales volumes in discontinued
stores. Selling and administrative expenses as a percentage of sales in
continuing stores increased as a result of lower sales in existing stores as
discussed above and due to the impact of new stores that have not yet grown to
expected sales levels. However, the increased rate of selling and
administrative expenses in continuing stores was offset by reduced corporate
overhead and distribution costs as a percentage of sales. The Company has
implemented expense reductions at the beginning of fiscal 1997 which are
expected to reduce store and overhead costs in fiscal 1997 by approximately $4.0
million.
Pre-opening expenses of new SuperSports USA megastores are amortized over the
first 12 months of operation. The decline in pre-opening expenses in the first
quarter of fiscal 1997 is related to the reduced number of stores opened in the
last 12 months compared to the previous 12 month period.
Miscellaneous income was $2.3 million in the first quarter of fiscal 1997
compared to $295,000 in the same period of fiscal 1996. The fiscal 1997 results
include a gain of $1.9 million related to the sale of a leasehold interest.
Net interest expense for the first quarter of fiscal 1997 was $1.0 million
compared to $934,000 for the same period last year. The increased interest
expense is primarily related to increased average borrowings under the Company's
credit facility.
Income taxes in fiscal 1997 and 1996 are related primarily to state income
taxes. In fiscal 1997, net operating loss carryforwards are anticipated to be
realized resulting in no federal income tax expense.
<PAGE>
In the first quarter of fiscal 1997, the Company had pretax income of $564,000
compared to a loss of $1.2 million before income taxes in the same period last
year. The improved results in fiscal 1997 compared to fiscal 1996 is primarily
attributable to the gain from the sale of a leasehold interest and increased
gross profit contributions from discontinued stores, some of which were in
liquidation as discussed above. These increases were offset by reduced gross
profit contributions from continuing stores primarily related to same store
sales declines also discussed above. The Company expects the liquidation
process in stores targeted to close in fiscal 1997 to be completed by the end of
June 1997.
Liquidity and Capital Resources
In the first quarter of fiscal 1997, operating activities used cash totaling
$8.4 million. Cash totaling $1.3 million was used primarily for the purchase of
property plant and equipment offset by $2.0 in proceeds from the sale of a
leasehold interest. Financing activities provided $7.7 million through the
utilization of the Company's credit facility.
Merchandise inventories declined to $102.8 million from $107.6 million at the
beginning of the fiscal year primarily as a result of liquidation of inventories
in stores closed and targeted to close in fiscal 1997. These reductions offset
the normal seasonal buildup of inventories in continuing stores and the addition
of one new megastore opened during the first quarter of fiscal 1997.
Additionally, the Company has taken steps to improve inventory turnover rates
and reduce average store inventory levels. The Company's continuing stores
operated with approximately 10% less inventory in the first quarter of fiscal
1997 than during the first quarter of fiscal 1996.
Additions to property, plant and equipment of $1.3 million during the first
quarter of 1997 were related primarily to the opening of a new SuperSports USA
megastore. The Company expects to open five additional megastores during the
balance of fiscal 1997.
The Company's primary source of liquidity in the first quarter of fiscal 1997
was the Company's credit facility, under which average borrowings were $43.0
million compared to $38.3 million in the first quarter of fiscal 1996. Proceeds
from the sale of a leasehold interest also provided cash of $2.0 million. Long-
term obligations increased to $50.1 million from $42.4 million at the beginning
of the fiscal 1997 as the Company utilized its credit facility to meet its
working capital requirements. The Company believes that its revolving credit
facility together with cash provided by operations will be adequate to meet
anticipated capital needs for fiscal 1997.
The information discussed herein includes "forward-looking statements" within
the meaning of the federal securities laws. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
the Company's actual results could differ materially 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,
<PAGE>
fluctuating sales margins, increasing competition in sporting goods and apparel
retailing, the results of financing efforts and financial market conditions, as
well as other factors described from time to time in the Company's periodic
reports filed with the Securities and Exchange Commission.
<PAGE>
PART II -- OTHER INFORMATION
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act Of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OSHMAN'S SPORTING GOODS, INC.
June 16, 1997 /s/ TIMOTHY L. GRADY
Date: _____________________ By: ______________________________
Timothy L. Grady
Senior Vice President and
Chief Financial Officer
June 16, 1997 /s/ A. LYNN BOERNER
Date: _____________________ By: ______________________________
A. Lynn Boerner
Vice-President and
Chief Accounting Officer
<PAGE>
ITEM 6. EXHIBITS
Exhibit Index
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-03-1997
<CASH> 467
<SECURITIES> 0
<RECEIVABLES> 2,058
<ALLOWANCES> 0
<INVENTORY> 102,789
<CURRENT-ASSETS> 110,936
<PP&E> 94,623
<DEPRECIATION> 50,771
<TOTAL-ASSETS> 155,176
<CURRENT-LIABILITIES> 62,826
<BONDS> 50,083
0
0
<COMMON> 5,830
<OTHER-SE> 30,871
<TOTAL-LIABILITY-AND-EQUITY> 155,176
<SALES> 88,432
<TOTAL-REVENUES> 88,432
<CGS> 58,470
<TOTAL-COSTS> 28,369
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,029
<INCOME-PRETAX> 564
<INCOME-TAX> 23
<INCOME-CONTINUING> 541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 541
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
