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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (Fee Required). For the fiscal year ended December 29, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required). For the transition period from
to .
Commission file number 015767
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THE SPORTSMAN'S GUIDE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MINNESOTA 41-1293081
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or
organization)
</TABLE>
411 FARWELL AVE., SO. ST. PAUL, MINNESOTA 55075
(Address of principal executive offices)
(612) 451-3030
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
(TITLE OF CLASS)
Common Stock, par value $.01 per share
------------------------
Indicate by check mark whether the registrant (1) has filed all reports 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
As of March 19, 1996, the aggregate market value of the registrant's Common
Stock held by nonaffiliates was approximately $1,189,788 based on the average
bid and asked price of the Common Stock on such date.
As of March 19, 1996, there were 23,335,833 shares of the registrant's
Common Stock outstanding.
Exhibit index appears at page 33.
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PART I
ITEM 1. BUSINESS
The Sportsman's Guide, Inc. (the "Company") is engaged in the retail mail
order catalog business, featuring merchandise for people who enjoy the outdoors,
for handymen/do-it-your-selfers, and for anyone who appreciates high-value,
high-quality items for everyday use. The Company's merchandise is marketed via
monthly and specialty titles of The Sportman's Guide's catalog. The Company had
1995 sales of $101.8 million. The Sportman's Guide has had over 3.3 million
customers in its recent operating history of which 1.1 million purchased from
the Company's catalogs within the last twelve months. The typical Sportsman's
Guide customer is a 30-50 year old male who has an interest in hunting,
shooting, fishing, camping or the outdoors in general. The average customer has
a mean household income of $45,000 and many are located in smaller towns or
rural areas. The Company also has a small retail outlet store from which it
sells discontinued, overstocked and regular catalog merchandise.
The Company was incorporated under the laws of the State of Minnesota on
March 25, 1977, as The Olen Company, Inc. At that time the Company acquired the
business and assets of The Olen Company, a sole proprietorship owned by Gary
Olen, an officer, director and shareholder of the Company. In March 1986, the
Company changed its name to The Sportsman's Guide, Inc.
On January 25, 1996, the Company announced that it had entered into a letter
of intent to merge with VISTA 2000, Inc. On March 8, 1996, the Company entered
into an Agreement and Plan of Merger with VISTA Acquisition Subsidiary, Inc. and
VISTA 2000, Inc. Pursuant to the terms of the agreement, the Company will merge
with and into VISTA Acquisition Subsidiary, Inc. and become a wholly-owned
operating subsidiary of VISTA 2000, Inc. ("VISTA") (see Note L of Notes to
Financial Statements).
MERCHANDISING
Through its catalogs, the Company offers for sale a variety of merchandise,
primarily for the individual hunter, collector, shooter and outdoorsman. These
items include hunting and general apparel, footwear, hunting and shooting
accessories, ammunition, knives and accessories, general merchandise,
collectibles and a variety of gift items.
Although the Company does not manufacture any of its products, a small
percentage of the items in the catalogs are custom-designed by the Company,
including T-shirts and sweatshirts, hunting apparel, knives, patches, shirts and
other hunting accessories. Some of the Company's products are sold under the
Company's private label.
During fiscal years 1993, 1994 and 1995, no class of similar products
contributed more than 10 percent of the Company's total sales.
SUPPLIERS
The Company purchases its merchandise from a wide variety of suppliers.
Generally, the Company purchases all of its product needs for a given item from
one vendor. No single supplier accounted for more than 10 percent of the
Company's purchases during 1995. The Company believes that alternative sources
are available for most of its merchandise.
The Company primarily uses one printer to print and mail its catalogs. The
Company is not dependent upon this printer to perform these functions and has
used other companies for this purpose during 1995 and prior years.
MARKETING
Prior to 1987, the Company published one catalog per year, offering
primarily hunting equipment and apparel. In January of 1987, the Company began,
on a test basis, publication and distribution of a Spring/Summer catalog
featuring a wide range of outdoor equipment, in addition to the hunting
2
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equipment and apparel catalog. The Company has continued to increase its annual
catalog publications, with ten editions published in 1993, thirteen editions in
1994 and 23 editions in 1995. Publications during 1995 consisted of 12 monthly
editions complimented by 11 specialty titles targeting ammunition, military
surplus and hunting apparel consumers.
The Company mailed approximately 54 million catalogs to existing and
prospective customers during 1995, a 38 percent increase over 1994. The
marketing activities are centered around two primary programs: new customer
acquisition and existing customer programs.
The Company's customer acquisition programs are designed to identify and
capture new customers that fit its customer profile, and once acquired, maximize
the long-term profit potential from those customers. The primary sources of
prospective customers are rented mailing lists from over sixty different direct
marketing companies and over forty periodicals. In 1995, new customers accounted
for approximately 27 percent of the Company's sales.
With ongoing refinements in the Company's approach to merchandising and
marketing, the frequency and quantity of mailings to the top segments of the
existing customer list have increased which in turn have provided significant
sales growth over the last five years. Demographic and regression analyses of
historical purchasing patterns of existing customers, including recency,
frequency and monetary modeling, are performed to assist in merchandising and
customer targeting.
The Company introduced several new marketing programs during 1995 including
a Buyer's Club and an installment payment plan. Customers can purchase a
membership in the Buyer's Club for a $29.99 annual fee and receive merchandise
discounts of ten percent on regularly priced items and five percent on sale
items and special buys. All customers with orders of $50 or more can utilize the
Company's E-Z Pay Plan consisting of a 25% down payment with three payments of
equal amounts in 30 day increments.
As a part of its marketing approach, the Company maintains a liberal policy
of making refunds or exchanges for all merchandise returned by customers for any
reason. The Company places no time limitation on this return policy. Returned
merchandise is restocked, sold in the retail outlet, returned to the supplier or
scrapped.
ORDER PROCESSING AND FULFILLMENT
Processing of customer orders is coordinated and handled by the Company's
on-line order entry system. Approximately 66 percent of the customer orders are
placed through the Company's toll-free telephone lines which are staffed 24
hours per day, seven days per week. The Company's telemarketing department is
staffed with individuals who are familiar with the products offered in the
catalogs, and can offer assistance to customers on availability, color, size,
etc. Telemarketers use a scripted catalog sales system, and enter orders
directly into the Company's on-line computer system. The remainder of the
Company's sales are primarily received through the mail or fax. Mail orders are
payment verified, batched and processed through the order entry system.
Customers can pay for their orders by any combination of check or credit card.
Charges are not billed to customer credit cards until the orders are ready for
shipment.
The Company promises next business day shipping on orders received by 7 p.m.
for in-stock merchandise. Virtually all of the Company's merchandise is stocked
at, and shipped from, its facility in South St. Paul, Minnesota, although a
small percentage of merchandise is drop-shipped directly to the customer by
specific vendors. The Company primarily utilizes the United Parcel Service and
United States Postal Service for shipment of its merchandise to its customers.
When cost effective the Company utilizes a consolidating shipper for delivery to
the United States Postal Service.
COMPETITION
The direct marketing industry includes a wide variety of specialty and
general merchandise retailers in a highly competitive and fragmented business
environment. The Company sells its products to customers in all fifty states and
competes in the purchase and sale of merchandise with all
3
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retailers. The Company believes that no direct competitor offers as
comprehensive a selection of products at lower prices. However, there are other
mail order catalogs as well as discount retailers that offer similar products to
those found in The Sportsman's Guide catalog. Other outdoor/hunting catalogs
include Gander Mountain, Bass Pro Shops and Cabela's. None of these catalogs
focus directly on the value-oriented, outdoorsman niche but rather compete with
The Sportsman's Guide only in certain product categories. Discount retailers,
such as Wal-Mart and K-Mart, offer selected similar products to those found in
the Company's catalogs but generally at equal or higher prices.
The Company competes by emphasizing the following:
- Concentration on high quality products sold at low prices, including
manufacturers' close-outs, military surplus and unusual or hard-to-find
products which provide value to the customers.
- Creative and expansive use of art and copy where each product is
extensively described with humorous call-outs and photo captions, photos
and caricatures. Copy is written in the first person from Gary Olen, the
President of the Company, to the reader. The catalog is perceived by
customers as having entertainment value and is positioned as "The
Fun-to-Read Catalog-TM-".
- Each product is hand-picked and field tested by Company associates to
insure its quality, functionality, proper sizing, etc. and therefore its
ultimate appeal to the customers.
- Strong emphasis on customer service exists by keeping most items in stock,
allowing a guaranteed return policy, personally replying to complaints,
and providing courteous and prompt service and delivery times.
- Toll-free telephone and fax ordering and toll-free customer service lines
are provided for customer use.
SEASONALITY
The majority of the Company's sales historically occur during the third and
fourth fiscal quarters. The seasonal nature of the Company's business is due to
the catalog's focus on hunting/shooting merchandise and related accessories for
the fall and holiday seasons. The following table illustrates the seasonal
trends in the Company's sales for the fiscal years ended December 29, 1995,
December 30, 1994, and December 31, 1993.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
SIX MONTHS ENDED ANNUAL SALES
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<S> <C>
June 1993..................................................................... 30%
December 1993................................................................. 70%
June 1994..................................................................... 37%
December 1994................................................................. 63%
June 1995..................................................................... 41%
December 1995................................................................. 59%
</TABLE>
As the chart illustrates, the Company's efforts to reduce seasonality while
increasing sales volume have been successful.
SERVICE MARK
The Company believes that its service marks, "The Sportsman's Guide" and
"The Fun-to-Read Catalog" are of significant value and has registered the
service marks with the United States Patent and Trademark Office and with the
appropriate agencies in Canada. If continuously used and registered, United
States service marks may be used exclusively by the owner for an indefinite
period.
EMPLOYEES
As of December 29, 1995, the Company had approximately 750 Associates.
4
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REGULATION
The Company is subject to federal, state and local laws and regulations
which affect its catalog mail order operations. Federal Trade Commission
regulations, in general, govern the manner in which orders may be solicited, the
information which must be provided to prospective customers, the time in which
orders must be shipped, obligations to customers if orders are not shipped
within the time promised, and the time in which refunds must be paid if the
ordered merchandise is unavailable or if it is returned.
The Federal Trade Commission has also established guidelines for advertising
and labeling many of the products sold by the Company. The Company is also
subject to a variety of state laws and regulations relating to, among other
things, advertising, pricing, charging and collecting state sales or use tax and
product safety/restrictions.
ITEM 2. PROPERTIES
The Company's offices, warehouse and distribution facilities are located at
411 Farwell Avenue, South St. Paul, Minnesota. The Company currently leases
approximately 338,000 square feet under a triple net lease expiring October,
1998. All of the Company's operations are located at this facility. The Company
believes its present facilities will be sufficient for its current operating
plan.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings other than
routine litigation which is incidental to its business and which is not material
in nature.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock is traded in the Minneapolis-St. Paul
over-the-counter market.
The following table sets forth the quarterly high and low bid prices for the
Company's Common Stock for the past two fiscal years as reported by Metro Data
Company, a Minneapolis computer service bureau that collects quotations from
local market makers. Such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
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<S> <C> <C>
1995
Fourth Quarter................................................................. 5/16 3/32
Third Quarter.................................................................. 1/2 5/16
Second Quarter................................................................. 11/16 1/4
First Quarter.................................................................. 1 9/16
1994
Fourth Quarter................................................................. 1 1/8 11/16
Third Quarter.................................................................. 9/16 1/2
Second Quarter................................................................. 5/8 1/2
First Quarter.................................................................. 5/8 5/16
</TABLE>
HOLDERS
At March 19, 1996, there were approximately 300 holders of record of the
Company's Common Stock. This number does not include persons whose shares are
held in "street" or nominee name.
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DIVIDENDS
The Company neither declared nor paid any cash dividends to holders of its
Common Stock during the fiscal years ended December 29, 1995, and December 30,
1994. The Company currently intends to retain all earnings for use in its
business for the forseeable future. The Company is prohibited from paying and
declaring dividends under the terms of its revolving loan agreement.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial information with
respect to the Company's five most recent fiscal years. This selected financial
information should be read in conjunction with the Company's Financial
Statements included in this report.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED (2)
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DECEMBER 29, DECEMBER 30, DECEMBER 31, JANUARY 1, DECEMBER 27,
1995 1994 1993 1993 1991
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IN THOUSANDS, EXCEPT PER SHARE DATA
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA
Sales..................................... $ 101,832 $ 96,398 $ 60,191 $ 38,162 $ 23,431
Earnings (loss) from operations........... (1,229) 3,732 (26) 592 304
Net earnings (loss)....................... (1,744) 2,722 (478) 511 212
Net earnings (loss) per common share:
Primary................................. (.07) .11 (.02) .02 .01
Fully Diluted........................... (.07) .10 (.02) .02 .01
Weighted average number of shares
outstanding:
Primary................................. 23,336 25,882 23,333 23,333 23,333
Fully Diluted........................... 23,336 26,997 23,333 23,333 23,333
BALANCE SHEET DATA
Total assets.............................. $ 23,709 $ 21,179 $ 14,546 $ 8,623 $ 5,237
Long-term obligations excluding trade
creditors' obligation (1)................ 287 3,873 1,900 912 935
Trade creditors' obligation (1)........... -- 74 635 635 850
Stockholders' equity...................... 1,548 3,292 570 1,048 537
</TABLE>
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(1) See Note B of Notes to Financial Statements for discussion of bankruptcy
settlement.
(2) The Company operates on a 52 or 53 week fiscal year ending the Friday
nearest December 31. All of the above fiscal years consisted of 52 weeks
except fiscal year ended January 1, 1993 which consisted of 53 weeks.
Reclassifications have been made to prior years' information to conform to
current year's presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
The Company's net sales in fiscal 1995 were $101,832,000 compared to
$96,398,000 in 1994, an increase of approximately 6 percent. The increase in
sales was a result of a 38 percent increase in total catalog mailings offset,
for the most part, by lower than anticipated customer demand. The Company
continues to increase its annual catalog publications, with twenty-three
editions published in 1995 as compared with thirteen editions in 1994. The lower
than anticipated customer demand was partially caused by several catalog
mailings being delivered late to the customers' homes. Management has
implemented controls to ensure timely catalog mailing during 1996.
Gross profit in 1995 increased $2,664,000, or 8 percent compared to fiscal
1994, primarily reflecting the increased sales volume. The gross profit as a
percentage of sales increased to 34.1 percent from 33.2 percent in fiscal 1994.
The majority of the increase in the gross profit percentage was a result of the
Company increasing shipping and handling charges on outgoing parcels to its
customers. In the aggregate, retail product margins, as a percentage of sales,
were virtually unchanged from the prior year.
Selling, general and administrative expenses were $35,924,000 or 35.3
percent of sales in 1995 compared to $28,299,000 or 29.4 percent of sales in
1994. The increase in dollars was primarily due to the higher catalog mailings
and higher equipment and building rent as well as increased depreciation, all of
which were spent to increase the capacity of the computer system, telephone
switch and warehouse. The increase as a percent of sales was primarily due to
lower than anticipated customer response on virtually all catalogs along with
higher postage and paper costs. Virtually the entire mail order industry and
retailing in general experienced softness in consumer demand. The Company's plan
for 1996 includes improvement to selling, general and administrative expenses as
a percentage of sales by eliminating mailings to lower quality customer segments
thereby improving response rates.
As a result of the above, the Company incurred a loss from operations of
$1,229,000 in fiscal 1995.
Interest expense for 1995 was $943,000 compared to $582,000 in 1994. The
increase of $361,000 was primarily attributable to higher daily bank borrowings
as a result of higher inventory throughout the year.
Income tax benefits for fiscal 1995 were $355,000 as compared to an income
tax expense of $385,000 in 1994. The Company's effective tax rate for 1995 and
1994 was 16.9 percent and 12.4 percent, respectively. At December 29, 1995, the
Company has net operating loss carryforwards of $3,756,000 that may be utilized
in future years.
As a result of the aforementioned, the net loss for fiscal 1995 was
$1,744,000 as compared to net earnings of $2,722,000 for fiscal 1994. The net
loss per common share in 1995 was 7 cents, compared to net earnings per common
share of 11 cents in 1994.
1994 COMPARED TO 1993
The Company's net sales in fiscal 1994 were $96,398,000 compared to
$60,191,000 in 1993, an increase of approximately 60 percent. The increase in
sales was primarily due to a planned 75% increase in total catalog mailings
offset somewhat by a decrease in the average customer response rates. The
Company continues to increase its annual catalog publications, with thirteen
editions published in 1994 as compared with ten editions in 1993.
Gross profit in 1994 increased $14,257,000, or 80 percent compared to fiscal
1993, primarily reflecting the increased sales volume. The gross profit as a
percentage of sales increased to 33.2 percent from 29.5 percent in fiscal 1993.
Most of the increase in the gross profit percentage was a result of the Company
reducing its shipping costs of outgoing parcels to customers. Retail product
margins, as a percentage of sales, were virtually unchanged from the 1993 level.
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Selling, general and administrative expenses were $28,299,000 or 29.4
percent of sales in 1994 compared to $17,800,000 or 29.6 percent of sales in
1993. The increase in dollars was due primarily to the higher catalog mailings
and increased order fulfillment costs associated with the higher sales volume.
The decrease as a percent of sales was due principally to increased productivity
on catalogs mailed and improved leverage of labor and other overhead expenses to
the sales volume increase.
As a result of the above, earnings from operations in 1994 were $3,732,000
or 3.9 percent of sales compared to a loss from operations of $26,000 for the
prior year.
Interest expense for 1994 was $582,000 compared to $437,000 in 1993. The
increase of $145,000 was attributable primarily to the private placement of
$2,500,000 of subordinated debt.
Income tax expense for 1994 increased by $385,000 over 1993. The Company's
effective tax rate for 1994 was 12.4 percent. The Company utilized net operating
loss carryforwards of approximately $1,465,000 during the year ended December
31, 1994.
As a result of the aforementioned items, net earnings for fiscal 1994
increased to $2,722,000 from a loss of $478,000 in fiscal 1993. Net earnings per
common share increased to 11 cents in 1994 from a loss of 2 cents in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company meets its operating cash requirements through funds generated
from operations, borrowings under its revolving line of credit and subordinated
debt with shareholders and other investors. In February 1995, the Company
entered into a credit facility providing a revolving line of credit up to
$15,500,000, subject to an adequate borrowing base, expiring March 1997. The
revolving credit facility provided an available base of $5,000,000 with an
additional seasonal amount of $10,500,000 available from May 1 through November
30 of each year. The availability of funds under the facility is subject to the
principal balance and commercial letter of credit total being paid down to $2
million, plus 80% of credit card receivables under installment plan, and
remaining at this level for not less than 30 consecutive days between December 1
and March 31 each year. To facilitate a newly created customer installment pay
plan, the Company's credit facility was amended in October 1995 to include in
its borrowing base accounts receivable financed under the Company's E-Z Pay
installment plan. As of December 29, 1995, the Company was in technical
violation of certain financial covenants, which have subsequently been waived by
the bank. In February 1996, the credit facility was amended and capped at the
low season availability of $5,000,000. The bank also required certain
conditions, including receipt by the Company of $1.7 million in additional
equity or debt subordinated to the bank and the extension of current
subordinated debt of the Company. Subsequent to execution of the Merger
Agreement with VISTA (see Note L of Notes to Financial Statements), the bank
tentatively agreed, subject to internal bank approvals, to modify its conditions
by waiving the requirement for the $1.7 million equity infusion and increasing
the credit facility to $7.0 million through June 30, 1996, upon the deposit of
$2.0 million of collateral by VISTA with the bank prior to April 15, 1996.
Management believes that the amended credit facility will provide sufficient
operating funds through June 1996. Management further believes that it can
obtain alternative financing, although at a higher cost of capital, in the event
the merger with VISTA is not consummated. As of December 29, 1995, the
outstanding borrowings against the line of credit were $965,000. The revolving
credit facility is secured by substantially all of the assets of the Company.
The Company provided $1,276,000 of cash from operations during 1995 compared
to utilizing $125,000 of cash during 1994. The net increase of $1,401,000 in
cash from operations resulted primarily from an increase in accounts payable of
$2,664,000 and in the bank overdraft position of $1,619,000. Other items
affecting working capital were an increase in accounts receivable of $1,446,000
and an increase in inventory of $637,000. The increase in accounts payable was
primarily the result of negotiating special arrangements with major suppliers to
extend payment terms in order to achieve the annual credit facility pay down as
of January 5, 1996. The increase in accounts receivable is primarily as a result
of the newly created E-Z Pay installment program whereby the Company finances
customers' purchases over three months. The increase in inventory is largely due
8
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to softer retail demand than planned and certain volume purchases to obtain
favorable pricing. The changes in working capital reduced the Company's current
ratio to .89:1.00 at December 29, 1995 compared to 1.28:1.00 at December 30,
1994. A significant item affecting the Company's current ratio was the current
maturity of the Company's subordinated debt of $3,414,000 due February 16, 1996.
At December 30, 1994 the subordinated debt was classified as long-term.
Excluding the subordinated debt, the Company has a current ratio of 1.05:1.00 at
December 29, 1995. Because of bank requirements with regard to the amended
credit facility, as discussed above, the Company has not paid the subordinated
debt when due. The Company has obtained extensions from the holders of such debt
(see Note G of Notes to Financial Statements). The subordinated debt will be
paid in full pursuant to the terms of the merger with VISTA (see Note L of Notes
to Financial Statements) or extended or replaced if the merger is not finalized.
Any further extension or replacement of the subordinated debt may result in a
higher cost of capital or require the issuance of additional equity to such
subordinated debt holders.
The Company's utilization of cash for investment activities of $1,775,000 in
1995 was $260,000 lower than the 1994 utilization of cash. Investment activities
during fiscal 1995 consisted of capital expenditures including projects to
develop computer software systems and enhance warehouse operations in terms of
efficiencies and capacity. During the fourth quarter of 1994, the Company began
a multi-year project of replacing and enhancing its operational and management
information system. During 1996, the Company plans to continue the system
development plan with an additional $900,000 of capital spending which will be
funded from operations.
During 1994, the Company entered into a three year operating lease
commitment for additional computer hardware with an equipment value of
approximately $600,000 to enhance system capability and facilitate future
growth. During 1995, this lease was extended an additional twelve months to
match the Company's revised growth plans. In February 1995, the Company entered
into a lease for an additional 95,000 square feet of contiguous warehouse space
and also entered into a forty-eight month lease for a telecommunication system
with an equipment value of approximately $1,000,000.
The Company entered into a three year agreement for long distance telephone
service with minimum purchase commitments of $1.4 million, $1.4 million and $1.6
million, for 1995, 1996 and 1997, respectively. The Company will realize cash
rebates of approximately $500,000 during the first half of 1996 relating to the
three year contract.
The Company believes it will have sufficient funds available to meet current
and future commitments.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and schedules relating to the Company are
included herein:
Financial Statements:
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Report of Independent Certified Public Accountants..................................... 11
Balance Sheets as of December 29, 1995 and December 30, 1994........................... 12
Statements of Operations for the fiscal years ended December 29, 1995, December 30,
1994 and December 31, 1993............................................................ 13
Statements of Changes in Stockholders' Equity for the fiscal years ended December 29,
1995, December 30, 1994 and December 31, 1993......................................... 14
Statements of Cash Flows for the fiscal years ended December 29, 1995, December 30,
1994 and December 31, 1993............................................................ 15
Notes to Financial Statements.......................................................... 16
Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts for the fiscal years ended December
29, 1995, December 30, 1994 and December 31, 1993..................................... 25
</TABLE>
10
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[GRANT THORNTON LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
The Sportsman's Guide, Inc.
We have audited the accompanying balance sheets of The Sportsman's Guide,
Inc. (a Minnesota corporation) as of December 29, 1995 and December 30, 1994 and
the related statements of operations, changes in stockholders' equity, and cash
flows for each of the three fiscal years in the period ended December 29, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Sportsman's Guide, Inc.
as of December 29, 1995 and December 30, 1994, and the results of its operations
and its cash flows for each of the three fiscal years in the period ended
December 29, 1995 in conformity with generally accepted accounting principles.
We have also audited Schedule II for each of the three fiscal years in the
period ended December 29, 1995. In our opinion this schedule presents fairly, in
all material respects, the information required to be set forth therein.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
January 29, 1996 (except for Notes F, G and L,
as to which the date is March 22, 1996)
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THE SPORTSMAN'S GUIDE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 30,
1995 1994
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(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................................... $ -- $ 653
Accounts receivable................................................................ 2,231 785
Inventory.......................................................................... 14,208 13,571
Prepaid expenses................................................................... 858 727
Promotional material............................................................... 2,114 2,155
------------ ------------
Total current assets............................................................. 19,411 17,891
PROPERTY AND EQUIPMENT -- NET........................................................ 4,298 3,288
------------ ------------
Total assets..................................................................... $ 23,709 $ 21,179
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft position............................................................ $ 1,619 $ --
Notes payable -- bank.............................................................. 965 --
Current maturities of long-term debt
Related parties.................................................................. 2,095 150
Other............................................................................ 1,368 314
Trade creditors' obligation........................................................ -- 561
Accounts payable................................................................... 13,554 10,890
Accrued expenses................................................................... 794 1,044
Customer deposits and other liabilities............................................ 1,479 981
------------ ------------
Total current liabilities........................................................ 21,874 13,940
LONG-TERM OBLIGATIONS
Long-term debt
Related parties.................................................................. -- 2,095
Other............................................................................ 220 1,678
Other long-term obligations........................................................ 67 174
------------ ------------
Total long-term obligations...................................................... 287 3,947
------------ ------------
Total liabilities................................................................ 22,161 17,887
COMMITMENTS AND CONTINGENCIES........................................................ -- --
STOCKHOLDERS' EQUITY
Series A Preferred Stock -- $.01 par value; 200,000 shares authorized, issued and
outstanding....................................................................... 2 2
Common Stock -- $.01 par value; 36,800,000 shares authorized; 23,335,833 shares
issued and outstanding............................................................ 233 233
Additional paid-in capital......................................................... 2,138 2,138
Accumulated earnings (deficit)..................................................... (825) 919
------------ ------------
Total stockholders' equity....................................................... 1,548 3,292
------------ ------------
Total liabilities and stockholders' equity....................................... $ 23,709 $ 21,179
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
DECEMBER 29, DECEMBER 30, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales................................................................. $ 101,832 $ 96,398 $ 60,191
Cost of sales......................................................... 67,137 64,367 42,417
------------ ------------ ------------
Gross profit........................................................ 34,695 32,031 17,774
Selling, general and administrative expenses.......................... 35,924 28,299 17,800
------------ ------------ ------------
Earnings (loss) from operations..................................... (1,229) 3,732 (26)
Interest expense...................................................... (943) (582) (437)
Miscellaneous income (expense)........................................ 73 (43) (15)
------------ ------------ ------------
Earnings (loss) before income taxes................................. (2,099) 3,107 (478)
Income tax benefit (expense).......................................... 355 (385) --
------------ ------------ ------------
Net earnings (loss)................................................. $ (1,744) $ 2,722 $ (478)
------------ ------------ ------------
------------ ------------ ------------
Net earnings (loss) per common share:
Primary............................................................. $ (.07) $ .11 $ (.02)
------------ ------------ ------------
------------ ------------ ------------
Fully Diluted....................................................... $ (.07) $ .10 $ (.02)
------------ ------------ ------------
------------ ------------ ------------
Weighted average common shares and common share equivalents
outstanding:
Primary............................................................. 23,336 25,882 23,333
------------ ------------ ------------
------------ ------------ ------------
Fully Diluted....................................................... 23,336 26,997 23,333
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FISCAL YEARS ENDED DECEMBER 29, 1995,
DECEMBER 30, 1994 AND DECEMBER 31, 1993
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL ACCUMULATED
-------------------------- ---------------------- PAID-IN EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT)
----------- ------------- --------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
January 1, 1993.................................. 200 $ 2 23,333 $ 233 $ 2,138 $ (1,325)
Net loss....................................... -- -- -- -- -- (478)
--
--- --------- ----- ----------- ------------
December 31, 1993................................ 200 2 23,333 233 2,138 (1,803)
Exercise of stock options...................... -- -- 3 -- -- --
Net earnings................................... -- -- -- -- -- 2,722
--
--- --------- ----- ----------- ------------
December 30, 1994................................ 200 2 23,336 233 2,138 919
Net loss....................................... -- -- -- -- -- (1,744)
--
--- --------- ----- ----------- ------------
December 29, 1995................................ 200 $ 2 23,336 $ 233 $ 2,138 $ (825)
--
--
--- --------- ----- ----------- ------------
--- --------- ----- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
DECEMBER 29, DECEMBER 30, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................................................. $ (1,744) $ 2,722 $ (478)
Adjustments to reconcile net earnings (loss) to cash provided by
(used in) operating activities:
Depreciation and amortization..................................... 708 455 209
Deferred income taxes expense (benefit)........................... (290) 290 --
Gain on bankruptcy settlement..................................... (74) -- --
Other............................................................. 36 94 111
Changes in assets and liabilities:
Accounts receivable............................................. (1,446) (521) (44)
Inventory....................................................... (637) (3,419) (3,320)
Prepaid expenses................................................ (131) (594) (50)
Promotional material............................................ 41 (688) (573)
Bank overdraft position......................................... 1,619 -- --
Accounts payable................................................ 2,664 1,979 4,193
Accrued expenses................................................ (249) 636 268
Customer deposits and other liabilities......................... 779 (1,079) 804
------------ ------------ ------------
Cash flows provided by (used in) operating activities......... 1,276 (125) 1,120
Cash flows from investing activities:
Purchases of property and equipment................................. (1,911) (2,063) (1,226)
Proceeds from sale of property and equipment........................ 136 28 19
------------ ------------ ------------
Cash flows used in investing activities....................... (1,775) (2,035) (1,207)
Cash flows from financing activities:
Gross borrowings under line of credit............................... 37,095 20,170 7,900
Gross payments on line of credit.................................... (36,130) (20,170) (7,900)
Payments on trade creditors' obligation............................. (561) (150) (215)
Borrowings under long-term debt..................................... -- 2,500 1,300
Payments on long-term debt.......................................... (558) (258) (277)
------------ ------------ ------------
Cash flows provided by (used in) financing activities......... (154) 2,092 808
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents...................... (653) (68) 721
Cash and cash equivalents at beginning of year........................ 653 721 --
------------ ------------ ------------
Cash and cash equivalents at end of year.............................. $ -- $ 653 $ 721
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosure of cash flow information
Cash paid during the periods for:
Interest...................................................... $ 938 $ 613 $ 320
Income taxes.................................................. $ 191 $ 28 $ 1
Supplemental disclosure of noncash investing and
financing activities
Fixed assets acquired under capital lease......................... $ 17 $ 11 $ 70
Disposal of fixed assets acquired under capital lease............. $ -- $ 27 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. DESCRIPTION OF BUSINESS
The Sportsman's Guide, Inc. (the "Company") is a consumer catalog marketer,
offering a variety of merchandise such as apparel, footwear, hunting and
shooting accessories, ammunition, knives, optics, general merchandise,
collectibles, and a variety of gift items. The Company conducts its operations
out of one facility in South St. Paul, Minnesota and distributes its catalogs
throughout the United States.
2. RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial
statements to conform to the current year's presentation.
3. REVENUE RECOGNITION
Sales are recorded at time of shipment and provision for anticipated
merchandise returns, net of exchanges, is recorded based upon historical
experience. The provision charged against sales during fiscal years 1995, 1994
and 1993 was $5,230,000, $4,941,000 and $3,488,000. Reserves for returns, net of
exchanges, of $177,000, $218,000 and $312,000 were recorded in accrued expenses
at December 29, 1995, December 30, 1994 and December 31, 1993.
Amounts billed to customers for shipping and handling of orders are netted
against the associated costs.
Customers can purchase memberships in the Buyer's Club for a $29.99 annual
fee, and receive merchandise discounts of 10% on regularly priced items and 5%
on sale items and special buys. Membership fees are deferred and recognized in
income as the members place orders and receive discounts. After six months
members can no longer cancel their memberships, and any remaining deferred
membership fees are recognized as income.
4. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid temporary investments purchased with
an original maturity of three months or less to be cash equivalents. The Company
also considers credit card settlements in-transit as cash for reporting
purposes. Chargebacks from the credit card companies are charged against
operations at the time initiated by the credit card company.
5. BANK OVERDRAFT POSITION
As a result of maintaining a consolidated cash management system, the
Company maintains overdraft positions at its primary bank. Such overdrafts are
consistent with the Company's cash management strategy of utilizing the "float"
on outstanding checks written. When outstanding checks exceed the bank cash
balances, the bank overdraft position is included in current liabilities.
6. ACCOUNTS RECEIVABLE
Accounts receivable consists primarily of amounts owed for merchandise by
customers utilizing the four payment installment plan, and amounts owed for list
rental by other companies. The Company considers all of the accounts receivable
to be fully collectible, therefore no allowance for doubtful accounts is
provided. If amounts become uncollectible, they are charged to operations at the
time of such determination.
7. INVENTORY
Inventory consists of purchased finished merchandise available for sale and
is recorded at the lower of cost or market. The first-in, first-out (FIFO)
method is used to determine cost for inventory.
16
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
8. PROMOTIONAL MATERIAL
The cost of producing and mailing catalogs is deferred and expensed over the
estimated useful lives of the catalogs, which generally do not exceed four
months. The ongoing cost of developing and maintaining the customer list is
charged to operations as incurred.
9. PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation and
amortization. The Company capitalizes external and incremental internal costs of
developing computer software for internal use that represent major enhancements
and/or replacements of operating and management systems. Depreciation and
amortization is computed using the straight-line method.
10. INCOME TAXES
The Company accounts for income taxes under the liability method. Deferred
tax assets and liabilities represent the tax effects, based on current tax law,
of future deductible or taxable items that have been recognized in the financial
statements.
11. NET EARNINGS (LOSS) PER COMMON SHARE
Net earnings (loss) per common share is computed by dividing net earnings
(loss) by the weighted average number of shares of common stock and common stock
equivalents outstanding. The effect of the potential exercise of outstanding
options and warrants to purchase shares of common stock is calculated using the
treasury stock method when dilutive.
12. FISCAL YEAR
The Company's fiscal year ends on the Friday nearest December 31. Fiscal
years 1995, 1994 and 1993 consisted of 52 weeks.
13. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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 the amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE B -- BANKRUPTCY
The Company's dismissal from Chapter 11 proceedings in November 1989,
established a settlement obligation with certain pre-petition trade creditors.
The trade creditors' obligation required the Company to pay $710,000 to settle
these claims. The Company fulfilled this obligation, with the final payment made
in 1994.
As part of the settlement, the Company also agreed to make additional
settlement payments of up to $850,000, contingent upon the after-tax
profitability of the Company during the period January 1, 1990 through December
29, 1995. Annual payments equal to 25 percent of cumulative after-tax profits in
excess of predetermined levels, less all previous payments made under this
agreement, were payable in April 1992 through April 1996. If total payments
under this contingent obligation were less than $850,000, the difference was to
be recognized as a gain.
The cumulative after-tax profit levels were met in fiscal years 1992 and
1994, requiring the Company to pay a total of $776,000. The cumulative after-tax
profit level at the end of fiscal 1995 was not met, therefore the Company
recognized the remaining $74,000 as a gain in 1995.
17
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE C -- RELATED PARTY TRANSACTIONS
The Company purchased approximately $175,000, $448,000 and $546,000 of
inventory during fiscal years 1995, 1994 and 1993 from companies owned by a
family member of an officer and a director of the Company.
In addition, the Company purchased approximately $4,406,000, $6,700,000 and
$896,000 of inventory during the fiscal years 1995, 1994 and 1993 from a company
partially owned by a director of the Company.
The Company incurred interest expense related to notes payable to related
parties (see Note G) of approximately $172,000, $171,000 and $55,000 during
fiscal years 1995, 1994 and 1993.
NOTE D -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 30, ESTIMATED
1995 1994 USEFUL LIVES
------------ ------------- --------------
<S> <C> <C> <C>
Machinery, equipment and furniture.............. $ 3,005 $ 2,562 5 - 12 years
Equipment under capital leases.................. 133 325 5 years
Leasehold improvements.......................... 802 579 Lease life
Computer software............................... 1,728 570 5 years
------------ -------------
5,668 4,036
Less accumulated depreciation and
amortization................................... (1,370) (748)
------------ -------------
$ 4,298 $ 3,288
------------ -------------
------------ -------------
</TABLE>
NOTE E -- COMMITMENTS AND CONTINGENCIES
The Company is a party to a number of noncancelable operating lease
agreements involving building and equipment. The lease for the office and
warehouse facility expires October 31, 1998 with options to renew the lease term
through March 2004. In addition to the base rent, the lease requires the Company
to pay its pro rata share of real estate taxes, utilities, insurance and
maintenance, therefore these costs are included in future minimum lease
payments.
Future minimum lease payments at December 29, 1995 are as follows (in
thousands):
<TABLE>
<S> <C>
1996............................................... $ 1,791
1997............................................... 1,796
1998............................................... 1,362
1999............................................... 219
2000............................................... --
---------
$ 5,168
---------
---------
</TABLE>
Rent expense for fiscal years 1995, 1994 and 1993 was $1,697,000, $874,000
and $338,000, respectively.
The Company is not a party to any pending legal proceedings other than
routine litigation which is incidental to its business and which is not material
in nature.
Several states, where the Company does not currently collect and remit sales
and use taxes, have attempted to enact legislation that seeks to require
out-of-state mail order companies to collect and remit such taxes. No
assessments have been made against the Company, and, to its knowledge, none
18
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE E -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
have been threatened or are contemplated. The United States Supreme Court held
such taxes place an unconstitutional burden on interstate commerce, which may
only be resolved by actions of the United States Congress.
NOTE F -- REVOLVING CREDIT FACILITY
Effective February 16, 1995, the Company entered into a new credit facility
providing a revolving line of credit up to $15.5 million, subject to an adequate
borrowing base, expiring March 1997. The credit facility provides an available
base amount of $5.0 million with an additional seasonal amount of $10.5 million
available from May 1 through November 30 of each year. The revolving line of
credit is for working capital and letters of credit. Commercial letters of
credit could not exceed $5.0 million at any time. Borrowings under the revolving
line of credit bear interest (at the Company's option) of either LIBOR plus 2.50
percentage points, reserve adjusted CD rate plus 2.60 percentage points or the
bank's prime rate. The availability of funds under the revolving line of credit
was subject to the principal balance and commercial letter of credit total being
paid down to $2.0 million plus 80% of credit card receivables under an
installment plan and remaining at this level for not less than 30 consecutive
days between December 1 through March 31 each fiscal year.
The revolving line of credit facility is secured by substantially all of the
assets of the Company. All borrowings are subject to various monthly covenants.
The most restrictive covenants require minimum levels of tangible net worth, a
minimum current ratio and a maximum level of total liabilities to tangible net
worth.
As of December 29, 1995, the Company was in violation of certain financial
covenants, which have been waived by the bank. In February 1996, the credit
facility was amended and capped at the low season availability of $5.0 million,
pending the finalization of a merger with VISTA 2000, Inc. ("VISTA") (see Note
L).
Under the terms of the amended credit agreement, commercial letters of
credit cannot exceed $1.0 million at any time. Borrowings under the revolving
line of credit will bear interest at the bank's prime rate increased by 2.00
percent for any month a maximum level of total liabilities to tangible net worth
is exceeded.
The amended credit agreement has revised covenants relating to the Company's
financial performance. The most restrictive covenants require minimum levels of
tangible net worth, a minimum current ratio, a maximum level of total
liabilities to tangible net worth, minimum monthly gross profit, minimum monthly
interest and operating lease coverage ratio, prohibits interest or principal
payments on stockholders' debt and requires a capital infusion of $1,744,000 by
March 31, 1996.
Subsequent to execution of the Agreement and Plan of Merger with VISTA (see
Note L), the bank tentatively agreed to modify its conditions by waiving the
requirement for the $1,744,000 capital infusion and increasing the credit
facility to $7.0 million through June 30, 1996. These changes are subject to
internal bank approvals and the deposit of $2.0 million of collateral by VISTA
with the bank prior to April 15, 1996. Management believes the amended credit
facility will provide sufficient operating funds through June, 1996. Management
further believes it can obtain alternative financing, although at a higher cost
of capital, in the event the merger with VISTA is not consummated.
19
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F -- REVOLVING CREDIT FACILITY (CONTINUED)
The following is a summary of the credit facility (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Balance at end of year........................................ $ 965 $ -- $ --
Interest rate at year-end..................................... 9.5% 10.0% 7.5%
Maximum month-end borrowing during the year................... $ 11,720 $ 6,985 $ 5,860
Average daily borrowing during the year....................... $ 6,729 $ 2,445 $ 3,448
Weighted average interest rate during the year................ 9.2% 9.3% 7.5%
</TABLE>
NOTE G -- LONG-TERM DEBT
Long-term debt is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 30,
1995 1994
------------- -------------
<S> <C> <C>
Subordinated notes payable to stockholders, interest at 8%
payable quarterly, principal due February 1996. Collateralized
by the assets of the Company. (See Notes F and L)............... $ 3,247 $ 3,247
Unsecured notes payable to stockholders, interest at 12% payable
annually, principal due in two payments of $167 in January 1995
and 1996. (See Notes F and L)................................... 167 333
Note payable to a governmental agency, interest at 4%, principal
and interest payable annually through June 1998. Collateralized
by machinery, equipment and furniture and fixtures.............. 220 258
Note payable to a financial institution, interest at prime plus
2% (effective rate of of 10.5% at December 30, 1994); paid in
1995............................................................ -- 122
Note payable to a former officer and stockholder, paid January
1995............................................................ -- 80
Obligations under capitalized leases............................. 49 197
------------- -------------
3,683 4,237
Less current maturities.......................................... 3,463 464
------------- -------------
$ 220 $ 3,773
------------- -------------
------------- -------------
</TABLE>
All of the above notes payable to stockholders are subordinate to present
and future financial institution borrowings (see Note F).
During February 1996, the Company extended the maturity date of the notes
payable to stockholders and the payment of accrued interest pending the merger
with VISTA. The notes payable to stockholders will be paid in full pursuant to
the terms of the merger agreement with VISTA (see Note L). If the merger is not
consummated, management believes it can obtain further extensions or renewals
for the notes payable to stockholders. Any further extension or replacement of
the subordinated debt may result in a higher cost of capital or require the
issuance of additional equity to such subordinated debt holders.
20
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE G -- LONG-TERM DEBT (CONTINUED)
In 1993, financing was obtained from a government agency in connection with
the Company's new facility lease. Annual principal payments of $30,000 plus
interest are required, with the final payment of $160,000 due in June 1998.
Principal of $13,000 will be forgiven each year if the Company attains certain
payroll levels. In 1995 and 1994, principal of $13,000 was reduced as the
required payroll level was satisfied. If the Company renews its lease in 1998,
the final payment of $160,000 will be restructured to be payable over five
additional years.
Aggregate maturities of long-term debt at December 29, 1995 are as follows
(in thousands):
<TABLE>
<S> <C>
1996............................................... $ 3,463
1997............................................... 52
1998............................................... 168
---------
$ 3,683
---------
---------
</TABLE>
Under the discounted cash flow method, the fair value of long-term debt
approximates the carrying value at December 29, 1995.
NOTE H -- RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." It establishes guidance for when to recognize and how to
measure impairment losses of long-lived assets and certain identifiable
intangibles and how to value long-lived assets to be disposed of. The Statement
provides that such assets should be reviewed for impairment whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. The Statement is effective for fiscal years beginning after
December 15, 1995. The Company has not yet evaluated the effect of this
Statement on its financial statements.
The Financial Accounting Standards Board has also issued Statement No. 123,
"Accounting for Stock-Based Compensation." The Statement introduces a method of
accounting to recognize compensation cost for employee stock-based compensation
plans based on the fair value of awards on the date they are granted ("fair
value based method"). The Statement allows entities to continue to account for
stock options issued to employees under APB 25 ("intrinsic value based method"),
however, they are required to disclose the pro forma net income as if the fair
value based method had been used. The disclosure requirements are effective for
fiscal years beginning after December 15, 1995. The disclosures must include
awards granted in fiscal years beginning after December 15, 1994. The Company
intends to utilize the intrinsic value based method of accounting for
stock-based compensation.
21
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE I -- INCOME TAXES
The provision for income tax expense (benefit) consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Current
Federal........................................................... $ (70) $ 89 $ --
State............................................................. 5 6 --
--------- --------- ---------
(65) 95 --
Deferred
Federal........................................................... (290) 290 --
State............................................................. $ -- $ -- $ --
--------- --------- ---------
(290) 290 --
--------- --------- ---------
$ (355) $ 385 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Differences between income tax expense (benefit) and amounts derived by
applying the statutory federal income tax rate to earnings (loss) before income
taxes is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
U.S. federal statutory rate................................. (34.0)% 34.0% (34.0)%
Change in valuation allowance............................... 20.2 (21.7) 34.0
Other....................................................... (3.1) .1 --
----- ----- -----
(16.9)% 12.4% --%
----- ----- -----
----- ----- -----
</TABLE>
The components of the net deferred tax asset and liability at December 29,
1995 and December 30, 1994, calculated at 34% consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 30,
1995 1994
------------ ------------
<S> <C> <C>
Deferred tax assets:
Inventory capitalization....................................... $ 185 $ 308
Trade creditors' obligation.................................... -- 27
Vacation accrual............................................... 100 80
Returns reserve................................................ 60 74
Net operating loss carryforwards............................... 1,277 167
Other.......................................................... 145 106
------------ ------------
1,767 762
Valuation allowance.............................................. (424) --
------------ ------------
1,343 762
Deferred tax liabilities:
Promotional material........................................... (671) (684)
Depreciation................................................... (306) (196)
Prepaid expenses............................................... (240) (156)
Other.......................................................... (126) (16)
------------ ------------
(1,343) (1,052)
------------ ------------
Net deferred tax liability....................................... $ -- $ (290)
------------ ------------
------------ ------------
</TABLE>
The Company has operating loss carryforwards of approximately $3,756,000
that expire in 2010.
22
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE J -- STOCKHOLDERS' EQUITY
The Company is authorized to issue 40,000,000 shares, of which 200,000 are
Series A Preferred Stock, 36,800,000 are Common Stock, and 3,000,000 are
undesignated shares.
The Company has a stock option plan (the "Plan") which authorizes the
granting of options to purchase shares of the Company's common stock. The
Company has reserved 350,000 shares of common stock under the Plan. Options may
be granted to full-time employees of the Company, directors and consultants or
independent contractors. The exercise price for incentive stock options must be
at least 100% (110% in the case of incentive stock options granted to
stockholders holding 10% or more of the Company's common stock) of the fair
market value of the common stock on the date of the grant. Non-qualified options
may be granted at any exercise price. The term of any incentive stock options
granted under the Plan may not exceed ten years (five years in the case of
incentive stock options granted to stockholders holding 10% or more of the
Company's common stock) from the date of the grant. The term of non-qualified
options may not exceed fifteen years. Options granted become exercisable ratably
over a four-year period following the grant.
Option transactions under the Plan during fiscal years 1995, 1994 and 1993
are as follows (in thousands of shares):
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
----------- ------------
<S> <C> <C>
Outstanding at January 1, 1993........................................ 140 $ .20
Granted............................................................. 102 .25
Canceled............................................................ (20) .20
---
Outstanding at December 31, 1993...................................... 222 .20 - .25
Canceled............................................................ (75) .20 - .25
Exercised........................................................... (2) .25
---
Outstanding at December 30, 1994...................................... 145 .20 - .25
Canceled............................................................ (18) .20
---
Outstanding at December 29, 1995...................................... 127 .20 - .25
---
---
</TABLE>
For 1994, the Company had a Non-Qualified Stock Option Plan (the "1994
Non-qualified Plan") which authorized the granting of up to 1,000,000 options to
purchase shares of the Company's common stock, contingent upon meeting certain
quarterly pre-tax earnings levels. These options could be granted to the
Company's executive officers and certain other employees, at the fair market
value of the common stock on the date of grant. The options are exercisable as
of the date of the grant and expire after three years. Under the 1994
Non-qualified Plan, the Company granted options during 1994 to purchase 300,000
shares, and in 1995 granted options to purchase 200,000 shares. The exercise
price of these options ranges from $.37 to $.87 per share. In 1995, options to
purchase 10,000 shares at prices ranging from $.37 to $.87 were canceled.
For 1995, the Company had a Non-Qualified Stock Option Plan (the "1995
Non-qualified Plan") which authorized the granting of up to 1,000,000 options to
purchase shares of the Company's common stock, contingent upon meeting certain
annual pre-tax earnings levels. These pre-tax earnings levels were not met,
therefore no options were granted under the 1995 Non-qualified Plan.
During 1992, the Company entered into an Option Agreement granting an
officer 50,000 options to purchase shares of the Company's common stock at an
option price of $.25 per share. These options were exercisable at December 29,
1995 and expire in August 1997.
23
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE J -- STOCKHOLDERS' EQUITY (CONTINUED)
During 1993, the Company entered into an Option Agreement granting an
officer 550,000 options to purchase shares of the Company's common stock at an
option price of $.25 per share. The options, which are nontransferable, may only
be exercised within 6 months of the occurrence of any of the following events or
they terminate: the death or permanent disability of the officer, retirement at
age 62, termination of employment without cause or a public offering of the
Company's stock. None of the 550,000 options were exercisable at December 29,
1995.
In aggregate, options to purchase 646,000 shares of common stock were
exercisable at December 29, 1995.
In connection with private placements of debt in 1993 and 1994, stock
warrants to purchase 3,747,000 shares of the Company's common stock were issued
to the debtors. Of these stock warrants, 500,000 were issued at $.25 per share
and expire in June 1998, and 3,247,000 were issued at $.1875 per share and
expire in April 1999. All 3,747,000 stock warrants were exercisable at December
29, 1995.
NOTE K -- ADVERTISING EXPENSE
Selling, general and administrative expenses include advertising expenses of
$21,650,000, $15,138,000 and $10,589,000 for 1995, 1994 and 1993, respectively.
NOTE L -- SUBSEQUENT EVENTS
Effective February 1, 1996, the Company entered into an agreement to amend
its revolving credit facility (see Note F). Subsequent to execution of the
Agreement and Plan of Merger with VISTA (see below), the bank tentatively agreed
to increase the credit facility to $7.0 million through June 30, 1996, subject
to internal bank approvals and the deposit of $2.0 million of collateral by
VISTA with the bank prior to April 15, 1996.
The Company entered into an Agreement and Plan of Merger (the "Agreement")
with VISTA on March 8, 1996. Under the terms of the Agreement, the Company will
be merged with and into a subsidiary of VISTA. The consummation of the merger is
subject to various significant terms and conditions including, but not limited
to, the Company obtaining stockholder approval, a fairness opinion acceptable to
the Company and regulatory consents, approvals and/or authorizations from
applicable governmental agencies.
The terms of the Agreement provide for the Company's stockholders to receive
shares of VISTA common stock based upon formulas defined in the Agreement.
Stockholders owning less than 100,000 common shares will receive a cash payment,
as defined in the Agreement, in lieu of shares of VISTA common stock.
The Agreement also provides for the repayment in full of all of the
subordinated notes payable to stockholders and related interests (see Note G)
immediately upon closing. Concurrently with such repayment, VISTA will issue
warrants to each subordinated debt holder in return for extending the maturity
date of the related debt through the date of closing of the merger. The
aggregate number of warrants to be issued is 300,000 pursuant to the terms of
the Agreement.
The Agreement includes various provisions for termination. Termination fees
may be payable by either party depending on the nature of the termination. Under
certain conditions, either party may terminate the Agreement if the closing has
not occurred by May 31, 1996 unless the delay is caused solely by the failure to
obtain regulatory consents, approvals and/or authorizations.
24
<PAGE>
THE SPORTSMAN'S GUIDE, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COL. C
---------------------------
ADDITIONS
COL. B ---------------------------
----------- (1) (2) COL. D COL. E
COL. A BALANCE AT CHARGED TO: CHARGED TO: ----------- ---------------
- --------------------------------------------- BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE* END OF PERIOD
- --------------------------------------------- ----------- ----------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Returns Reserve
December 29, 1995.......................... $ 218 $ 5,230 -- $ 5,271 $ 177
December 30, 1994.......................... 312 4,941 -- 5,035 218
December 31, 1993.......................... 175 3,488 -- 3,351 312
</TABLE>
- ------------------------
* Represents actual returns from customers.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information with respect to each director and
executive officer of the Company.
VINCENT W. SHIEL, 63, has been a director of the Company since 1990, and has
extensive experience in the sporting goods industry. Dr. Shiel was elected
Chairman on April 27, 1994. He previously owned a controlling interest in Gander
Mountain, Inc., a Wisconsin-based catalog retail company, and served on its
board of directors. Dr. Shiel is no longer a director of Gander Mountain, but he
owns 19,797 shares of its outstanding stock. Gander Mountain is a competitor of
the Company. Dr. Shiel owns an interest and serves as a director of National
Recreational Shooting Supplies, Inc., a Mansfield, Ohio based wholesale firearms
distributor. Dr. Shiel is a principal shareholder of and has served as
President, director, and consultant to Outdoor Consulting, Inc., a management
consulting firm, for the past eight years.
GARY OLEN, 54, is a co-founder of the Company and served as its Executive
Vice President and Secretary from its incorporation until December 31, 1993. Mr.
Olen was elected President and Chief Operating Officer of the Company on January
1, 1994. Mr. Olen was elected Chief Executive Officer on April 27, 1994. Mr.
Olen has been a director of the Company since its incorporation. From 1970
through 1977, Mr. Olen was employed as the Marketing Director for Fidelity File
Box, Inc. From 1967 through 1970, Mr. Olen was a Merchandise Manager with C&H
Distributors, a specialty mail order catalog business specializing in the sale
of industrial and office equipment. From 1960 through 1967, Mr. Olen was
employed in the catalog division of J.C. Penney Company. Mr. Olen was also the
sole proprietor of the predecessor of the Company.
LEONARD M. PALETZ, 61, is a co-founder of the Company and served as its
Chairman, Chief Executive Officer, Treasurer and a director from the Company's
incorporation in 1977 until 1994. In 1994, Mr. Paletz resigned his offices of
Chairman, Chief Executive Officer and Treasurer. Mr. Paletz retired as an
employee of the Company effective December 31, 1994. Mr. Paletz also served as
the Company's President from its incorporation through December 31, 1993. From
1962 through 1977, Mr. Paletz was employed by Fidelity File Box, Inc. in various
positions including Vice President and General
25
<PAGE>
Manager. Mr. Paletz was also a director and shareholder of Fidelity File Box,
which sells, through mail order catalogs, corrugated storage products, office
and industrial equipment and office and industrial supplies.
MARK F. KROGER, 42, has been a director of the Company since 1990. He is the
Chairman of the Board, President, Chief Executive Officer and Treasurer of
National Recreational Shooting Supplies, Inc. Mr. Kroger has served as President
of National since 1986 and is a member of its board of directors. Mr. Kroger has
over 21 years experience in the sporting goods industry.
WILLIAM T. SENA, 59, has been a director of the Company since 1990. He is an
investment advisor with Sena Weller Rohs Williams, Inc., a Cincinnati, Ohio
investment advisory firm. Mr. Sena has been associated with the investment
advisory firm and/or its predecessor since 1965. Mr. Sena is also a director of
Phoenix Medical Technology, Inc.
GREGORY BINKLEY, 47, has been a director of the Company since 1995. Mr.
Binkley has been employed by the Company since February, 1994 and was elected
Vice President in 1994 and Senior Vice President of Operations and Chief
Operating Officer in 1995. From 1993 to 1994, Mr. Binkley served as an
independent operations consultant. From 1990 to 1993, Mr. Binkley was employed
by the operations division of Fingerhut Companies, Inc., a mail-order catalog
business.
CHARLES B. LINGEN, 51, has been a director of the Company since December,
1995. Mr. Lingen has been employed by the Company since May, 1994 as its Chief
Financial Officer, Vice President-Finance and Treasurer. In 1995, Mr. Lingen was
elected to serve as Secretary of the Company. From 1973 to 1994, Mr. Lingen was
employed by Fingerhut Companies, Inc., a mail-order catalog business.
WILLIAM G. LUTH, 46, has been employed by the Company since June, 1995 and
was elected Vice President-Marketing in December, 1995. Mr. Luth has numerous
years experience in the direct marketing industry, including being employed by
Fingerhut Companies, Inc. from 1994 to 1995, serving as an independent
consultant to a direct marketing catalog firm from 1993 to 1994, and being
employed by Lands' End, a mail-order catalog business, from 1992 to 1993 and
Fingerhut Companies, Inc. from 1982 to 1992.
LARRY POPPS, 45, has been employed by the Company since November, 1993 when
he was elected Vice President-Information Systems and Technology. From 1992 to
1993, Mr. Popps was employed as a director of management information systems by
The Company Store, a mail order and retail company. From 1977 to 1992, Mr. Popps
was employed as a director of management information systems by Shopsmith, Inc.,
a mail order and retailer of power tools.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and ten percent beneficial owners of the Common
Stock to file reports with the Securities and Exchange Commission. The Company
believes that during fiscal 1995, all filing requirements applicable to its
directors, executive officers, and ten percent beneficial owners were met.
26
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid to the named
executive officers for the services rendered in all capacities to the Company
for each of the fiscal years indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- -------------
SALARY BONUS OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#)
- ---------------------------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Gary Olen, 1995 126,253 -- --
President and Chief Executive Officer 1994 125,000 95,571 218,750
1993 96,943 -- 550,000
Joseph Friebe, 1995 80,842 -- --
Vice President of Marketing (1) 1994 88,269 47,785 68,125
1993 76,548 -- --
Gregory Binkley, 1995 98,269 -- --
Chief Operating Officer (2) 1994 76,827 47,785 53,125
</TABLE>
- ------------------------
(1) Mr. Friebe was elected as an executive officer of the Company in April, 1993
and resigned in December, 1995.
(2) Mr. Binkley was elected as an executive officer of the Company in 1994.
The following table sets forth information with respect to the named
executive officers concerning options held at fiscal year end 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE FY-END (#) FY-END ($)
ON EXERCISE REALIZED -------------------------- ----------------------------------
NAME # ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- --------------- ------------- ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Gary Olen -- -- 218,750 550,000 -- --
Joseph Friebe -- -- 88,125 -- -- --
Gregory Binkley -- -- 53,125 -- -- --
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Olen entered into an Employment Agreement with the Company in 1994,
pursuant to which he is entitled to an annual salary of $125,000, adjusted July
1 of each year to reflect cost of living changes. The Agreement was renewed upon
the mutual agreement between Mr. Olen and the Company pursuant to its terms. The
Agreement may be terminated upon the agreement of the parties, resignation,
death or mental or physical disability of the officer or notice by the Company
to the officer of termination for cause.
Also, in 1994, in order to ensure that key management personnel would
continue employment with the Company if certain adverse circumstances should
arise, the Company entered into Retention Agreements with Messrs. Olen, Friebe
and Binkley, pursuant to which the officers would be paid in the event of a
Change of Control of the Company. Upon a Change of Control, as defined in the
Retention Agreements, Mr. Olen would have received at least 1.5% of the
transaction proceeds but no more than $2 million, depending on the size of the
transaction. Messrs. Friebe and Binkley would each have received at least
$33,333 but no more than 1/3% of the transaction proceeds, depending on the size
of the transaction. The change of control provisions of each of these Retention
Agreements expired pursuant to their terms as of December 31, 1995.
27
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is comprised of Dr.
Shiel, Mr. Paletz and Mr. Sena. Mr. Paletz is a former chief executive officer
of the Company. During 1995, the Company purchased merchandise inventory in the
amount of (a) $136,000 from Palco, Inc., a company owned by James Paletz, son of
Leonard Paletz, and (b) $4,406,000 from National Recreational Shooting Supplies,
Inc. of which Dr. Shiel is a shareholder and director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 19, 1996, certain information
regarding the beneficial ownership of Common Stock and Preferred Stock of the
Company by each director and named executive officer of the Company, all
directors and executive officers as a group, and each person known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock or Preferred Stock of the Company.
<TABLE>
<CAPTION>
TITLE OF
NAME OF BENEFICIAL OWNER (1) CLASS NO. OF SHARES PERCENT OF CLASS (2)
- ------------------------------------------ ------------ ----------------- ---------------------
<S> <C> <C> <C>
Vincent W. Shiel Common 5,937,438(3) 24.5%
6900 Golf House Drive Preferred 100,000(4) 50.0%
Hobe Sound, FL 33455
Mark F. Kroger Common 996,674(5) 4.3%
110 Baird Parkway Preferred 10,000 5.0%
Mansfield, OH 44903
Leonard M. Paletz Common 2,424,095(6) 10.2%
4740 S. Ocean Blvd., Apt. 814
Highland Beach, FL 33487
Gary Olen Common 1,050,577(7) 4.5%
411 Farwell Avenue
So. St. Paul, MN 55075
William T. Sena -- -- --
300 Main Street
Cincinnati, OH 45202
Charles B. Lingen Common 18,750(8) *
411 Farwell Avenue
So. St. Paul, MN 55075
Gregory Binkley Common 153,125(9) *
411 Farwell Avenue
So. St. Paul, MN 55075
All directors and officers as a group Common 10,608,159(10) 42.5%
(9 persons) Preferred 110,000 55.0%
</TABLE>
28
<PAGE>
Holders of More Than 5% of Common Stock of the Company (in addition to
directors and executive officers named above):
<TABLE>
<CAPTION>
TITLE OF
NAME OF BENEFICIAL OWNER (1) CLASS NO. OF SHARES PERCENT OF CLASS (2)
- ---------------------------------- ------------ ---------------- ---------------------
<S> <C> <C> <C>
Stuart A. Shiel Common 1,733,333(11) 7.4%
17010 Butteroak Drive
Spring, TX 77379
Susan M. Mills Common 1,868,479(12) 8.0%
640 Hay Avenue Preferred 39,200 19.6%
Brookville, OH 45309
Ralph E. Heyman Common 4,577,593(13) 19.1%
1100 Courthouse Plaza, SW
Dayton, OH 45402
</TABLE>
- ------------------------
* Less than 1% of outstanding shares
(1) Unless otherwise indicated, all shares are held of record and beneficially
owned by the person indicated.
(2) Percentages are calculated on the basis of the number of shares outstanding
on March 1, 1996, plus the number of shares issuable pursuant to presently
exercisable options and stock warrants for that individual.
(3) Includes 4,970,763 shares (720,740 of which represent shares issuable upon
the exercise of stock warrants) held in the name of Vincent W. Shiel as
Trustee and Settlor of the Vincent W. Shiel Revocable Trust and 966,675
shares (216,667 of which represent shares issuable upon the exercise of
stock warrants) held in the name of Helen M. Shiel, the wife of Dr. Shiel,
as Trustee and Settlor of the Helen M. Shiel Revocable Trust.
(4) Includes 75,000 shares held in the name of Vincent W. Shiel as Trustee and
Settlor of the Vincent W. Shiel Revocable Trust and 25,000 shares held in
the name of Helen M. Shiel as Trustee and Settlor of the Helen M. Shiel
Revocable Trust.
(5) Includes 63,333 shares issuable upon the exercise of stock warrants.
(6) Includes 280,095 shares issuable upon the exercise of stock warrants and
50,000 shares issuable upon the exercise of an option.
(7) Includes 218,750 shares issuable upon the exercise of options.
(8) Includes 18,750 shares issuable upon the exercise of options.
(9) Includes 20,000 shares held in the name of Mr. Binkley's wife and 53,125
shares issuable upon the exercise of options.
(10) Includes 1,648,960 shares issuable upon the exercise of stock warrants and
options.
(11) Includes 100,000 shares issuable upon the exercise of stock warrants. Does
not include 1,726,635 shares held in trust for the benefit of Stuart Shiel's
children. Mr. Shiel expressly disclaims beneficial ownership of all such
shares.
(12) Includes 39,200 shares issuable upon the exercise of stock warrants.
(13) Includes 579,260 shares issuable upon the exercise of stock warrants as a
trustee of various trusts. Mr. Heyman holds 3,978,333 shares as a trustee of
various trusts, of which he has no pecuniary interest.
As of March 8, 1996, the Company entered into an Agreement and Plan of
Merger with VISTA Acquisition Subsidiary, Inc. and VISTA 2000, Inc. which, if
consummated, will result in a change of
29
<PAGE>
control of the Company. Pursuant to the terms of this Agreement, the Company
will merge with and into VISTA Acquisition Subsidiary, Inc. Upon the
consummation of this merger, the outstanding shares of Common Stock and
Preferred Stock of the Company will be exchanged for shares of common stock of
VISTA 2000, Inc. and cash.
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
On January 11, 1990, the Company entered into a Consulting Agreement with
Outdoor Consulting, Inc., pursuant to which Outdoor Consulting provides
consulting services to the Company for $4,000 per month plus certain
out-of-pocket expenses. The initial term of the agreement expired on December
31, 1990, and continues on a year-to-year basis until terminated by either party
upon 60 days prior written notice or unless sooner terminated. Vincent W. Shiel
is the controlling shareholder of Outdoor Consulting, Inc.
During fiscal 1995, the Company was indebted to Mr. Paletz for certain
working capital loans made during 1988 and prior years ("Prior Loans"). The
Company was also indebted to Mr. Paletz for a loan made as part of a June, 1993
financing transaction and a renewal thereof in February, 1994 (the "1993 Loan").
The largest aggregate principal amount owed to Mr. Paletz during 1995 with
respect to the Prior Loans and the 1993 Loan was $260,190. In January, 1995, the
Company paid the Prior Loans in full. The Company's aggregate interest expense
on these loans during 1995 was $14,868.
During fiscal 1990, Vincent W. Shiel and certain other investors made a
$500,000 term loan to the Company in connection with their acquisition of a
controlling interest in the Company. This loan is unsecured and bears interest
at 12% per annum with principal payable in three annual installments of $166,667
beginning in 1993. The principal payments were extended for one year upon
agreement between the lenders and the Company. The January 1994 principal
payment was made in the form of new promissory notes in the amount of $166,667
as described below. The notes pay interest quarterly with a full principal
payment due in February 1996. These notes have been extended until such time as
the merger between the Company and VISTA Acquisition Subsidiary, Inc. is
consummated. The Company's aggregate interest expense on this loan during 1995
was $20,931.
In February, 1994, the Company issued $3,246,762 of debt in a private
placement transaction. The debt is represented by promissory notes bearing
interest at the rate of 8% per annum payable quarterly. Pursuant to the terms of
the notes, the entire principal amount was payable in February, 1996. These
notes have been extended until such time as the merger between the Company and
VISTA Acquisition Subsidiary, Inc. is consummated. Of the entire financing,
$2,500,000 represented additional funds provided to the Company to meet certain
working capital needs, $500,000 represented a rollover of the payment of
short-term promissory notes issued in June, 1993, $166,667 represented a
rollover of the principal payments due in January, 1994 on the 1990 Loans
discussed above, and $80,095 represents a rollover of a principal payment on Mr.
Paletz's Prior Loans. Warrants to purchase 3,246,762 shares of common stock of
the Company were attached to the promissory notes issued in 1994. The promissory
notes are secured by the assets of the Company subordinate to financing held by
a financial institution. The Company's aggregate interest expense on the 1994
financing during 1995 was $246,006.
During fiscal 1995, the Company purchased from the companies listed below
merchandise which the Company sold in its catalog. The Company believes the
terms of such purchases were as favorable as could have been obtained from an
unrelated party.
- Approximately $136,000 of merchandise was purchased from Palco, Inc. a
company owned by James Paletz, a son of Leonard M. Paletz.
- Approximately $4,406,000 of merchandise was purchased from National
Recreational Shooting Supplies, Inc. Vincent W. Shiel is a shareholder and
director, and Mark F. Kroger is a shareholder, director and President of
this company.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
The following financial statements of the Company are incorporated herein by
reference as part of this report at Item 8.
Report of Independent Certified Public Accountants
Balance Sheets as of December 29, 1995 and December 30, 1994
Statements of Operations for the fiscal years ended December 29, 1995,
December 30, 1994 and December 31, 1993
Statements of Changes in Stockholders' Equity for the fiscal years ended
December 29, 1995, December 30, 1994 and December 31, 1993
Statements of Cash Flows for the fiscal years ended December 29, 1995,
December 30, 1994 and December 31, 1993
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULES:
The following financial statement schedule of the Company is incorporated
herein by reference as part of this report at Item 8.
Schedule II -- Valuation and Qualifying Accounts for the fiscal years
ended December 29, 1995, December 30, 1994 and December 31, 1993
3. EXHIBITS: See Exhibit Index at page 33 of this report.
(B) REPORTS ON FORM 8-K: None.
31
<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.
THE SPORTSMAN'S GUIDE, INC. Date: March 25, 1996
By /s/ GARY OLEN By /s/ CHARLES LINGEN
----------------------------------- -----------------------------------
Gary Olen Charles Lingen
President and Chief Executive Chief Financial Officer, Treasurer
Officer and Vice President of Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of The
Sportsman's Guide, Inc., The Registrant, and in the capacities and on the dates
indicated.
By /s/ GARY OLEN By /s/ VINCENT W. SHIEL
----------------------------------- -----------------------------------
Gary Olen, Vincent W. Shiel,
President, Chief Executive Officer Chairman and Director
and Director
By /s/ GREG BINKLEY By /s/ CHARLES LINGEN
----------------------------------- -----------------------------------
Greg Binkley, Charles Lingen,
Chief Operating Officer, Senior Chief Financial Officer, Treasurer,
Vice Vice President of Finance and
President of Operations and Director
Director
By /s/ MARK KROGER By /s/ WILLIAM T. SENA
----------------------------------- -----------------------------------
Mark Kroger, William T. Sena,
Director Director
By /s/ LEONARD M. PALETZ
-----------------------------------
Leonard M. Paletz,
Director
Date: March 25, 1996
The undersigned, by signing his name hereto, does sign and execute this
report on behalf of each of the above-named directors of The Sportsman's Guide,
Inc. pursuant to a power of attorney executed by each such director and filed
with the Securities Exchange Commission as an exhibit to this report.
/s/ GARY OLEN
---------------------------------------
Gary Olen
Attorney-in-Fact
32
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- -----------
<C> <S>
2.1 Agreement and Plan of Merger between the Company, VISTA Acquisition Subsidiary, Inc. and VISTA 2000,
Inc., dated March 8, 1996 (incorporated by reference from Exhibit 2 to Form 8-K dated March 22, 1996)
3.1 Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 to Registration Statement
No. 33-4496C on Form S-18 (the "Registration Statement") filed April 1, 1986)
3.2 Certificate of Amendment to Articles of Incorporation dated April 30, 1987 (incorporated by reference
from Exhibit 3.2 to Form 10-K for the year ended December 31, 1987)
3.3 Certificate of Amendment to Articles of Incorporation dated January 10, 1990 (incorporated by reference
from Exhibit 28.1 to Form 8-K dated January 16, 1990)
3.4 Certificate of Amendment to Articles of Incorporation dated April 29, 1994 (incorporated by reference
from Exhibit 3.4 to Form 10-K for the year ended December 30, 1994)
3.5 Bylaws (incorporated by reference from Exhibit 3.2 to the Registration Statement)
4.1 Specimen of the Company's Common Stock certificate (incorporated by reference from Exhibit 4.1 to
Amendment No. 1 to the Registration Statement filed May 8, 1986)
4.2 Form of Promissory Note dated February 21, 1994 issued by the Company (incorporated by reference from
Exhibit 4.2 to Form 10-K for the year ended December 30, 1994)
10.1 Letter of agreement between Vincent W. Shiel and the Company dated September 8, 1989 (incorporated by
reference from Exhibit 19.1 to Form 10-Q for the quarter ended September 29, 1989)
10.2 Consulting Agreement dated January 11, 1990 between the Company and Outdoor Consulting, Inc.
(incorporated by reference from Exhibit 10.16 to Form 10-K for the year ended December 29, 1989)
10.3* The Company's Incentive Stock Option Plan (incorporated by reference from Exhibit 10.16 to Form 10-K for
the year ended December 27, 1991)
10.4* Option Agreement between the Company and Leonard M. Paletz dated July 1, 1992 (incorporated by reference
from Exhibit 10.17 to Form 10-K for the year ended January 1, 1993)
10.5* First Amendment to Option Agreement between the Company and Leonard M. Paletz dated June 1, 1993
(incorporated by reference from Exhibit 10.5 to Form 10-K for the year ended December 30, 1994)
10.6* Second Amendment to Option Agreement between the Company and Leonard M. Paletz dated January 27, 1995
(incorporated by reference from Exhibit 10.6 to Form 10-K for the year ended December 30, 1994)
10.7* Employment Agreement between the Company and Gary Olen dated October 5, 1994 (incorporated by reference
from Exhibit 10.7 to Form 10-K for the year ended December 30, 1994)
10.8* Agreement between the Company and Gary Olen dated July 1, 1992, granting the use of Mr. Olen's name,
picture and likeness (incorporated by reference from Exhibit 10.19 to Form 10-K for the year ended
January 1, 1993)
10.9* Option Agreement between the Company and Gary Olen dated July 1, 1993 (incorporated by reference from
Exhibit 10.18 to Form 10-K for the year ended December 31, 1993)
</TABLE>
33
<PAGE>
<TABLE>
<C> <S>
10.10 Industrial Real Estate Lease between the Company and CB Commercial Real Estate Group, Inc. dated April
22, 1993 (incorporated by reference from Exhibit 10.20 to Form 10-K for the year ended December 31,
1993)
10.11 Second Amended and Restated Business Loan Agreement between the Company and Bank One, Dayton, N.A. dated
June 20, 1995
10.12 Amendment to Second Amended and Restated Business Loan Agreement between the Company and Bank One,
Dayton, N.A. dated October 16, 1995
10.13 Second Amendment to Second Amended and Restated Business Loan Agreement between the Company and Bank One,
Dayton, N.A. dated November 10, 1995
10.14 Third Amendment to Second Amended and Restated Business Loan Agreement between the Company and Bank One,
Dayton, N.A. dated February 1, 1996
25.1 Powers of Attorney of each person who signed this report on Form 10-K on behalf of another pursuant to a
power of attorney
27 Financial Data Schedule
</TABLE>
Those exhibits marked with an asterisk (*) above constitute compensation
agreements for management and executive officers of the Company.
34
<PAGE>
EXHIBIT 10.11
SECOND AMENDED AND RESTATED
[LOGO] BUSINESS LOAN AGREEMENT
Agreement by and between Bank One, Dayton, NA ("Bank One"), located at
Kettering Tower, Dayton, Ohio, and The Sportsman's Guide, Inc. ("Borrower"),
located at 411 Farwell Ave., South St. Paul, MN. Borrower has requested that
certain extension(s) of credit be provided by Bank One, same evidenced by
the following:
<TABLE>
<S> <C> <C> <C> <C>
Revolving
(a) Promissory Note $ 15,500,000.00 02/16/95 The Sportsman's Guide, Inc.
--------------------- --------------- ---------- -------------------------------
Instrument Amount Date Obligor
----------------------- ----------------------- -----------------------
Obligor Obligor Obligor
(b) Promissory Note $ 600,000.00 06/09/93 The Sportsman's Guide, Inc.
--------------------- --------------- ---------- -------------------------------
Instrument Amount Date Obligor
----------------------- ----------------------- -----------------------
Obligor Obligor Obligor
(c) $
--------------------- --------------- ---------- -------------------------------
Instrument Amount Date Obligor
----------------------- ----------------------- -----------------------
Obligor Obligor Obligor
</TABLE>
and any and all renewals, modifications, extensions or substitutions therefor
("Obligations").
In consideration of the mutual promises set forth below and the extension(s)
of credit as described above and subject to Borrower's satisfactory
fulfillment of all conditions incident to the borrowing(s), Bank One and
Borrower agree as follows:
ARTICLE 1 - DEFINITIONS
The following terms shall have the following meanings in this Agreement or in
any document made or delivered pursuant to or in conjunction with this
Agreement:
1.1 All computations and determinations as to accounting or financial matters
shall be made in accordance with generally accepted accounting principles
consistently applied ("GAAP"), and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.
1.2 "Indebtedness" shall mean:
(a) All Indebtedness and liabilities of whatsoever kind, nature and
description owed to Bank One by Borrower, whether direct or indirect,
absolute or contingent, due or to become due or whether now existing or
hereafter arising, and howsoever evidenced or acquired, and whether joint
and several;
(b) All future advances which Bank One at any time may, but shall not be
required to, make for the protection or preservation of Bank One's rights
and interests arising hereunder, including, without limitation, advances
for taxes, levies, assessments, insurance, and reasonable attorneys' fees,
if allowable by law; and
(c) All costs and expenses incurred by Bank One in the protection and
preparation for sale of any of its collateral including, without
limitation, attorneys' fees, if allowable by law, and court costs.
1.3 "Obligation" shall mean the above referenced extension(s) of credit
including any Promissory Note, Guaranty, Letter of Credit or other instrument
of Borrower evidencing any loan, advance, credit or extension or renewal
thereof made or committed by Bank One to Borrower under this Agreement.
1.4 "Person" shall mean and include an individual, partnership, corporation,
trust, unincorporated association or organization, government or any
department or agency thereof.
1.5 "Related Person" shall include, but shall not be confined to, any Person
related to Borrower by common control or ownership.
1.6 "Subordinated Debt" shall mean indebtedness of Borrower which is
subordinated to all indebtedness of Borrower to Bank One under the terms and
conditions approved in writing by Bank One.
1.7 The aforestated definitions, and all other definitions which may be set
forth herein, shall be applicable to the singular and plurals of said defined
term.
ARTICLE II - REPRESENTATION AND WARRANTIES
Borrower represents and warrants that:
2.1 If applicable, it is a duly organized, legally existing corporation in
good standing under the laws of the State of Minnesota, is qualified to do
business in and is in good standing under the laws of any other state in
which it conducts its business.
2.2 It has the power and is duly authorized to enter into this Agreement and
to execute and deliver to Bank One, now and from time to time hereafter,
additional instruments, resolutions, agreements and other instruments or
documents relating to the Obligation owed to Bank One. It has, by proper
action, authorized and empowered those persons whose signatures appear in
this Agreement, and any instruments, documents and exhibits that have been
delivered in connection herewith, to execute the same for and on its behalf.
2.3 The execution by it of this Agreement or any other agreements,
instruments, or documents which may, from time to time hereafter, be executed
in respect hereto and delivered to Bank One, shall not constitute a breach of
any provisions contained in its articles of incorporation or bylaws, or if
applicable, partnership agreement, or any agreements to which it is now a
party, does not violate any law, statute, or ordinance or rule or regulation
promulgated pursuant thereto, and that the performance by it of its
obligations hereunder or any agreements executed by it and delivered
hereunder shall not constitute an event of default under any other agreement
to which it is now a party.
2.4 All financial statements and information relating to it which have been
or may hereafter be delivered by it, its agents or accountants to Bank One
are true and correct and have been prepared in accordance with GAAP and that
there have been no material adverse changes in its financial or business
condition or operations since the submission of any financial information to
Bank One, and no material adverse changes in its financial or business
condition or operations are imminent or threatened.
2.5 All of its Federal, State and other tax returns and reports, including
reports to any governmental authority, for the proper maintenance and
operation of its properties, assets and business, as may be required by law
to be filed or paid, have been filed, and all Federal, State and other taxes,
assessments, fees and other governmental charges (other than those presently
payable, without penalty) imposed upon it or its properties or assets, which
are due and payable, have been fully paid unless being contested by it in the
ordinary course of business and for which it has provided adequate reserves.
2.6 There is no litigation or, legal or administrative proceedings,
investigations or other action of any nature, pending or, to its knowledge,
threatened against or affecting it, which have not been disclosed to Bank One
and involve the possibility of any judgement or liability not covered by
insurance which may materially or adversely affect any of its properties or
assets or its right to carry on its business as now conducted.
2.7 It has good, valid and marketable title to all of its property and assets
free of any adverse lien, security interest or encumbrance, except liens,
security interests, pledges and encumbrances disclosed to Bank One by
Borrower in writing prior to the date hereof.
2.8 All of the funds loaned to it pursuant to this Agreement have been or
will be used exclusively in its normal business operation, will not be
diverted to or used in any other manner, and will not be used for the
purchasing or carrying of any "Margin Stock" as defined in regulations
promulgated by the Federal Reserve Board or the Securities and Exchange
Commission.
2.9 It possesses and will continue to possess all permits, licenses,
trademarks, patents and rights thereto to conduct its business and that its
business does not conflict or violate any valid rights of others with respect
to the foregoing.
<PAGE>
2.10 If applicable, it is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and published
interpretations thereof ("ERISA"). Neither a Reportable Event nor a Prohibited
Transaction, as defined per ERISA, has occurred and is continuing with
respect to any Plan, nor has there been a notice of intent to terminate a
Plan or appoint a trustee to administrate a Plan.
2.11 To the best of Borrower's knowledge it is in material compliance with
all Federal, State and local laws, statutes, ordinances, regulations, rulings
and interpretations relating to industrial hygiene, public health or safety,
environmental conditions, the protection of the environment, the release,
discharge, emission or disposal to air, water, land or ground water, the
withdrawal or use of ground water or the use, handling, disposal, treatment,
storage or management of or exposure to Hazardous Materials ("Hazardous
Materials Laws"), the violation of which would have a material effect on its
business, its financial condition or its assets. The term "Hazardous
Materials" means any flammable materials, explosives, radioactive materials,
pollutants, toxic substances, hazardous water, hazardous materials, hazardous
substances, polychlorinated biphenyls, asbestos, urea formaldehyde, petroleum
(including its derivatives, by-products or other hydrocarbons) or related
materials or other controlled, prohibited or regulated substances or
materials, including, without limitation, any substances defined or listed as
or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "pollutants" or "toxic substances" under any Hazardous
Materials Laws. It has not received any written or oral communication or
notice from any judicial or governmental entity nor is it aware of any
investigation by any agency for any violation of any Hazardous Materials Law.
2.12 Details of all litigation, legal or administrative proceedings,
investigation or other action of similar nature, pending or threatened
against it, at any time during the term of this Agreement, which in part or
in whole may or will render any of these Representations and Warranties no
longer true, accurate and correct in each and every respect, will be brought
to the attention of Bank One, in writing, within thirty (30) days from the
date Borrower acquires knowledge of same.
ARTICLE III - SECURITY
3.1 As security for Indebtedness, regardless of whether the principal sum
evidenced by an Obligation is reduced to zero and thereafter
increased/decreased an unlimited number of times. Borrower hereby grants to
Bank One or has previously caused to be granted to Bank One a security
interest in the following property under separate instrument(s):
/X/ Accounts, general intangibles, chattel paper, instruments, and other
forms of obligations and receivables
/X/ Inventory, merchandise, raw materials, work in process and supplies
/X/ Goods, equipment, machinery, furnishings and other personal property
/ / Real Estate located at __________________________________________________
/ / An assignment of life insurance on the life of __________________________
in an amount no less than $_________________
/X/ Specific collateral described as follows: Borrower's complete mailing
list and related demographic
materials and all rights of
Borrower with respect thereto.
3.2 It is further agreed that the security described above shall secure
repayment of all indebtedness and that a default in the terms of any note,
security agreement, mortgage, or other agreement from Borrower to Bank One
shall constitute a default of all notes, security agreements, mortgages, and
other agreements, and that Bank One may proceed in exercising its rights
thereunder in any order or manner it may choose. The purpose of this section
being to cross-collateralize and cross-default all Indebtedness. Additionally,
the security interest described above, if any, may be modified, added to or
deleted from time to time without modification to this Agreement.
ARTICLE IV - AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any Indebtedness is outstanding
or so long as this Agreement is in effect, Borrower shall:
4.1 Maintain insurance against fire, business interruption, public liability,
theft and other casualty on its insurable real and personal property to their
full replacement costs with companies reasonably acceptable to Bank One and
against liability on account of damage to persons or property and as required
under all applicable Workers' Compensation Laws. Furthermore, Borrower shall
maintain any other insurance as may from time to time be reasonably requested
by Bank One, shall insert a joint loss payee clause naming Bank One in all
fire and extended coverage policies and shall deliver certified copies of all
such insurance policies to Bank One upon demand. *
4.2 Maintain, keep, and preserve its buildings and properties and every part
thereof in good repair, working order, and condition and from time to time
make all needful and proper repairs, renewals, replacements, additions,
betterments, and improvements thereto, so that at all times the efficiency
thereof shall be fully preserved and maintained. *
4.3 Duly pay and discharge or cause to be paid and discharged all taxes,
assessments, and other governmental charges imposed upon it and its properties
or any part thereof or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies, which if unpaid might by law become
a lien or charge upon its property, except such items as are being in good
faith appropriately contested and for which it has provided adequate
reserves. *
4.4 Carry on and conduct its business in substantially the same manner and in
substantially the same fields as such business is now and has heretofore been
carried on, maintain management with the substantially similar expertise and
experience, and if senior management is to be changed, immediately notify
Bank One of said change, and maintain its legal existence, and comply with
all valid and applicable statutes rules and regulations. **
4.5 Maintain, keep, and preserve a system of accounting in accordance with
GAAP, deliver to Bank One financial reports in a form satisfactory to Bank
One as Bank One may request from time to time, permit the duly authorized
representative(s) of Bank One at all reasonable times to examine and inspect
the books and records of it or any related business entity of it, to make
abstracts and copies thereof, and to visit and inspect any of its property
wherever same may be located.
4.6 Comply with all laws and regulations which it is required to comply with
including all Hazardous Materials Laws and regulations, and permit Bank One
to make environmental audits from time to time if requested by Bank One with
costs of same to be borne by Borrower. *
ARTICLE V - NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any indebtedness is outstanding
or so long as this Agreement is in effect, except for that previously
disclosed in writing to and consented to by Bank One, Borrower shall not
without prior written consent of Bank One:
5.1 Create, incur or assume any indebtedness for borrowed money, other than
to Bank One, or act as guarantor for any indebtedness of others in an
aggregate amount greater than $ -0- at any time. For the purpose hereof,
sale of accounts receivable and (or) entering into capital leases of
personal property shall be deemed the incurring of indebtedness for borrowed
money.
5.2 Mortgage, pledge, assign, hypothecate, encumber, create or grant a
security interest in any of its assets except to Bank One, nor sell, lease,
transfer, assign or otherwise dispose of any of its assets, properties or
business outside of the ordinary course of business, except secured purchase
money or lease indebtedness up to the amount permitted by Section 5.1, if any.
5.3 Invest in, loan or advance money to, organize or participate in the
organization or in the creation of any other business entity.
5.4 Merge, transfer, acquire or consolidate with or into any other entity,
change ownership, dissolve, and/or transfer or sell any assets outside of the
ordinary course of business without the prior written consent of Bank One.
5.5 If Borrower is a corporation, release, redeem, retire, purchase, or
otherwise acquire directly or indirectly any of its capital stock, or make
any changes in its capital structure, or pay, set aside, allocate or declare
any dividends, in cash or other property, upon its capital stock.
ARTICLE VI - ADDITIONAL COVENANTS
Borrower agrees that each additional covenant listed below is fully
applicable if marked by an "X" or a check in the applicable box or boxes, or
if the information necessary to complete same is typed or written in the
appropriate space provided.
/ / 6.1 GUARANTY. Prior to or contemporaneous with the execution of this
Agreement, Borrower shall deliver to Bank One the Guaranty(s)
of ____________________________________ (Guarantor(s) name(s)) in form
and content acceptable to Bank One which Guaranty(s) shall provide for
liability of the Guarantor(s) for payment of the indebtedness.
/X/ 6.2 FINANCIAL REPORTS. Borrower covenants in accordance with paragraph
4.5 that it will deliver to Bank One:
/X/ (a) Within ninety (90) days after the end of each fiscal year of
Borrower, audited financial statements of Borrower prepared in
accordance with GAAP which shall include a Balance Sheet,
Statement of Income, Statement of Reconciliation of Net Worth,
Statement of Changes in Financial Position and Notes to financial
statements and, upon request Borrower's Federal income tax return.
/X/ (b) Within thirty (30) days after the end of each fiscal month of
Borrower, unaudited financial statements of Borrower prepared in
accordance with GAAP which shall include a Balance Sheet at the
end of each such period and an Income Statement for the period from
the beginning of the current fiscal year to the end of such period.
These statements shall be prepared on substantially the same
accounting basis as the statements required in Section 6.2(a)
above, if applicable, and the accuracy of the statements (subject
to audit and year-end adjustments) shall be certified by the chief
financial officer or president of Borrower.
* Borrower shall have fifteen (15) days after receipt of written notice from
Bank One of a breach of the covenant(s) set forth in this Section to cure
such breach.
** Borrower shall have fifteen (15) days after the receipt of written notice
from Bank One to cure a breach of the covenant with respect to compliance
with applicable statutes, rules & regulations.
<PAGE>
/X/ (c) Simultaneously with the financial statements required in 6.2b
above, a compliance certificate, in form acceptable to Bank One,
certifying that the financial statements are complete and correct
and that Borrower has no knowledge of any condition, event or act
which with notice or lapse of time or both, could constitute an
Event of Default or which materially and adversely could affect the
financial condition or operations of Borrower, or if such
condition, event or acts exist, specifying the nature and status
thereof.
/ / (d) Within ____________________ (______) days after the end of
each ________________ year, signed and dated personal financial
statements of all Individual Guarantor(s) and Obligor(s), if any,
on Bank One's forms, and by May 1 of each calendar year, the
personal income tax returns filed for the past calendar year of all
individual Guarantor(s) and Obligor(s), if any.
/ / (e) Simultaneously with the financial statement required in _______
above, _____________financial statement(s) of all corporate or
partnership Guarantor(s) and Obligor(s), if any, prepared in
accordance with GAAP.
/X/ 6.3 TANGIBLE NET WORTH. Borrower agrees to maintain a Tangible Net Worth
of not less than either (check one):
/ / (a) DOLLARS ($ ) or
--------------------------------------- ----------
/ / (b) the amount(s) set forth for the following period(s):
Period(s): Amount(s)
See Exhibit "A" #1
------------------------------- -------------------------------
------------------------------- -------------------------------
------------------------------- -------------------------------
"Tangible Net Worth" shall be determined in accordance with GAAP and
shall be deemed to include the amount of total assets of Borrower
excluding the amount of Intangible Assets of Borrower minus the amount
of total liabilities of Borrower, exclusive of Subordinated Debt, if
any.
"Intangible Assets" shall be determined in accordance with GAAP and
be deemed to include at book value, without limitation, goodwill,
patents, copyrights, secret processes, deferred expenses relating to
promotional materials sales, general administrative, research and
development expense, and all amounts due from any officer, employee,
director, shareholder or Related Person.
/X/ 6.4 DEBT TO TANGIBLE NET WORTH. Borrower agrees to maintain a ratio of
Debt to Tangible Net Worth of not more than either (check one):
/ / (a)
------------------------ to ------------------------ or
/ / (b) the ratio(s) set forth for the following period(s):
Period(s): Ratio(s)
See Exhibit "A" #2
------------------------------- -------------------------------
------------------------------- -------------------------------
------------------------------- -------------------------------
"DEBT" shall be determined in accordance with GAAP and shall be
deemed to include all liabilities of Borrower including but not
limited to accruals, deferrals, and capitalized leases, less
Subordinated Debt, if any.
/ / 6.5 WORKING CAPITAL. Borrower agrees to maintain net working capital
(Current Assets less current liabilities) of not less than either
(check one):
/ / (a) DOLLARS ($ ) or
--------------------------------------- ----------
/ / (b) the amount(s) set forth for the following period(s):
Period(s): Amount(s)
------------------------------- -------------------------------
------------------------------- -------------------------------
------------------------------- -------------------------------
"CURRENT ASSETS" shall be determined in accordance with GAAP and
shall be deemed to include inventory at lower of cost or current market
value less any amounts due from any officer, employee, director,
shareholder or Related Person.
/X/ 6.6 CURRENT RATIO. Borrower agrees to maintain a Current Ratio
/ / (a)
------------------------ to ------------------------ or
/ / (b) the ratio(s) set forth for the following period(s):
Period(s): Ratio(s)
See Exhibit "A" #3
------------------------------- -------------------------------
------------------------------- -------------------------------
------------------------------- -------------------------------
/ / 6.7 CASH FLOW RATIO. Borrower agrees to maintain a Cash Flow Ratio (net
income after taxes plus depreciation plus amortization to current
maturities of long term debt) of not less than either (check one):
/ / (a)
------------------------ to ------------------------ or
/ / (b) the ratio(s) set forth for the following period(s):
Period(s): Ratio(s)
------------------------------- -------------------------------
------------------------------- -------------------------------
------------------------------- -------------------------------
/X/ 6.8 DEBT SERVICE COVERAGE RATIO. Borrower agrees to maintain a Debt
Service Coverage Ratio
/ / (a)
------------------------ to ------------------------ or
/ / (b) the ratio(s) set forth for the following period(s):
Period(s): Ratio(s)
See Exhibit "A" #4
------------------------------- -------------------------------
------------------------------- -------------------------------
------------------------------- -------------------------------
/ / 6.9 CAPITAL EXPENDITURES. Borrower agrees not to purchase, lease or
otherwise acquire or enter into any commitment to purchase, lease or
otherwise acquire additional capital assets where the aggregate liability or
expenditure therefore exceeds the following, except with prior written
consent by Bank One (check one):
/ / (a) $__________________________________________ per fiscal year
commencing with fiscal year ___________ or
/ / (b) the amount(s) set forth for the following period(s):
Period(s): Amount(s)
------------------------------- -------------------------------
------------------------------- -------------------------------
------------------------------- -------------------------------
<PAGE>
/X/ 6.10 SUBORDINATION OF DEBT. Borrower shall cause to be subordinate all
Indebtedness including interest thereon ("Junior Indebtedness"), which may at
any time now or hereafter be owed to any officer, employee, director,
shareholder or Related Person by the Borrower in favor of all Indebtedness,
including interest thereon ("Senior Indebtedness"). Borrower shall obtain and
deliver to Bank One subordination agreements from said officers, employees,
directors, shareholders or Related Persons for said Junior Indebtedness in
form and content acceptable to Bank One. Upon the occurrence of an Event of
Default under this Agreement, Borrower shall without notice from Bank One
immediately cease payment of any fees or advances to any officer, employee,
director, shareholder or Related Person and shall also cease payment of the
sums, if any, allowed to be paid by the terms of the Subordination
Agreement(s).
/X/ 6.11 DEPOSIT ACCOUNTS. Borrower shall establish and maintain its
principal deposit accounts at Bank One as long as any indebtedness remains
outstanding or so long as this Agreement remains in effect.
/ / 6.12 COMPENSATION. Borrower agrees, except with prior written consent of
Bank One, that salary, withdrawals, bonuses and all other compensation paid,
in cash or otherwise, by Borrower to the following person(s) shall not exceed
the following amount(s).
Person(s) Amount(s)
$
------------------------------- -------------------------------
$
------------------------------- -------------------------------
/X/ 6.13 BORROWING BASE. Borrower is subject to certain "Borrowing Base"
conditions as set forth in the "Borrowing Base" Addendum attached hereto and
made a part hereof.
/X/ 6.14 OPINION OF COUNSEL. Bank One shall receive a favorable written
opinion of Counsel for Borrower acceptable to Bank One in form and substance
satisfactory to Bank One in its sole discretion, relating to the
Representations and Warranties set forth herein and such other matters as
Bank One may reasonably request.
ARTICLE VII - DEFAULT AND REMEDIES
7.1 Borrower shall be in default hereunder upon the happening of any of the
following ("Event of Default"):
(a) The occurrence of an event of default under the terms of any
Obligation, security agreement, mortgage and other agreement executed in
connection therewith or herewith, including any renewal, extension or
modification thereof or hereof or in any other obligation or agreement with
Bank One, whether now or hereafter existing; *
(b) Non-performance of any covenant, warranty or liability contained or
referred to herein; or *
(c) If any warranty, representation or statement made or furnished to Bank
One by or on behalf of Borrower or any Obligor, in connection with this
Agreement, or to induce Bank One to make a loan to Borrower, proves to have
been false in any material respect when made or furnished.
7.2 Upon the occurrence of an Event of Default, Bank One may, at its option,
declare principal and accrued interest of all Indebtedness to be immediately
due and payable forthwith, without presentation, demand, protest or notice of
any kind, all of which are hereby expressly waived. Bank One shall have all
the rights and remedies of a Secured Party under the Uniform Commercial Code,
as enacted in the state where Bank One's principal office is located, said
rights and remedies being cumulative in nature. Bank One may set off any of
the Borrower's deposits or accounts, and any other indebtedness of Bank One
to Borrower against the Indebtedness before or after an Event of Default,
without first looking to any property securing payment thereof.
7.3 Acceptance of payment, in full or part, or waiver of any Event of Default
shall not operate as a waiver of any current or later Event of Default, nor
of any other right of Bank One.
7.4 The provisions of this Agreement concerning any Event of Default are not
intended in any way to affect any rights of Bank One with respect to any
Indebtedness of Borrower to Bank One which may or hereafter be payable on
demand.
7.5 No delay or failure of Bank One in exercising any right, power, remedy or
privilege hereunder shall affect such right, power or privilege or be construed
as a waiver against Bank One.
7.6 Any waiver, permit, consent or approval by Bank One of any breach or
default hereunder must be in writing and shall be effective only to the
extent set forth in such writing.
ARTICLE VIII - MISCELLANEOUS
8.1 All notices required to be given under any term of this Agreement shall
be sufficient if mailed, via registered or certified mail, return receipt
requested, or sent via overnight or hand courier, to the parties at their
respective addresses as previously set forth.
8.2 All documents referred to in this Agreement shall for all purposes be
considered a part of this Agreement, and all terms used in this Agreement
shall have the meaning set forth in said documents, and this Agreement shall
include all of the provisions stated in said documents.
8.3 This Agreement is a continuing agreement and shall continue in effect
notwithstanding that from time to time, no indebtedness may exist. This
Agreement shall continue as to any indebtedness and as to any and all
renewals, extensions or modifications thereof.
8.4 This Agreement may be executed in several counter-parts, each of which
shall be an original and all of which shall constitute the same instrument.
8.5 This Agreement, together with all other documents executed concurrently
herewith or attached hereto, constitutes the full and complete Agreement of
the parties and may not be modified except by written instrument signed by
all parties hereto.
8.6 This Agreement shall be binding upon and inure to the benefit of Borrower
and Bank One and their respective successors and assigns.
8.7 Borrower agrees to pay on demand all costs and expenses in connection
with the negotiation, preparation, execution, delivery, filing, recording,
administration, enforcement, litigation, collection, or filing of any legal
action on or for any Obligation, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for Bank One, with
respect thereto. Time is of the essence of all requirements of Borrower
hereunder. The obligations of Borrower under this paragraph shall survive
payment of any Obligation.
8.8 This Agreement shall be governed and construed in accordance with the
laws of the state where Bank One's principal office is located.
8.9 Any provision contained in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
8.10 Borrower shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless Bank One from any and all claims, orders,
demands, causes of action, proceedings, judgements, or suits and all
liabilities, losses, costs or expenses (including, without limitation,
technical consultant fees, court costs, expenses paid to third parties and
reasonable legal fees) and damages arising out of, or as a result of (i) any
release, discharge, deposit, dump, spill, leak or placement of any Hazardous
Material into or on any Collateral or property owned, leased, rented or used
by Borrower (the "Property") at any time; (ii) any contamination of the soil
or ground water of the Property or damage to the environment and natural
resources of the Property or the result of actions whether arising under any
Hazardous Material Law, or common law; or (iii) any toxic, explosive or
otherwise dangerous Material which have been buried beneath or concealed
within the Property. This indemnity shall survive termination of this
Agreement.
8.11 This Agreement contains the entire agreement of the parties and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof.
Executed this 20 day of June, 1995.
Bank One: BORROWER:
By: /s/ John B. Middelberg The Sportsman's Guide, Inc.
----------------------------- -----------------------------
Its: Vice President By: /s/ Charles Lingen
----------------------------- -----------------------------
Its: V.P. Finance/CEO
-----------------------------
* which is not cured within the applicable cure period set forth in the
applicable Obligation, if any:
<PAGE>
EXHIBIT 10.12
AMENDMENT TO SECOND AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
This Amendment to Second Amended and Restated Business Loan Agreement
("Amendment") is made this 16th day of October, 1995, by and between the
Sportsman's Guide, Inc., a Minnesota corporation ("Borrower"), and Bank One,
Dayton, N.A. ("Bank One").
WITNESSETH:
WHEREAS, Borrower and Bank One entered into a Second Amended and Restated
Business Loan Agreement dated June 20, 1995 (the "Agreement"); and WHEREAS,
Borrower desires and Bank One has agreed to amend the Business Loan Agreement
"Borrowing Base" Addendum set forth in the Agreement.
NOW, THEREFORE, in consideration of the premises and the terms and conditions
set forth herein, Borrower and Bank One agree to amend the Agreement as
follows:
1. Delete the "Borrowing Base" Addendum and the Borrowing Base Compliance
Certificate attached to the Agreement and insert the Amended
"Borrowing Base" Addendum and the Borrowing Base Compliance
Certificate attached hereto in its place.
2. This Amendment is a modification only and not a novation. Except for
the above-quoted modification(s), the Agreement, any agreement or
security document, and all the terms and conditions thereof, shall be
and remain in full force and effect with the changes herein deemed to
be incorporated therein. This Amendment is to be considered attached
to the Agreement and made a part thereof. This Amendment shall not
release or affect the liability of any guarantor, surety or endorser
of the Agreement or release any owner of collateral securing the
Agreement. The validity, priority and enforceability of the Agreement
shall not be impaired hereby. To the extent that any provision of this
Amendment shall not be impaired hereby. To the extent any provision of
this Amendment conflicts with any term or condition set forth in the
Agreement, or any agreement or security document executed in
conjunction therewith, the provisions of this Amendment shall
supersede and control.
IN WITNESS WHEREOF, the parties have executed this Amendment effective as of
the day and year first written above.
THE SPORTSMAN'S GUIDE, INC.,
A MINNESOTA CORPORATION
By: /s/ Charles Lingen
-------------------------
Its: V.P. FINANCE/CFO
-------------------------
BANK ONE, DAYTON, NA
By: /s/ John B. Middelberg
-------------------------
Its: Vice President
-------------------------
<PAGE>
EXHIBIT 10.13
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
This Second Amendment to Second Amended and Restated Business Loan Agreement
("Amendment") is made this 10 day of November, 1995, to be effective as of
October 1, 1995 ("Effective Date") by and between The Sportsman's Guide,
Inc., a Minnesota corporation ("Borrower"), and Bank One, Dayton, N.A. ("Bank
One").
WITNESSETH:
WHEREAS, Borrower and Bank One entered into a Business Loan Agreement dated
June 20, 1995 (the "Agreement"); and WHEREAS, Borrower desires and Bank One
has agreed to amend certain financial covenants and delete the two
consecutive month requirement as set forth in the Agreement.
NOW, THEREFORE, in consideration of the premises and the terms and conditions
set forth herein, Borrower and Bank One agree to amend the Agreement as
follows:
1. Delete Exhibit "A" attached to the Agreement and insert amended Exhibit
"A" attached hereto in its place.
2. This Amendment is a modification only and not a novation. Except for
the above-quoted modification(s), the Agreement, any agreement or
security document, and all the terms and conditions thereof, shall be
and remain in full force and effect with the changes herein deemed to
be incorporated therein. This Amendment is to be considered attached to
the Agreement and made a part thereof. This Amendment shall not release
or affect the liability of any guarantor, surety or endorser of the
Agreement or release any owner of collateral securing the Agreement.
The validity, priority and enforceability of the Agreement shall not be
impaired hereby. To the extent that any provision of this Amendment
conflicts with any term or condition set forth in the Agreement, or any
agreement or security document executed in conjunction therewith, the
provisions of this Amendment shall supersede and control.
IN WITNESS WHEREOF, the parties have executed this Amendment effective as of
the day and year first written above.
THE SPORTSMAN'S GUIDE, INC. A
MINNESOTA CORPORATION
By: Charles Lingen
---------------------------------
Its: Vice Pres. Finance/CEO
---------------------------------
BANK ONE, DAYTON, NA
By: /s/ Michael Powe
---------------------------------
Its: Senior Commercial Banking Officer
---------------------------------
<PAGE>
EXHIBIT 10.14
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED
BUSINESS LOAN AGREEMENT
This Third Amendment to Second Amended and Restated Business Loan Agreement
("Amendment") is made this 1 day of February, 1996, to be effective as of
February 1, 1996 ("Effective Date") by and between The Sportsman's Guide,
Inc., a Minnesota corporation ("Borrower"), and Bank One, Dayton, NA ("Bank
One").
WITNESSETH:
WHEREAS, Borrower and Bank One entered into a Second Amended and Restated
Business Loan Agreement dated June 20, 1995 (the "Agreement") as amended by
an Amendment to Second Amended and Restated Business Loan Agreement dated
October 16, 1995 and a Second Amendment to Amended and Restated Business Loan
Agreement dated November 10, 1995; and WHEREAS, Borrower desires and Bank One
has agreed to amend certain financial covenants as set forth in the
Agreement, to include one new and additional covenant and amend the Borrowing
Base Addendum attached to the Agreement.
NOW, THEREFORE, in consideration of the premises and the terms and conditions
set forth herein, Borrower and Bank One agree to amend the Agreement as
follows:
1. Delete the amended Exhibit "A" attached to the Agreement and insert the
second amended Exhibit "A" attached hereto in its place.
2. Delete the Amended "Borrowing Base" Addendum and the Borrowing Base
Compliance Certificate attached to the Agreement and insert the Second
Amended "Borrowing Base" Addendum and the Borrowing Base Compliance
Certificate attached hereto in its place.
3. Availability under credit facility is subject to a capital infusion
into The Sportsman's Guide, Inc. prior to March 31, 1996 of an amount
equal to or greater than Borrower's 1995 fiscal year end after tax
loss. In addition, The Sportsman's Guide, Inc. is prohibited from
paying any subordinated debt, including principal and interest.
4. This Amendment is a modification only and not a novation. Except for
the above-quoted modification(s), the Agreement, any agreement or
security document, and all the terms and conditions thereof, shall be
and remain in full force and effect with the changes herein deemed to
be incorporated therein. This Amendment is to be considered attached to
the Agreement and made a part thereof. This Amendment shall not release
or affect the liability of any guarantor, surety or endorser of the
Agreement or release any owner of collateral securing the Agreement.
The validity, priority and enforceability of the Agreement shall not be
impaired hereby. To the extent that any provision of this Amendment
conflicts with any term or condition set forth in the Agreement, or any
agreement or security document executed in conjunction therewith, the
provisions of this Amendment shall supersede and control.
IN WITNESS WHEREOF, the parties have executed this Amendment effective as of
the day and year first written above.
THE SPORTSMAN'S GUIDE, INC., A
MINNESOTA CORPORATION
By: /s/ Charles Lingen
-------------------------
Its: V.P. FINANCE/CFO
-------------------------
BANK ONE, DAYTON NA
By: John Middelberg
-------------------------
Its: Vice President
-------------------------
<PAGE>
EXHIBIT 25
THE SPORTSMAN'S GUIDE, INC.
POWER OF ATTORNEY
WHEREAS, The Sportsman's Guide, Inc. (the "Company") intends to file with
the Securities and Exchange Commission its Report on Form 10-K for the fiscal
year ended December 29, 1995:
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints Gary Olen his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to execute in his
name, place and stead, the Company's Report on Form 10-K for the fiscal year
ended December 29, 1995 (including any amendment to such report) and any and
all other instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in the aforesaid capacity, to all intents and
purposes as the undersigned might or could do in person. The undersigned
hereby ratifies and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
18th day of March, 1996.
/s/ William T. Sena
-----------------------
William T. Sena
<PAGE>
EXHIBIT 25
THE SPORTSMAN'S GUIDE, INC.
POWER OF ATTORNEY
WHEREAS, The Sportsman's Guide, Inc. (the "Company") intends to file with
the Securities and Exchange Commission its Report on Form 10-K for the fiscal
year ended December 29, 1995:
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints Gary Olen his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to execute in his
name, place and stead, the Company's Report on Form 10-K for the fiscal year
ended December 29, 1995 (including any amendment to such report) and any and
all other instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in the aforesaid capacity, to all intents and
purposes as the undersigned might or could do in person. The undersigned
hereby ratifies and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
18th day of March, 1996.
/s/ Vincent W. Shiel
-----------------------
Vincent W. Shiel
<PAGE>
EXHIBIT 25
THE SPORTSMAN'S GUIDE, INC.
POWER OF ATTORNEY
WHEREAS, The Sportsman's Guide, Inc. (the "Company") intends to file with
the Securities and Exchange Commission its Report on Form 10-K for the fiscal
year ended December 29, 1995:
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints Gary Olen his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to execute in his
name, place and stead, the Company's Report on Form 10-K for the fiscal year
ended December 29, 1995 (including any amendment to such report) and any and
all other instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in the aforesaid capacity, to all intents and
purposes as the undersigned might or could do in person. The undersigned
hereby ratifies and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
18th day of March, 1996.
/s/ Leonard M. Paletz
-----------------------
Leonard M. Paletz
<PAGE>
EXHIBIT 25
THE SPORTSMAN'S GUIDE, INC.
POWER OF ATTORNEY
WHEREAS, The Sportsman's Guide, Inc. (the "Company") intends to file with
the Securities and Exchange Commission its Report on Form 10-K for the fiscal
year ended December 29, 1995:
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints Gary Olen his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to execute in his
name, place and stead, the Company's Report on Form 10-K for the fiscal year
ended December 29, 1995 (including any amendment to such report) and any and
all other instruments necessary or incidental in connection therewith, and to
file the same with the Securities and Exchange Commission. Said attorney
shall have full power and authority to do and perform in the name and on
behalf of the undersigned, in the aforesaid capacity, to all intents and
purposes as the undersigned might or could do in person. The undersigned
hereby ratifies and approves the acts of said attorney.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
18th day of March, 1996.
/s/ Mark Kroger
-----------------------
Mark Kroger
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS FOUND ON PAGES 12 AND 13 OF THE COMPANY'S
FORM 10-K FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> DEC-29-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2231
<ALLOWANCES> 0
<INVENTORY> 14208
<CURRENT-ASSETS> 19411
<PP&E> 5668
<DEPRECIATION> 1370
<TOTAL-ASSETS> 23709
<CURRENT-LIABILITIES> 21874
<BONDS> 287
0
2
<COMMON> 233
<OTHER-SE> 1313
<TOTAL-LIABILITY-AND-EQUITY> 23709
<SALES> 101832
<TOTAL-REVENUES> 101832
<CGS> 67137
<TOTAL-COSTS> 67137
<OTHER-EXPENSES> (73)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 943
<INCOME-PRETAX> (2099)
<INCOME-TAX> (355)
<INCOME-CONTINUING> (1744)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1744)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
