SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. )
Filed by Registrant x
Filed by a Party other than the Registrant []
Check the appropriate box:
[] Preliminary Proxy Statement
[] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
x Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SPORT SUPPLY GROUP INC.
(Name of Registrant as Specified In Its Charter)
___________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
[] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________
(2) Aggregate numer of securities to which transactions applies:
______________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
______________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________
(5) Total Fee Paid
______________________________________________________________
[] Fee paid previously with preliminary materials.
[] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
______________________________________________________________
(2) Form, Schedule or Registration Statement No:
______________________________________________________________
(3) Filing Party:
(4) Date Filed:
______________________________________________________________
<PAGE>
SPORT SUPPLY GROUP, INC.
1901 Diplomat Drive
Farmers Branch, Texas 75234
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 29, 1999
As a stockholder of Sport Supply Group, Inc. (the "Company"), you
are hereby given notice of and invited to attend in person or by proxy
the Annual Meeting of Stockholders of the Company to be held at Bent Tree
Country Club, 5201 Westgrove, Dallas, Texas 75248, on January 29, 1999,
at 2:00 p.m., for the following purposes:
1. To elect five directors to serve for a term of one year; and
2. To transact such other business as may properly come before
the meeting and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on December
15, 1998 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at such meeting and any
adjournment(s) thereof. Only stockholders of record at the close of
business on the Record Date are entitled to notice of and to vote at such
meeting. The transfer books of the Company will not be closed.
You are cordially invited to attend the meeting. However, whether
or not you expect to attend the meeting, management desires to have the
maximum representation at the meeting and respectfully requests that you
date, execute and mail promptly the enclosed proxy in the enclosed
stamped envelope for which no additional postage is required if mailed in
the United States. A proxy may be revoked by a stockholder any time
prior to its use as specified in the enclosed proxy statement.
By Order of the Board of Directors
TERRENCE M. BABILLA,
Secretary
Dallas, Texas
December 17, 1998
<PAGE>
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED HEREIN.
SPORT SUPPLY GROUP, INC.
_____________________
PROXY STATEMENT
_____________________
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANAURY 29, 1999
_____________________
To Our Stockholders:
This Proxy Statement is furnished to stockholders of Sport Supply
Group, Inc. (the "Company") for use at the Annual Meeting of Stockholders
to be held at the date, time and place and for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders, or at any
adjournment or adjournments thereof (the "Annual Meeting"). The enclosed
proxy is solicited on behalf of the Board of Directors of the Company and
is subject to revocation at any time prior to the voting of the proxy.
Unless a contrary choice is indicated, all duly executed proxies received
by the Company will be voted in accordance with the instructions set
forth on the back side of the proxy card. The record of stockholders
entitled to vote at the Annual Meeting was taken at the close of business
on December 15, 1998 (the "Record Date"). The approximate date on which
this Proxy Statement and the enclosed proxy are first being sent or given
to stockholders is December 17, 1998.
VOTING PROCEDURES AND REVOCABILITY OF PROXIES
At the record date there were 7,410,703 shares of the Company's
common stock, par value $.01 per share (the "Common Stock") issued and
outstanding and entitled to vote at the Annual Meeting. The holders of a
majority of the outstanding shares of Common Stock, present in person or
by proxy, will constitute a quorum for the transaction of business at the
Annual Meeting. If a quorum is not present, the Annual Meeting may be
adjourned from time to time until a quorum is obtained. Each outstanding
share of Common Stock is entitled to one vote.
The accompanying proxy card is designed to permit each stockholder
of record at the close of business on the Record Date to vote on each of
the proposals brought before the Annual Meeting. The proxy card provides
space for a stockholder to vote in favor of, or to withhold voting for,
the nominees for the Board of Directors. With respect to the proposal
regarding the election of directors, checking the box that "Withholds
Authority" to vote for a particular director is the equivalent of an
abstention.
<PAGE>
For purposes of the quorum and the discussion below regarding the
vote necessary to take stockholder action, stockholders of record who are
present at the meeting in person or by proxy and who abstain, including
brokers holding customers' shares of record who cause abstentions to be
recorded at the meeting, are considered stockholders who are present and
entitled to vote and they count toward the quorum.
Brokers holding shares of record for customers generally are not
entitled to vote on certain "non-routine" matters unless they receive
voting instructions from their customers. A broker non-vote occurs when
a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary
voting power with respect to that proposal and has not received
instructions from the beneficial owner (despite voting on at least one
other proposal for which the nominee does have discretionary authority or
for which it has received instructions). Broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business.
Directors are elected by a plurality and the five (5) nominees who
receive the most votes will be elected. Abstentions and broker non-votes
will not be taken into account in determining the outcome of the election
of directors.
When a signed card is returned with choices specified with respect
to voting matters, the proxies designated on the proxy card in accordance
with the stockholder's instructions vote the shares represented. The
proxies for the stockholders are Geoffrey P. Jurick and John P. Walker.
A stockholder desiring to name another person as his or her proxy may do
so by crossing out the names of the designated proxies and inserting the
name(s) of such other person(s) to act as his or her proxy(ies). In that
case, it will be necessary for the stockholder to sign the proxy card and
deliver it to the person named as his or her proxy and for the person so
named to be present and vote at the Annual Meeting. Proxy cards so
marked should not be mailed to the Company.
If a signed proxy card is returned and the stockholder has made no
specifications with respect to voting matters, the shares will be voted
for the election of the five nominees for director and, at the discretion
of the proxies, on any other matter that may properly come before the
Annual Meeting or any adjournment(s). Valid proxies will be voted at the
Annual Meeting and at any adjournment in the manner specified.
Any stockholder of the Company has the unconditional right to revoke
his or her proxy at any time prior to the voting thereof by any act
inconsistent with the proxy, including notifying the Secretary of the
Company in writing, executing a subsequent proxy, or personally appearing
at the Annual Meeting and casting a contrary vote. However, no
revocation shall be effective unless notice of such revocation has been
received by the Company at or prior to the Annual Meeting.
<PAGE>
ELECTION OF DIRECTORS
Five directors are proposed to be elected at the Annual Meeting. If
elected, each director will hold office until the next annual meeting of
stockholders or until his successor shall be elected and shall qualify.
The election of directors will be decided by a plurality vote. All
nominees named below are members of the present Board of Directors of the
Company. All nominees have consented to serve if elected. If any
nominee becomes unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board
may recommend, the Board may reduce the number of directors to eliminate
the vacancy, or the Board may fill the vacancy at a later date after
selecting an appropriate nominee. Management has no reason to believe
that any of the nominees named below will be unable to serve.
Nominations for election to the Board of Directors may be made by
the Board of Directors, a nominating committee appointed by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Nominations made by stockholders must be made by written
notice, certified mail, return-receipt requested and received by the
Secretary of the Company no later than 60 days after the end of the
Company's fiscal year. If, however, less than thirty-five days' notice
of a stockholders' meeting called for the election of directors is given
to stockholders, nominations by stockholders must be so made and received
by the Secretary of the Company not later than the close of business on
the seventh day following the day on which the notice was mailed. Such
notice shall set forth as to each proposed nominee who is not an
incumbent director: (a) the name, age, business address and, if known,
residence address of each nominee proposed in such notice; (b) the
principal occupation or employment of each such nominee; (c) the number
of shares of Common Stock of the Company that are beneficially owned by
each such nominee and the nominating stockholder; and (d) any other
information concerning the nominee that must be disclosed of nominees in
proxy solicitations pursuant to Rule 14(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
<PAGE>
The current Board of Directors nominated the nominees named below
for election to the Board of Directors of the Company. The name, age (as
of December 10, 1998), business experience and public directorships of
each nominee for director are as follows:
Year
Principal Occupation First
Name Age or Employment (1) Became
Director
---- --- ----------------- --------
Geoffrey P. Jurick 57 Chairman of the Board and Chief 1996
Executive Officer (2)(7)
John P. Walker 35 President, Chief Operating 1996
Officer and Chief Financial
Officer (3)(7)
Thomas P. Treichler 54 Chairman of the Board and Chief 1997
Executive Officer of Orient
Financial Corporation (4)
Peter G. Bunger 58 Consultant (5) 1996
Johnson C.S. Ko 47 Chairman of Universal Appliances 1996
Limited (6)
________________________
(1) Each of the nominees has held the position listed, or a similar
position with the same or an affiliated organization, for at least
the last five years, except as otherwise provided herein.
(2) Geoffrey P. Jurick has served as a director of the Company since
December 10, 1996. Mr. Jurick has served as the Company's Chairman
of the Board since December 11, 1996 and the Company's Chief
Executive Officer since January 23, 1997. Mr. Jurick has served as a
director of Emerson Radio Corp. ("Emerson"), a Delaware corporation
listed on the American Stock Exchange under the symbol "MSN" since
1990, and as Emerson's Chief Executive Officer and Chairman since
July 1992 and December 1993, respectively. Mr. Jurick served as
President of Emerson from July 1993 to October 1994. Emerson
beneficially owns approximately 39% the Company's issued and
outstanding Common Stock. See "Certain Relationships and Related
Transactions." Since December 1993, Mr. Jurick has served as a
director of Fidenas International Limited, L.L.C. and its
predecessor ("FIN"), and, since May 1994, as an officer and general
manager of FIN. Mr. Jurick has also served as a Director of Fidenas
Investment Limited ("FIL") and Fidenas International Bank Limited
("FIBANK"). On January 10, 1995, the Supreme Court of the
Commonwealth of the Bahamas (the "Bahamas Court") appointed an
official liquidator of FIL and ordered that FIL be wound up. On
January 27, 1995, the Bahamas Court appointed an official liquidator
for FIBANK and ordered, subject to the ongoing supervision of the
Bahamas Court, that FIBANK's assets be liquidated. Since May 1994,
Mr. Jurick has served as a director, Chairman, and Chief Executive
Officer of GSE Multimedia Technologies Corporation ("GSE"), which is
traded in the over-the-counter market. Since March 1996, Mr. Jurick
has served as Chairman of Elision International Ltd. ("Elision"), a
provider of computer and telecommunication services. See "Certain
<PAGE>
Relationships and Related Transactions." For more than the past
five years, Mr. Jurick has held a variety of senior executive
positions with several of the entities comprising the Fidenas group
of companies, whose activities encompass merchant banking,
investment banking, investment management, and corporate
development.
(3) John P. Walker has served as a director of the Company since
December 10, 1996 and served as the Company's Chief Financial
Officer since December 11, 1996. Mr. Walker served as an Executive
Vice President from December 11, 1996 to July 28, 1998. Mr. Walker
has served as the Company's President and Chief Operating Officer
since July 28, 1998. Mr. Walker has served as Executive Vice
President and Chief Financial Officer of Emerson since April 1996.
Mr. Walker served as Emerson's Senior Vice President from April 1994
until March 1996, Vice President-Finance from February 1993 to April
1994, Assistant Vice President-Finance from June 1991 to January
1993, and Director of Financial Management from September 1989 to
May 1991. Emerson beneficially owns approximately 39% of the
Company's issued and outstanding Common Stock. See "Certain
Relationships and Related Transactions."
<PAGE>
(4) Dr. Thomas P. Treichler has been a Director of the Company since
March 23, 1997. Dr. Treichler has been the Chairman of the Board and
Chief Executive Officer of Orient Financial Corporation, a San
Francisco based financial and investment banking firm, since 1983.
Dr. Treichler is a founder and member of the Board of Directors of
Satrecol Australia Limited, an Australian venture capital investment
company listed on the Main Board of the Australian Stock Exchange.
Dr. Treichler is also an Independent Director of the Shanghai Growth
Fund (listed on the Hong Kong Stock Exchange), a fund for direct
investments into the greater Shanghai region.
(5) Peter G. Bunger has been a director of the Company since December
10, 1996. Mr. Bunger has been a director of Emerson since July
1992. Emerson beneficially owns approximately 39% of the Company's
issued and outstanding Common Stock. See "Certain Relationships and
Related Transactions." Presently, he is a consultant with Savarina
AG. Since October 1992, Mr. Bunger has served as a director of
Savarina AG, an entity engaged in the business of portfolio
management monitoring in Zurich, Switzerland, and since 1992, as a
director of ISCS, a computer software company. From December 1991
until December 1993, Mr. Bunger was Vice Chairman of Montcour Bank
and Trust Company Limited, a bank organized in the Bahamas and an
affiliate of FIN.
<PAGE>
(6) Johnson C.S. Ko has been a director of the Company since December
10, 1996. Since February 1994, Mr. Ko has served as the Chairman
and Director of Universal Appliances Limited ("Universal"), a Hong
Kong corporation listed on the Hong Kong Stock Exchange, which is
engaged in manufacturing and distributing consumer electronics,
household electrical and telecommunication products and printed
circuit boards and in the dissemination of international financial
market information and consumer data. Universal is the holding
company for the Universal Group that owns or controls numerous
subsidiary companies. Mr. Ko has also served on certain boards of
these subsidiaries since February 1994. Since September 1997,
Mr. Ko has served as Chairman of Cybersonic Technology Limited, a
corporation listed on the Hong Kong Stock Exchange. Cybersonic is
engaged in manufacturing and distributing consumer electronic
products and footwear products. Mr. Ko has also served as the
Chairman and Director of Kwan Wing Holdings Limited ("Kwan Wing
Holdings") since October 1992, which is the holding company of
Universal and an investment vehicle whose activities encompass
trading, real property holding and financial services. Kwan Wing
Holdings' principal operating company in Hong Kong is its wholly
owned subsidiary Kwan Wing Development Ltd., in which Mr. Ko has
served as director since 1989. From November 1992 to April 1995,
Mr. Ko also served as Chairman and director of Mandarin Dragon
Holdings Limited, a Hong Kong corporation listed on the Hong Kong
Stock Exchange, which was also an investment holding company with
business in the manufacturing and distribution of pharmaceuticals.
(7) On September 29, 1993, Emerson and five of its United States
subsidiaries filed voluntary petitions for relief under the
reorganization provisions of Chapter 11 of the United States
Bankruptcy Code. On March 31, 1994, the United States Bankruptcy
Court for the District of New Jersey entered an order confirming the
Fourth Amended Joint Plan of Reorganization that became effective on
that date. See "Certain Relationships and Related Transactions."
THE BOARD OF DIRECTORS URGES STOCKHOLDERS TO VOTE "FOR"
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of December 8, 1998, the
beneficial ownership of each current director, each nominee for director,
each officer named in the Summary Compensation Table, the directors and
executive officers as a group and each stockholder known to management of
the Company to own beneficially more than 5% of the Company's outstanding
shares of Common Stock. Except as otherwise indicated and based upon the
Company's review of information as filed with the Securities and Exchange
Commission ("SEC"), the Company believes that the beneficial owners of
the securities listed below have sole investment and voting power with
respect to such shares, subject to community property laws where
applicable.
Amount and Percent
Nature of Of
Name and Address of Beneficial Class
Beneficial Owner Ownership
---------------- --------- -----
Emerson Radio Corp. 3,269,500 (1) 38.9%
Nine Entin Road
Parsippany, New Jersey 07054
Dimensional Fund Advisors, Inc. 423,725 (2) 5.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Wellington Management Company, LLP 747,800 (3) 10%
75 State Street
Boston, Massachusetts 02109
Geoffrey P. Jurick* 3,469,500 (4) 40.3%
John P. Walker* 111,814 (5) 1.5%
Peter G. Bunger* 6,250 (6) **
Johnson C.S. Ko* 16,250 (6) **
Thomas P. Treichler* 6,250 (6) **
Terrence M. Babilla 34,530 (7) **
Adam Blumenfeld 126,800 (8) 1.7%
Executive Officers and Directors
as a group (7 persons) 3,771,394 (9) 42.6%
____________________
(*) Director (all current directors are nominees for director).
(**) Less than one percent
<PAGE>
(1) Based on information set forth in Amendment No. 3 to Schedule 13D
dated December 3, 1996, filed with the SEC by Emerson. On August 1,
1996, Emerson and Emerson Radio (Hong Kong) Limited, a wholly owned
subsidiary of Emerson ("Emerson HK"), filed a Schedule 13D with the
SEC. Pursuant to the Schedule 13D, Emerson HK reported that it
acquired 669,500 shares of the Company's Common Stock (the "Initial
Shares"). Emerson HK reported in such Schedule 13D that it has sole
voting and dispositive power with respect to the Initial Shares. On
December 10, 1996, Emerson acquired directly from the Company (i) an
additional 1,600,000 shares of newly-issued Common Stock (the "New
Shares") and (ii) 5-year warrants to acquire an additional 1,000,000
shares of Common Stock at an exercise price of $7.50 per share,
subject to standard anti-dilution adjustments (the "Emerson
Warrants"). Pursuant to a Pledge and Security and Agreement,
Emerson pledged to Congress Financial Corporation ("Congress") the
New Shares and the Emerson Warrants together with all proceeds
thereof and all dividends and other income and distributions thereon
or with respect thereto and all rights of Emerson to have the New
Shares and any shares of Common Stock acquired through the exercise
of the Emerson Warrants (as permitted by Congress) registered under
a certain Registration Rights Agreement. Effective March 31, 1998,
Congress released 1,100,000 of the New Shares from the Pledge and
Security Agreement. See "Certain Relationships and Related
Transactions" for a more detailed description of Emerson's
investment in the Company.
(2) Based on information set forth in a letter from Dimensional Fund
Advisors, Inc. ("Dimensional"), a registered investment advisor.
For the period ending September 30, 1998, Dimensional reported it
has sole voting power with respect to 289,725 shares and sole
dispositive power with respect to 423,725 shares. Dimensional
reported that all of such shares are held in portfolios of DFA
Investment Dimensions Group, Inc. (the "Fund"), a registered open-
end investment company, or in a series of The DFA Investment Trust
Company (the "Trust"), a Delaware business trust, or the DFA Group
Trust and DFA Participating Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional serves as
investment manager. Dimensional disclaims beneficial ownership of
all such shares. Persons who are officers of Dimensional also
serve as officers of the Fund and the Trust. In their capacity as
officers of the Fund and the Trust, the persons vote 42,300
additional shares that are owned by the Fund and 91,700 additional
shares that are owned by the Trust (both of which are included in
sole dispositive power above).
(3) Based on information set forth in a Schedule 13G dated February 10,
1998, filed with the SEC by Wellington Management Company, LLP
("WMC"). WMC reported it has shared voting power with respect to
697,800 shares of Common Stock and shared dispositive power with
respect to 747,800 shares of Common Stock.
<PAGE>
(4) Mr. Jurick's address is Sport Supply Group, Inc., 1901 Diplomat
Drive, Farmers Branch, Texas 75234. Mr. Jurick, directly and
indirectly, beneficially owns approximately 60.5% of the outstanding
shares of Emerson's common stock and is the Chairman of the Board
and Chief Executive Officer of Emerson and, therefore, may be deemed
to control Emerson. As a result of such control, Mr. Jurick may be
deemed to beneficially own the securities of the Company
beneficially owned by Emerson. See Note (1) above. Mr. Jurick
disclaims any such beneficial ownership. See "Certain Relationships
and Related Transactions." Mr. Jurick's beneficial ownership also
includes 200,000 shares of Common Stock issuable upon exercise of
stock options that are exercisable currently or within sixty (60)
days of the date hereof.
(5) Consists of (i) 45,147 shares of Common Stock, of which 10,444 are
subject to vesting requirements, and (ii) 66,667 shares of Common
Stock issuable upon exercise of stock options that are exercisable
currently or within sixty (60) days of the date hereof.
(6) Includes 6,250 shares of Common Stock issuable upon exercise of
stock options that are exercisable currently or within sixty (60)
days of the date hereof.
(7) Consists of 1,197 shares of Common Stock and 33,333 shares of Common
Stock issuable upon exercise of stock options that are exercisable
currently or within sixty (60) days of the date hereof.
(8) Consists of 126,800 shares of Common Stock issuable upon exercise of
stock options that are exercisable
currently or within sixty (60) days of the date hereof.
(9) Includes 445,550 shares of Common Stock issuable upon exercise of
stock options that are exercisable currently or within sixty (60)
days of the date hereof and 1,000,000 shares of Common Stock
issuable upon exercise of the Emerson Warrants. Mr. Jurick
disclaims beneficial ownership of the securities of the Company
owned by Emerson. See footnote 4 above.
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the
Board of Directors. The Board meets during the Company's fiscal year to
review significant developments affecting the Company and to act on
matters requiring Board approval. The Board of Directors held five (5)
formal meetings. During the 1998 fiscal year, each member of the Board
participated in at least 75% of all Board and committee meetings held
during the period for which he served as a director and/or committee
member.
During fiscal 1998, the Board of Directors had an audit committee, a
stock option committee, and a compensation committee to devote attention
to specific subjects and to assist the Board in the discharge of its
responsibilities. The functions of these committees and their current
members are described below.
Audit Committee. The Company's Audit Committee is presently
comprised of Peter G. Bunger and Thomas P. Treichler. The Audit
Committee recommends to the Board of Directors the appointment of a firm
of certified public accountants to conduct audits of the accounts and
affairs of the Company and monitors the performance of such firm, reviews
accounting objectives and procedures of the Company and the findings and
reports of the independent certified public accountants, and makes such
reports and recommendations to the Board of Directors as it deems
appropriate. The Audit Committee held one (1) formal meeting during
fiscal 1998.
Stock Option Committee. Johnson C. S. Ko and Thomas P. Treichler
(each of whom is a Non-employee Director, as defined in the Company's
Amended and Restated Stock Option Plan) presently administer the
Company's Option Plan. The Amended and Restated Stock Option Plan
provides that the Stock Option Committee has full and final authority to
select the key employees, directors and consultants to whom awards are
granted, the number of shares of Common Stock with respect to such
awards, and the terms of such awards, including the exercise price of the
stock options and any vesting periods. In general, the Stock Option
Committee is authorized to construe, interpret and administer the Amended
and Restated Stock Option Plan and the provisions of the options granted
thereunder, prescribe and amend rules for the operation of the Amended
and Restated Stock Option Plan, and make all other determinations
necessary or advisable for its implementation and administration. The
Stock Option Committee held one (1) formal meeting and acted by unanimous
consent two (2) times during fiscal 1998.
Compensation Committee. The Company's Compensation Committee is
presently comprised of Peter G. Bunger and Johnson C.S. Ko. The
Compensation Committee administers the Employee Stock Purchase Plan. In
addition, the Compensation Committee is responsible for recommending to
the Board of Directors compensation arrangements for the Company's
Chairman of the Board, which recommendation is subject to the approval of
a majority of the disinterested directors. The Compensation Committee
held one (1) formal meetings during fiscal 1998.
The Board of Directors did not have a standing nominating committee,
or any other committee performing similar functions during fiscal 1998.
The Board of Directors performed the functions customarily attributable
to a nominating committee as a whole.
<PAGE>
Compensation of Directors
During fiscal 1998, nonmanagement directors were entitled to receive
up to $8,000 in annual directors' fees. During fiscal 1998, Mr. Bunger,
Mr. Ko and Dr. Treichler each received $8,000 in directors' fees.
Officers of the Company do not receive compensation for serving on the
Board of Directors. Non-employee directors are automatically granted
nonqualified stock options to purchase 3,125 shares of Common Stock on an
annual basis.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to
the Company's Chief Executive Officer and each of the Company's other
most highly compensated executive officers, based on salary and bonus
earned during fiscal 1998. During 1997 the Company changed its fiscal
year-end from October 31 to September 30. As a result, fiscal 1997 is a
transition period consisting of eleven calendar months. During fiscal
1996, the Company was operating on a 52/53-week year ending on the Friday
closest to October 31. During fiscal 1997 and 1998, the Company was
operating on a 52/53-week year ending on the Friday closest to September
30. The information set forth in the following table is for the twelve-
month fiscal year-ended November 1, 1996, the eleven-month fiscal year-
ended September 26, 1997, and the twelve-month fiscal year-ended October
2, 1998.
<PAGE>
<TABLE>
Securities
Other Annual Restricted Underlying
Name and Fiscal Salary Bonus Compensation Stock Options/ All Other
Principal Position Year ($) ($) (3) ($) Awards SARs Compensation
($) (#) ($)
- --------------------- ----------------------------------------------------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Geoffrey P. Jurick, 1998 $250,000 --- --- --- --- ---
Chairman of the Board 1997 $114,582(1) $280,000 --- --- 300,000 ---
and Chief 1996 --- --- --- --- --- ---
Executive Officer (1)
John P. Walker, 1998 $260,833(2) --- $110,518 (2) $412,500(2) --- $ 3,213(2)
President, Chief 1997 $152,609 $200,000 $130,805 (2) --- 100,000(5) $ 1,188(2)
Operating Officer 1996 --- --- --- --- --- ---
and Chief Financial
Officer (2)
Terrence M. Babilla, 1998 $220,000 --- $ 48,628 (4) --- 100,000(5) $ 2,904(4)
Executive Vice 1997 $183,333 $ 75,000 --- --- --- ---
President, General 1996 $182,500 $ 35,000 --- --- $ 71,875(4)
Counsel and Secretary 25,000(4)
(4)
Adam Blumenfeld, 1998 $114,792 --- --- --- 45,000 ---
Vice President- Sales 1997 $ 81,639 $ 37,000 --- --- ---
and Marketing (6) 1996 $ 68,474 $ 20,557 --- --- --- ---
Peter S. Blumenfeld, 1998 $208,333 --- $ 14,042 --- --- $1,135,047(7)
President and Chief 1997 $226,245 $135,000 --- --- 279,325(5)(7) ---
Operating Officer, 1996 $224,258 --- --- --- --- ---
retired (7)
</TABLE>
(1) Mr. Jurick has served as Chairman of the Board since December 10,
1996, the date which the Company and Emerson consummated that
certain Securities Purchase Agreement, dated November 27, 1996, by
and between the Company and Emerson (the "Emerson Agreement"). See
"Certain Relationships and Related Transactions." Mr. Jurick has
served as the Company's Chief Executive Officer since January 23,
1997. The Company did not pay Mr. Jurick any salary during fiscal
1997. However, pursuant to a Management Services Agreement by and
between the Company and Emerson, the Company paid Emerson $114,582
in reimbursement of salary paid by Emerson to Mr. Jurick for the
benefit of the Company. See "Certain Relationships and Related
Transactions." Effective October 18, 1997, the Company began paying
Mr. Jurick an annualized salary of $250,000 and ceased reimbursing
Emerson for such payments.
<PAGE>
(2) Mr. Walker served as Executive Vice President from December 11, 1996
through July 28, 1998. Mr. Walker has served as Chief Financial
Officer since December 11, 1996 and as President and Chief Operating
Officer since July 28, 1998. Emerson reimbursed SSG $70,833 of the
amount included in "Salary" in the Summary Compensation Table for
fiscal 1998 in reimbursement of salary paid by SSG to Mr. Walker for
the benefit of Emerson. Emerson reimbursed SSG $35,000 of the
amount included in "Bonus" in the Summary Compensation Table for
fiscal 1997 in reimbursement of bonus paid by SSG to Mr. Walker for
the benefit of Emerson. Emerson has agreed to pay SSG an additional
$15,000 of this bonus amount. The amount in "Other Annual
Compensation" in the Summary Compensation Table for fiscal 1998
consists of the following: (i) country club related dues and
expenses of $16,071, (ii) automobile related expenses of $18,336 and
(iii) relocation expenses, including tax gross-ups relating to such
expenses, of $76,111. The amount in "Restricted Stock Awards" in
the Summary Compensation Table for fiscal 1998 relates to a grant of
50,000 shares of the Company's restricted common stock to Mr. Walker
(the "Restricted Shares"). The fair market value of the Restricted
Shares as set forth in the Summary Compensation Table was calculated
by multiplying 50,000 times $8.25, which was the closing market
price of the Company's common stock on the date of grant. 16,667 of
the Restricted Shares vested immediately. The balance of the
Restricted Shares is scheduled to vest in 24 equal monthly
installments, beginning February 15, 1998. The Restricted Shares
vest immediately upon a Change in Control of the Company, as defined
therein. Mr. Walker possesses all incidents of ownership to the
Restricted Shares, including the right to vote and receive dividends
on the Restricted Shares if any dividends are issued. Mr. Walker
also has certain registration rights relating to the resale of the
Restricted Shares. As of the end of fiscal 1998, Mr. Walker owned
41,819 Restricted Shares; 8,181 Restricted Shares were withheld to
satisfy tax obligations on the 27,779 Restricted Shares that vested
during fiscal 1998. The fair market value of the 41,819 Restricted
Shares at October 2, 1998 was $297,960. The amount in "Other Annual
Compensation" in the Summary Compensation Table for fiscal 1997
consists of the following: (i) $32,577 for initiation fees for a
country club plus monthly dues, (ii) automobile allowance of $9,000,
and (iii) relocation expenses, including tax gross-ups relating to
such expenses, of $89,228. See "Executive Compensation and Other
Information -- Employment Agreements." The amount in "All Other
Compensation" is comprised of matching 401(k) contributions. Mr.
Walker also received an interest free bridge loan in the amount of
$100,000 to be used toward the purchase of a residence in Texas.
The loan is due to be repaid on March 31, 1999. Such loan is not
reflected in the Summary Compensation Table. See "Executive
Compensation and Other Information -- Employment Agreements."
(3) Bonuses for the fiscal year-ended October 2, 1998 are not reflected
in this column because they were not calculable through the date of
this Proxy Statement.
<PAGE>
(4) Mr. Babilla has served as General Counsel since March 13, 1995,
Secretary since May 13, 1996 and Executive Vice President since
January 13, 1998. From September 1987 to March 1995, Mr. Babilla
was an attorney with the law firm of Hughes & Luce, L.L.P. in
Dallas, Texas. The amount in "Other Annual Compensation" in the
Summary Compensation Table for fiscal 1998 consists of country club
initiation fees and related dues of $36,821 and automobile related
expenses of $11,807. See "Executive Compensation and Other
Information-Employment Agreements." The amount in "All Other
Compensation" in the Summary Compensation Table for fiscal 1998 is
comprised of matching 401(K) contributions. Mr. Babilla was granted
options to acquire 25,000 shares of the Company's Common Stock in
fiscal 1995. All of Mr. Babilla's options granted in fiscal 1995
were repriced in fiscal 1996 and are, therefore required to be
reported as compensation in fiscal 1996. These stock options
permitted Mr. Babilla to elect for a period of 180 days following a
change in control (as defined in the option agreements governing the
options) to surrender to the Company for cancellation all or any
part of the unexercised portion of the option. In consideration of
such surrender and cancellation, Mr. Babilla was entitled to receive
for each share of Common Stock as to which the surrendered portion
of the option relates, an amount in cash equal to the difference
between the exercise price per share under the option and the
highest closing sales price per share of Common Stock during the 360
day calendar period prior to Mr. Babilla's election to surrender the
option as described in this paragraph. The execution, delivery and
performance of the Emerson Agreement were deemed to be a change in
control for purposes of these options. See "Certain Relationships
and Related Transactions." Mr. Babilla surrendered his options to
the Company on December 13, 1996 in exchange for $71,875. This
amount is reported in "All Other Compensation" in the Summary
Compensation Table for fiscal 1996.
(5) The agreements governing these stock options were amended in January
1998 to permit the optionee to elect for a period of 180 days
following a change in control (as defined in the option agreements
governing the options) to surrender to the Company for cancellation
all or any part of the unexercised portion of the option. In
consideration of such surrender and cancellation, the optionee will
be entitled to receive for each share of Common Stock as to which
the surrendered portion of the option relates, an amount in cash
equal to the difference between the exercise price per share under
the option and the highest closing sales price per share of Common
Stock during the 360 day calendar period prior to the optionee's
election to surrender the option as described in this paragraph.
(6) Adam Blumenfeld was Director of Youth Sales at the Company from
August 1, 1993 to December 31, 1994, Vice President of Youth Sales
from January 1, 1995 to January 15, 1998, and has been Vice
President of Sales and Marketing since January 16, 1998.
<PAGE>
(7) Mr. Peter Blumenfeld served as President and Chief Operating Officer
of the Company until his retirement on July 28, 1998. The Company
paid Mr. Peter Blumenfeld $898,650 upon his retirement (before taxes
and other deductions) pursuant to the terms of his Severance
Agreement. See "Executive Compensation and Other Information --
Severance Agreements." In addition, the Company paid Mr. Blumenfeld
$19,420 pursuant to the terms of a Consulting and Separation
Agreement dated to be effective as of July 28, 1998 (the "Consulting
Agreement"). Pursuant to the terms of the Consulting Agreement, the
Company has agreed to pay Mr. Blumenfeld approximately $9,700 per
month through July 31, 2000. The amount in "Other Annual
Compensation" in the Summary Compensation Table for fiscal 1998
consists of country club dues of $4,500 and automobile related
expenses of $9,542. The following amounts are included in "All
Other Compensation" in the Summary Compensation Table for fiscal
1998: (i) $898,650 paid in fiscal 1998 pursuant to Mr. Blumenfeld's
Severance Agreement; (ii) $233,034 accrued pursuant to the terms of
the Consulting Agreement; (iii) an automobile allowance of $1,908
that was paid after Mr. Blumenfeld's retirement, and (iv) $1,455 in
matching 401(k) contributions. Mr. Blumenfeld was granted an
option to acquire 35,000 shares of Common Stock during fiscal 1997.
In addition, options to acquire 244,325 shares of Common Stock
granted to Mr. Blumenfeld in prior fiscal years were repriced during
fiscal 1997 and are, therefore, required to be reported as
compensation during fiscal 1997. All of Mr. Blumenfeld's options
expired upon his retirement.
Option Grants During 1998 Fiscal Year
The following table provides information related to options granted to
the named executive officers during fiscal 1998.
<TABLE>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Individual Grants in Last Fiscal Year Appreciation for Option Term (1)
Number of % of Total
Securities Options/
Underlying SARs Grant
Options/ Granted to Exercise or Date
SARs Employees Base Market
Granted in Fiscal Price Price Expiration
Name (#) Year ($/Sh)(2) ($/Sh)(2) Date 0%($) 5%($) 10%($)
- ------------------- ------- -------- ------- ------ ---------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Terrence M. Babilla 100,000(3) 36% $7.50 $7.25 10/27/07 $-0- $11,250 $47,500
Adam Blumenfeld 45,000(4) 4% $7.50 $7.50 1/27/08 $-0- $16,875 $33,750
__________
</TABLE>
<PAGE>
(1) The potential realizable value portion of the foregoing table
illustrates value that might be realized upon exercise of the
options immediately prior to the expiration of their term, assuming
the specified compounded rates of appreciation on the Company's
Common Stock over the term of the options.
(2) The option exercise price may be paid (a) in shares of Common Stock
previously owned by the executive officer, (b) by withholding shares
of Common Stock that would otherwise be issued upon exercise, (c) in
cash or (d) a combination of the foregoing.
(3) All of these options vest in 3 equal annual installments beginning
on March 31, 1998; provided, however, the options will vest
immediately upon a change in control (as defined in the option
agreements) of the Company.
(4) All of these options vest in 3 equal annual installments beginning
on January 16, 1999.
Option Exercises During 1998 Fiscal Year and Fiscal Year End Option
Values
The following table provides information related to options exercised by
the named executive officers during the 1998 fiscal year and the number
and value of options held at fiscal year end. The Company does not have
any outstanding stock appreciation rights.
<TABLE>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs Options/SARs
Acquired at FY-End at FY-End
on Value (#) ($)(1)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ---------------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Geoffrey P. Jurick --- --- 100,000/200,000 0/0
John P. Walker --- --- 33,333/66,667 (2) 0/0
Terrence M. Babilla --- --- 33,333/66,667 (2) 0/0
Adam Blumenfeld --- --- 111,800/45,000 $27,950/0
Peter S. Blumenfeld (3) --- --- 0/0 0/0
(3)
__________________
</TABLE>
<PAGE>
(1) The closing price for the Company's Common Stock as reported by the
New York Stock Exchange on October 2, 1998 was $7.13. Value is
calculated on the basis of the difference between $7.13 and the option
exercise price of "in the money" options, multiplied by the number of
shares of Common Stock underlying the option.
(2) The agreements governing these stock options were amended in January
1998 to permit the optionee to elect for a period of 180 days
following a change in control (as defined in the option agreements
governing the options) to surrender to the Company for cancellation
all or any part of the unexercised portion of the option. In
consideration of such surrender and cancellation, the optionee will be
entitled to receive for each share of Common Stock as to which the
surrendered portion of the option relates, an amount in cash equal to
the difference between the exercise price per share under the option
and the highest closing sales price per share of Common Stock during
the 360 day calendar period prior to the optionee's election to
surrender the option as described in this paragraph.
(3) All of Mr. Peter Blumenfeld's options terminated upon his retirement
on July 28, 1998. See "Certain Relationships and Related
Transactions."
Employment Agreements
Effective January 14, 1998, the Company entered into a three-(3)
year employment agreement with John P. Walker. Pursuant to Mr. Walker's
employment agreement, Mr. Walker receives base annual compensation
(subject to annual increases by the Board of Directors) of $290,000. The
employment agreement also provides for (i) an annual bonus equal to an
amount up to 30% of Mr. Walker's base salary upon attainment of the
Company's business plan and other agreed upon benchmarks, (ii) an
additional annual performance bonus to be approved at the discretion of
the Board of Directors, or a committee thereof, (iii) country club dues,
(iv) car allowance, (v) relocation expenses, including an interest free
bridge loan in the amount of $100,000 secured by the real estate
purchased, (vi) participation in the Company's health insurance plans,
and (vii) certain tax gross-ups. Mr. Walker's Employment Agreement also
provides for certain severance payments if Mr. Walker is terminated
without cause or constructively discharged prior to January 13, 2001.
The Company has also agreed to make available to Mr. Walker an interest
free loan for 6 months to purchase the shares of Common Stock underlying
his stock options, which loan would be secured by the shares of Common
Stock. Pursuant to Mr. Walker's employment agreement, Mr. Walker may
devote up to 33% of his working time fulfilling his obligations as an
officer of Emerson. During fiscal 1998, Emerson reimbursed the Company
$100,000 for Mr. Walker's salary and $50,000 for Mr. Walker's fiscal 1997
bonus. See "Executive Compensation and Other Information-Summary
Compensation Table."
<PAGE>
Effective October 18, 1997, the Company entered into an employment
agreement with Geoffrey P. Jurick, which employment agreement is
scheduled to expire on March 31, 2000. Pursuant to Mr. Jurick's
employment agreement, Mr. Jurick receives base annual compensation
(subject to increases by the Board of Directors) of $250,000. The
employment agreement also provides for (i) an annual bonus equal to an
amount up to 30% of Mr. Jurick's base salary upon attainment of the
Company's business plan and other agreed upon benchmarks, (ii) an
additional annual performance bonus to be approved at the discretion of
the Board of Directors or a committee thereof, (iii) the use of a Company
car and certain other benefits, such as participation in the Company's
health insurance plans, and (iv) certain tax gross-ups. Pursuant to Mr.
Jurick's employment agreement, Mr. Jurick may devote up to 50% of his
working time fulfilling his obligations as an officer of Emerson.
Effective January 14, 1998, the Company entered into a three-(3)
year employment agreement with Terrence M. Babilla. Pursuant to Mr.
Babilla's employment agreement, Mr. Babilla receives base annual
compensation (subject to annual increases by the Board of Directors) of
$220,000. The employment agreement also provides for (i) an annual bonus
equal to an amount up to 30% of Mr. Babilla's base salary upon attainment
of the Company's business plan and other agreed upon benchmarks, (ii) an
additional annual performance bonus to be approved at the discretion of
the Board of Directors, or a committee thereof, (iii) country club dues,
(iv) car allowance, (v) participation in the Company's health insurance
plans, and (vi) certain tax gross-ups. Mr. Babilla's Employment
Agreement also provides for certain severance payments if Mr. Babilla is
terminated without cause or constructively discharged prior to January
13, 2001. Pursuant to Mr. Babilla's employment agreement, Mr. Babilla
may devote up to 10% of his working time fulfilling his obligations as an
employee of Emerson and Emerson will pay any salary directly to Mr.
Babilla. See "Executive Compensation and Other Information-Summary
Compensation Table."
Effective January 16, 1998, the Company entered into a three-(3)
year employment agreement with Adam Blumenfeld. Pursuant to Mr. Adam
Blumenfeld's employment agreement, Mr. Adam Blumenfeld receives base
annual compensation (subject to annual increases by the Board of
Directors) of $125,000. The employment agreement also provides for (i)
an annual bonus upon attainment of the Company's business plan and other
agreed upon benchmarks, (ii) an additional annual performance bonus to be
approved at the discretion of the Board of Directors, or a committee
thereof, (iii) car allowance, and (iv) participation in the Company's
health insurance plans. Mr. Adam Blumenfeld's Employment Agreement also
provides for certain payments if Mr. Adam Blumenfeld is terminated
without cause or constructively discharged prior to January 16, 2001.
See "Executive Compensation and Other Information-Summary Compensation
Table."
<PAGE>
In February 1991, the Company entered into a five-year employment
agreement with Peter S. Blumenfeld. Mr. Blumenfeld's employment agreement
expired by its own terms on February 28, 1998. However, the employment
agreement also provided that if Mr. Blumenfeld was terminated without
cause (as defined) prior to December 10, 1999, Mr. Blumenfeld would be
entitled to receive payments under his Severance Agreement. Mr.
Blumenfeld retired on July 28, 1998 and was paid pursuant to the terms of
his Severance Agreement. Mr. Blumenfeld also entered into a Consulting
and Separation Agreement with the Company. See "Executive Compensation
and Other Information - Summary Compensation Table; - Severance
Agreements." See also "Certain Relationships and Related Transactions."
The Company may terminate its obligations under the applicable
employment agreements if the employee covered by the employment agreement
is discharged for cause (as defined in such agreements). Each of the
foregoing employees may be discharged without cause, provided the Company
continues to pay the remaining compensation payments due under the
agreements. Each of the foregoing employees may terminate their
employment prior to expiration of the agreements and, if the Company has
not breached any provision of the agreements, the Company will be
required to pay only the compensation earned to the date of termination.
Any amount payable upon termination will reduce amounts payable under Mr.
Walker's and Mr. Babilla's Severance Agreements described below.
Severance Agreements
The Company has entered into a Severance Agreement with Messrs.
Peter Blumenfeld, Walker and Babilla. Upon a change in control of the
Company, each of the Severance Agreements becomes effective for three
years. The execution, delivery and performance of the Emerson Agreement
resulted in a change in control under Messrs. Blumenfeld's and Babilla's
Severance Agreements. See "Certain Relationships and Related
Transactions."
After a change in control, the Company may terminate the employee's
employment only by reason of the employee's death or disability or for
cause (as defined in the agreements). The employee is entitled to cash
severance compensation from the Company if the Company terminates the
employee's employment for any other reason after a change in control, or
if the employee resigns after a change in control and any one of the
following events has occurred: (a) an adverse change in the nature or
scope of the employee's position with the Company; (b) a reduction in the
employee's salary, bonus or incentive compensation or a significant
reduction in other monetary or nonmonetary benefits to which the employee
was entitled; (c) a good faith determination by the employee that a
change in circumstances has significantly affected his position, or that
a change in the composition or policies of the Board of Directors, or
such other material event, has substantially rendered such employee
unable to carry out or perform his position with the Company; (d) the
Company has required the employee to relocate or travel significantly
more than prior to the change in control; or (e) the Company has
committed any material breach of the agreement.
<PAGE>
The cash severance compensation is equivalent to 299% of the sum of:
(a) the highest annual salary of the employee during the period of
employment commencing on the day prior to a change in control and
continuing until expiration of the agreement or the employee's salary
immediately prior to the change in control, whichever is larger; and (b)
bonuses or incentive compensation paid by the Company in the preceding
fiscal year. The severance compensation is generally designed to
compensate for the loss of the employee's compensation, including salary
and bonuses, less any amounts the payment of which might cause adverse
consequences under federal income tax laws (as described in the
agreements). On July 28, 1998 the Company paid Mr. Peter Blumenfeld
$898,650 upon his retirement (before taxes and other deductions) pursuant
to the terms of his Severance Agreement. In addition, the Company and
Mr. Peter Blumenfeld entered into a Consulting and Separation Agreement
dated to be effective as of July 28, 1998 (the "Consulting Agreement").
Pursuant to the terms of the Consulting Agreement, the Company has agreed
to pay Mr. Blumenfeld approximately $9,700 per month through July 31,
2000. See "Executive Compensation and Other Information - Summary
Compensation Table." As of November 25, 1998, the maximum aggregate
contingent liability under the named executive officers' severance
agreements was approximately $2,267,500.
Anti-Takeover Effect of Certain Provisions
The provisions of the option agreements and Mr. Walker's restricted
stock agreement that include change-in-control provisions, employment
agreements and severance agreements may be deemed to have an anti-
takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder may consider to be in the
stockholder's best interest, including attempts that might result in a
premium over the market price for shares held by stockholders.
Compensation Committee Interlocks and Insider Participation In
Compensation Decisions
The Compensation Committee is responsible for recommending to the
Board of Directors compensation arrangements for the Company's Chairman
of the Board and Chief Executive Officer, which recommendation is subject
to the approval of a majority of the disinterested directors. The
Chairman of the Board was responsible for establishing compensation
arrangements for all other executive officers, subject to the review and
approval of the Board of Directors. During fiscal 1998, Peter G. Bunger
and Johnson C.S. Ko served as members of the Company's Compensation
Committee.
Geoffrey P. Jurick serves as Chairman of the Board and Chief
Executive Officer of the Company and Emerson. John P. Walker serves as
President, Chief Operating Officer and Chief Financial Officer of the
Company and Executive Vice President and Chief Financial Officer of
Emerson. Mr. Walker is also a director of the Company. Mr. Bunger, who
is a director of the Company and Emerson, serves on the Compensation
Committee of the Company and Emerson. The following executive officers,
who were also members of the Board of Directors during fiscal 1998,
participated in deliberations concerning executive officer compensation:
Geoffrey P. Jurick, Peter S. Blumenfeld and John P. Walker. Peter S.
Blumenfeld is no longer an officer or director of the Company. See
"Certain Relationships and Related Transactions."
<PAGE>
Report of the Compensation Committee and Stock Option Committee on
Executive Compensation
During fiscal 1998 the Company's Compensation Committee, Chairman of
the Board, and the Stock Option Committee shared the responsibility for
establishing and administering the Company's executive compensation
programs. The Compensation Committee had responsibility for determining
compensation to be paid to the Chairman of the Board and Chief Executive
Officer, subject to the approval of a majority of the disinterested
directors. The Stock Option Committee had responsibility for
administering the Company's Stock Option Plan, including authority
regarding the selection of award recipients and the size and terms of all
option grants under the Option Plan. The Chairman of the Board, subject
to review and approval by the Board of Directors, determines on an annual
basis the compensation to be paid to the executive officers of the
Company. Under the supervision of the Compensation Committee and the
Board of Directors, the Company developed and implemented compensation
policies, plans and programs that sought to enhance the profitability of
the Company, and thus stockholder value, by aligning closely the
financial interests of the Company's executives with those of its
stockholders. The specific objectives of the Company's executive
compensation program were to:
. Support the achievement of the Company's strategic operating
objectives.
. Provide compensation at competitive levels that will attract and
retain superior talent and reward executive officers based upon
performance.
. Align the executive officers' interests with the success of the
Company by placing the majority of pay increases at risk (i.e.
increases that are dependent upon Company performance).
The Company's executive officer compensation program for fiscal
1998 was comprised of base salary, cash bonuses and long-term incentive
compensation in the form of stock options and restricted stock.
Base salaries for the executive officers of the Company represent
compensation for the performance of defined functions and assumption of
defined responsibilities. The Compensation Committee reviews the base
salary for the Chairman of the Board and Chief Executive Officer on an
annual basis and recommends compensation arrangements for the Company's
Chairman of the Board and Chief Executive Officer. Implementation of the
Chairman and Chief Executive Officer's compensation arrangement is
subject to the approval of a majority of the disinterested directors.
The Chairman of the Board reviews the base salary of all the other
executive officers on an annual basis and recommends compensation
arrangements to the Board of Directors for such executive officers. In
determining salary adjustments, the Compensation Committee and the
Chairman of the Board consider the Company's growth in earnings and
revenues, the reduction in expenses, the Company's results of operations
as compared to the Company's business plan, and each executive's
performance level, as well as other factors relating to the executive's
specific responsibilities. Also considered are the executive's
positions, experience, skills, potential for advancement, responsibility
and current salary in relation to the expected level of pay for the
position(s) in which the executive serves. The Compensation Committee
(with respect to compensation arrangements for the Chairman and Chief
<PAGE>
Executive Officer) and the Chairman (with respect to compensation
arrangements for the other executive officers) exercise their judgment
based upon the above criteria and do not apply a specific formula or
assign a weight to each factor considered. The Company has entered into
employment agreements with each of Messrs. Jurick, A. Blumenfeld, Walker
and Babilla. See "Executive Compensation and Other Information --
Employment Agreements."
At the beginning of each fiscal year, management submits a business
plan to the Board of Directors and the Compensation Committee. The
business plan establishes performance goals of the Company for such
fiscal year. Such goals may include target increases in sales, net
income and earnings per share, reduction in expenses, as well as more
subjective goals with respect to marketing, product introduction and
expansion of customer base. Cash bonuses are paid based upon successful
achievement of some or all of the foregoing factors.
Bonuses for the fiscal year ended October 2, 1998 are not reflected
in the Summary Compensation Table because they were not calculable
through the date of this Proxy Statement. However, the Employment
Agreements described above provide for an annual bonus upon attainment of
the Company's business plan and other agreed upon benchmarks as well as
an additional annual bonus to be approved at the discretion of the Board
of Directors or a committee thereof. See "Executive Compensation and
Other Information-Employment Agreements."
The award of options to purchase Company Common Stock and the grant
of shares of restricted stock forms the basis for the Company's long-term
incentive plan for officers and key employees. Awards of stock options
have been made during the current fiscal year from the Option Plan
administered by the Stock Option Committee. The shares of restricted
stock issued to Mr. Walker during fiscal 1998 were approved by the
Compensation Committee. The specific objective of all awards is to align
executive and stockholder long-term interests by creating a strong
correlation between executive pay and stockholder return. The Company
intends that its executives develop and maintain a significant, long-term
stock ownership position in the Company's Common Stock. During fiscal
1998, executive officers were granted options to purchase 145,000 shares
of Common Stock and 50,000 shares of restricted stock. The Stock Option
Committee arbitrarily determined the number of stock options granted to
the executive officers. The Compensation Committee arbitrarily
determined the number of shares of restricted stock issued to the
executive officers.
The Company paid Mr. Jurick, the Chief Executive Officer, $250,000
in base salary during fiscal 1998. The salary paid to Mr. Jurick in
fiscal 1998 was subjectively established by the Compensation Committee
and not subject to specific criteria.
<PAGE>
The Board of Directors has considered the potential impact of
Section 162(m) of the Code. Section 162(m) of the Code generally
provides that a publicly held corporation's deduction for compensation
paid to its covered employees is limited to $1 million per year, subject
to certain exceptions. Since the cash compensation of each of the
Company's current covered employees is below the $1 million threshold and
the Amended and Restated Stock Option Plan has been revised to meet the
requirements of Section 162(m) of the Code, the Board of Directors
believes that Section 162(m) will not reduce the federal income tax
deduction available to the Company. The Company's policy is to qualify,
to the extent reasonable, its executive officers' compensation for
deductibility under applicable tax laws. However, the Board of Directors
believes that its primary responsibility is to provide a compensation
program that will attract, retain and reward the executive talent
necessary to the Company's success. Consequently, the Board of Directors
recognizes that the loss of a tax deduction could be necessary in some
circumstances.
This report is submitted by the members of the Board of Directors,
the Compensation Committee and the Stock Option Committee that were in
existence at the end of fiscal 1998:
Board of Directors Compensation Committee Stock Option Committee
Geoffrey P. Jurick Peter G. Bunger Thomas P. Treichler
John P. Walker Johnson C.S. Ko Johnson C.S. Ko
Peter G. Bunger
Johnson C.S. Ko
Thomas P. Treichler
This report will not be deemed to be incorporated by reference in
any filing by the Company under the Securities Act of 1933 (the
"Securities Act") or the Exchange Act, except to the extent that the
Company specifically incorporates this report by reference.
Corporate Performance Graph
The following graph shows a comparison of cumulative total returns
for the Company, the S&P 500 Composite Index and an index of peer
companies selected by the Company for the period since September 30,
1993. The comparison assumes $100 was invested on September 30, 1993 in
the Company's Common Stock and in each of the two indices and assumes
reinvestment of dividends. Companies in the peer group are as follows:
K2, Inc. (f/k/a Anthony Industries, Inc.), Escalade, Inc., Johnson
Worldwide Associates, Inc. and Genesis Direct. Genesis Direct, a mail
order company that went public in March 1998 was added to the Peer Group
Index for the first time and replaces Ajay Sports, Inc., which was
recently delisted. Media General Financial Services provided the
information in the graph.
<PAGE>
<TABLE>
COMPARE 5-YEAR OF CUMULATIVE TOTAL RETURN
AMONG SPORTS SUPPLY GROUP, INC.,
S&P 500 INDEX AND PEER GROUP INDEX
[PERFORMANCE GRAPH]
FISCAL YEAR ENDING
09/30/93 09/30/94 09/30/95 09/30/96 09/30/97 09/30/98
<S> <C> <C> <C> <C> <C> <C>
SPORT SUPPLY GROUP 100.00 99.56 90.36 40.74 57.87 52.78
PEER GROUP INDEX 100.00 118.83 120.29 131.62 137.85 104.81
S&P 500 INDEX 100.00 103.69 134.53 161.89 227.38 247.94
</TABLE>
The Customer Selected Stock List is made up of the following securities:
Escalade Inc.
Genesis Direct Inc.
Johnson Worldwide Assoc.
K2 Inc.
The stock price performance depicted in the above graph is not
necessarily indicative of future price performance. The Corporate
Performance Graph will not be deemed to be incorporated by reference in
any filing by the Company under the Securities Act or the Exchange Act,
except to the extent that the Company specifically incorporates the graph
by reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Emerson, one of the nation's largest volume consumer electronics
distributors, directly and through subsidiaries, designs, sources,
imports and markets a variety of video and audio consumer electronics and
microwave oven products. On August 1, 1996, Emerson and Emerson Radio
HK, filed a Schedule 13D with the SEC. Pursuant to the Schedule 13D,
Emerson HK reported that it acquired 669,500 shares of the Company's
Common Stock (the "Initial Shares").
On December 10, 1996, Emerson acquired directly from the Company (i)
an additional 1,600,000 shares of newly-issued Common Stock (the "New
Shares') for an aggregate consideration of $11,500,000, or approximately
$7.19 per share, and (ii) 5-year warrants to acquire an additional
1,000,000 shares of Common Stock at an exercise price of $7.50 per share,
subject to standard anti-dilution adjustments (the "Emerson Warrants")
for an aggregate consideration of $500,000. In addition, Emerson agreed
to arrange for foreign trade credit financing of $2 million for the
benefit of the Company to supplement the Company's existing credit
facilities.
Prior to the exercise of any of the Emerson Warrants, Emerson and
Emerson HK own approximately 30% of the issued and outstanding shares of
Common Stock. If Emerson exercises all of the Emerson Warrants, Emerson
will own approximately 38% of the issued and outstanding shares of Common
Stock.
Pursuant to a Registration Rights Agreement (the "Registration
Rights Agreement"), the Company granted to Emerson and Emerson HK certain
demand and incidental registration rights with respect to the resale of
the shares of Common Stock they own, as well as on the exercise and
resale of the shares of Common Stock Emerson may acquire under the
Warrant Agreement governing the Emerson Warrants.
<PAGE>
The total consideration paid by Emerson pursuant to the Emerson
Agreement was $12 million, of which $11,500,000 was attributable to the
1,600,000 New Shares and $500,000 was attributable to the Emerson
Warrants. The $12,000,000 purchase price was borrowed by Emerson from
Congress Financial Corporation ("Congress"), Emerson's United States
senior secured lender, under the terms of Emerson's existing credit
facility and in accordance with the terms of the consent obtained from
Congress. Pursuant to a Pledge and Security Agreement, Emerson pledged
to Congress the New Shares and the Emerson Warrants together with all
proceeds thereof and all dividends and other income and distributions
thereon or with respect thereto and all rights of Emerson to have the New
Shares (and any shares of Common Stock acquired through the exercise of
the Emerson Warrants as permitted by Congress) registered under the
Registration Rights Agreement. During fiscal 1998, Congress released its
lien on 1,100,000 of the New Shares.
The Company's Board of Directors now includes the following people
that are associated with Emerson: Geoffrey P. Jurick, who beneficially
owns approximately 60.5% of Emerson's issued and outstanding common stock
and is Emerson's Chairman, Chief Executive Officer and President;
John P. Walker, Emerson's Executive Vice President and Chief Financial
Officer; and Peter G. Bunger. Mr. Jurick is currently the Chairman of
the Board and Chief Executive Officer of the Company. Mr. Walker is
currently the President, Chief Operating Officer and Chief Financial
Officer of the Company. Mr. Bunger is a director of both companies and
serves on the Compensation Committee of each company. Mr. Jurick and Mr.
Walker have employment agreements with Emerson and the Company and split
their time between the two companies. Terrence M. Babilla, the Company's
General Counsel, also provides certain legal services to Emerson.
During fiscal 1997, the Company and Emerson entered into a
Management Services Agreement in an effort to utilize the Company's
excess capacity and to enable Emerson to reduce certain costs. The
Management Services Agreement implements a program whereby the Company
performs certain services for Emerson in exchange for a fee. The
services include human resources, banking, computer/management
information systems, payables management, warehouse services (including
subleasing warehouse storage space), provision of office space, design
services and financial management services. During fiscal 1998, Emerson
paid, or has agreed to pay, the Company $150,000 in reimbursement of
salary and bonus paid by the Company to Mr. Walker for the benefit of
Emerson. See "Executive Compensation and Other Information-Summary
Compensation Table." The Management Services Agreement may be terminated
by either party upon sixty-(60) day's prior notice. During fiscal 1998,
the Company invoiced Emerson approximately $604,000 for services provided
to Emerson, all of which has been paid.
In connection with the execution of his employment agreement with
the Company, John P. Walker, the Company's President, Chief Operating
Officer and Chief Financial Officer, agreed to relocate his residence to
the general locality of the Company's principal executive offices. To
assist in such relocation, the Company provided an interest-free bridge
loan of $100,000 to Mr. Walker to be secured by his new residence. The
term of the loan is due to be repaid on March 31, 1999.
<PAGE>
Pursuant to Emerson's bankruptcy restructuring plans on March 31,
1994, 30 million shares of Emerson's common stock were issued to GSE, FIN
and Elision (the "Affiliated Entities). The Affiliated Entities are all
affiliates of Geoffrey P. Jurick. Mr. Jurick is the Chairman of the
Board, Chief Executive Officer and President of Emerson, and the Chairman
of the Board and Chief Executive Officer of the Company, and a beneficial
owner of approximately 60.5% of the issued and outstanding shares of
Emerson's common stock. On June 11, 1996, a Stipulation of Settlement
and Order (the "Settlement Agreement") was executed, which settles
various legal proceedings in Switzerland, the Bahamas and the United
States. The Settlement Agreement provides for, among other things, the
payment by Mr. Jurick and his Affiliated Entities of $49.5 million to
various claimants of Mr. Jurick and the Affiliated Entities (the
"Creditors"), to be paid from the proceeds of the sale of certain of the
29,152,542 shares of Emerson common stock (the "Settlement Shares") owned
by the Affiliated Entities. In addition, Mr. Jurick is to be paid the
sum of $3.5 million from the sale of the Settlement Shares. The
Settlement Shares are to be sold over an indeterminate period of time by
a financial advisor, initially TM Capital (the "Advisor"). The Advisor
is formulating a marketing plan taking into consideration (i) the
interests of Emerson's minority stockholders, and (ii) the goal of
generating sufficient proceeds to pay the Creditors and Mr. Jurick as
quickly as possible. The Settlement Shares have been divided into two
pools. The Pool A Shares currently consist of 15,286,172 shares of
Emerson's common stock. The Pool B Shares currently consist of the
number of Emerson shares with respect to which Mr. Jurick must retain
beneficial ownership of voting power to avoid an event of default arising
out of a change of control of Emerson pursuant to the terms of Emerson's
Loan and Security Agreement with Congress and/or the Indenture governing
Emerson's 8-1/2% Senior Subordinated Convertible Debentures Due 2002 (the
"Debentures").
All of the Settlement Shares secure payment of the $49.5 million
owed to the Creditors on a first priority basis. Any Creditor may apply
to the Court for an order to terminate the Settlement Agreement if
certain events occur. Such events include, without limitation, delisting
of the Settlement Shares from a national securities exchange or a
determination that there is no reasonable prospect that the goals
contemplated by the Settlement Agreement can be achieved. In November
1997, Petra Stelling and Barclays Bank filed a Motion with the Court for
an Order (i) terminating the Settlement Agreement on the ground that
there is no reasonable prospect that the goals contemplated by the
Settlement Agreement can be accomplished, and (ii) granting the Creditors
authorization to exercise all the rights and remedies provided by the
Settlement and Pledge Agreements in the event of termination including
authorizing the Collateral Agent to sell the Emerson Shares to fund
payment of the settlement amount and to vote the Emerson Shares pending
such sale, directing the entry and release of the Consent Judgments,
authorizing Petra Stelling to enforce a judgment against Mr. Jurick in
Switzerland, and for such other relief as the Court deems appropriate.
If the Court enters an order terminating the Settlement Agreement, the
Creditors may take any action permitted by law to execute the Consent
Judgments given to them in connection with the Settlement Agreement to
collect the unpaid balance (including, without limitation, foreclosing on
the Settlement Shares). If the Creditors foreclose on the Settlement
Shares and such foreclosure results in a change of control (as defined in
the Indenture governing the Debentures) of Emerson, such foreclosure will
be deemed an event of default under Emerson's Senior Secured Credit
<PAGE>
Facility, entitling the holders to accelerate payment of such
indebtedness. In addition, if a change of control (as defined in the
Indenture governing the Debentures) occurs, each of the holders of the
Debentures, subject to the right of the Senior Secured Creditors to
impose a 120 day payment block, has the right to require Emerson to
repurchase its Debentures at the par value thereof plus accrued but
unpaid interest. Any such acceleration would have a material adverse
effect on Emerson and could result in a change of control of SSG.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Section 16(a)") requires the Company's officers and directors, and
persons who own more than 10% of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership
with the SEC and the New York Stock Exchange. Officers, directors and
greater than 10% stockholders are required by certain regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by
it, the Company believes that, during fiscal 1998, its officers,
directors and greater than 10% beneficial owners have complied with all
applicable filing requirements with respect to the Company's equity
securities, except Adam Blumenfeld was late in filing his Form 3.
STOCKHOLDER PROPOSALS
A proper proposal submitted by a stockholder in accordance with
applicable rules and regulations for presentation at the Company's next
annual meeting that is received at the Company's principal executive
office by August 19, 1999 will be included in the Company's proxy
statement and form of proxy for that meeting. If a stockholder desires
to bring a proposal before the next annual meeting and such proposal is
not timely submitted for inclusion in the Company's proxy statement, the
proposal must be received by the Company no later than November 2, 1999.
PERSONS MAKING THE SOLICITATION
The enclosed proxy is solicited on behalf of the Board of Directors
of the Company. The Company will pay the cost of soliciting proxies in
the accompanying form. Officers of the Company may solicit proxies by
mail, telephone or telegraph. Upon request, the Company will reimburse
brokers, dealers, banks and trustees, or their nominees, for reasonable
expenses incurred by them in forwarding proxy material to beneficial
owners of shares of the Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
Effective June 20, 1997, the Company appointed Ernst & Young LLP as
its independent auditors for the fiscal year ending September 26, 1997,
to replace the firm of Arthur Andersen LLP, who was dismissed as auditors
of the Company effective June 20, 1997. The decision to change auditors
was recommended by the Audit Committee of the Board of Directors and
approved by the Company's Board of Directors.
<PAGE>
The report of Arthur Andersen LLP on the Company's financial
statements for the year ended November 1, 1996 (which financial
statements are included in the Company's Annual Report on Form 10-K for
the fiscal year ended October 2, 1998) did not contain an adverse opinion
or a disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During the year ended November 1, 1996, and the subsequent interim
period prior to June 20, 1997, there were no disagreements with Arthur
Andersen LLP on any matter of accounting principles or practices,
financial statement disclosures, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen
LLP, would have caused it to make a reference to the subject matter of
the disagreements in connection with its reports.
The Company had not consulted with Ernst & Young LLP during the
fiscal year ended November 1, 1996, or subsequent interim periods prior
to June 20, 1997, on either the application of accounting principles or
the type of opinion Ernst & Young LLP might issue on the Company's
financial statements.
Ernst & Young LLP, independent certified public accountants, has
been selected by the Board of Directors as the Company's independent
auditor for the current year. A representative of Ernst & Young LLP is
expected to be present at the Annual Meeting, will have an opportunity to
make a statement if he desires to do so and is expected to be available
to respond to appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented
for action at the meeting other than the matters set forth herein.
Should any other matter requiring a vote of stockholders arise, the
proxies in the enclosed form confer upon the person or persons entitled
to vote the shares represented by such proxies discretionary authority to
vote the same in accordance with their best judgment in the interest of
the Company.
FINANCIAL STATEMENTS
The Company will provide a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended October 2, 1998 (exclusive of
exhibits), without charge, to each person to whom a copy of this Proxy
Statement is delivered, upon the written or oral request of such person.
Requests should be directed to Investor Relations (Attention: John P.
Walker), Sport Supply Group, Inc., 1901 Diplomat Drive, Farmers Branch,
Texas 75234.
By Order of the Board of Directors,
/s/ Terrence M. Babilla
TERRENCE M. BABILLA
Secretary
<PAGE>
FRONT OF PROXY CARD
SPORT SUPPLY GROUP, INC.
Board of Directors Proxy for the Annual Meeting
of Stockholders at 2:00 p.m., Friday, January 29, 1999
Bent Tree Country Club
5201 Westgrove Drive
Dallas, Texas 75248
The undersigned stockholder of Sport Supply Group, Inc. (the
"Company") hereby appoints Geoffrey P. Jurick and John P. Walker, or
either of them, as proxies, each with full powers of substitution, to
vote the shares of the undersigned at the above-stated Annual Meeting and
at any adjournment(s) thereof.
(Continued on reverse side)
<PAGE>
BACK OF PROXY CARD
(1) To elect five directors for a one-year term
FOR all nominees listed below WITHHOLD AUTHORITY
(except as provided to the to vote for all
contrary below) [ ] nominees below [ ]
Geoffrey P. Jurick, John P. Walker, Peter G. Bunger, Johnson
C.S. Ko, and Thomas P. Treichler.
(INSTRUCTION: To withhold authority to vote for any individual
nominee(s), write that nominee's name on the space
provided below):
(2) To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL
BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE HEREON. IF A CHOICE
IS NOT INDICATED WITH RESPECT TO ITEM (1), THIS PROXY WILL BE VOTED "FOR"
SUCH ITEM. THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY
MATTER REFERRED TO IN ITEM (2). THIS PROXY IS REVOCABLE AT ANY TIME
BEFORE IT IS EXERCISED.
Receipt herewith of the Company's 1998 Annual Report and Notice of
Meeting and Proxy Statement, dated December 17, 1998, is hereby
acknowledged.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN, DATE AND MAIL TODAY.
Dated:
____________________________________
____________________________________
____________________________________
(Signature of Stockholder(s))
(Joint owners must EACH sign.
Please sign EXACTLY as your
name(s) appear(s) on this card.
When signing as attorney,
trustee, executor, administrator,
guardian or corporate officer,
please give your FULL title.)
<PAGE>
December 9, 1998
Dear Shareholders:
As you may be aware, there have been substantial changes at Sport Supply
Group over the last several years. It has been my pleasure and privilege
to have been a part of these changes as executive vice president, chief
financial officer and director, which have resulted in successfully
restoring the company to growth and profitability. Now, as president of
Sport Supply, I want to personally introduce myself and lay out to you
the opportunities that lie before us and our strategy to turn these
opportunities into value for our shareholders.
First, I would like to summarize what we have accomplished in the past
two years:
. Increased net earnings by approximately 700%
. Increased earnings before income tax (EBIT) by approximately 800%
. Grew revenue by 23%
. Divested unprofitable operations
. Reduced debt (using cash flow) from 45% to 6% of total capital
. Increased cash flow per share from $0.36 to approximately $1.00
Essentially, we restructured Sport Supply Group to allow for growth while
keeping fixed costs relatively flat. In addition, we reduced the
company's debt load, which put our capital structure in great shape.
Since the first of 1997, we grew sales from $79.1 million to $97.3
million with less debt, meaning we moved products through our
distribution pipeline faster and more efficiently. We believe our profit
margins will continue to grow as a result of the full realization of
programs initiated in 1998 and others under development and planned for
1999.
Now our plan focuses on generating higher sales growth. We are excited
about the programs being implemented today that should achieve our target
of 15% annual sales growth. These strategies include:
Pursuing new, high-growth institutional sport and fitness niche markets.
We have entered two new markets. First, youth sports and physical
education, including early childhood development facilities, represent a
$2.3 billion market growing at 25%+ annually. Second, with the ATEC
acquisition, we are experiencing similar sales growth in baseball
pitching machines, accessories and other product line developments.
Rapidly evolving from a passive catalog-order business to an aggressive
sales organization. Once selling only through direct-mail catalogs, we
have built a national sales force of 25 professionals who develop,
monitor and enhance customer relations and sales. The company also
employs marketing programs such as physical fitness "edu-tainment"
seminars (using our equipment), team fund raisers to help purchase
uniforms and equipment, customer advisory boards on products and
practices, and other programs that actively involve our customers.
Introducing new and broader product lines. We are also building sales
with exclusive new product lines under such name brands such as
MacGregor, Huffy, Champion and ATEC.
<PAGE>
Capturing market share through competitive pricing and enhanced customer
service. Since we manufacture 40% of our merchandise, and negotiate high
volume purchasing discounts on the balance of our products, Sport Supply
is extremely price competitive while still able to generate operating
margins of 11%. As well, we believe we are a leader in customer service
because of internal quality and manufacturing controls, along with a
staff devoted to following through and getting it right.
Making acquisitions to gain market share and add products lines. In a
$5.5 billion market comprised of numerous regional dealers and retailers,
Sport Supply is always pursuing additional acquisition opportunities.
With long-term debt of only $5.2 million and cash flow of nearly $1.00
per share in 1998, we have the financial capacity to fund targeted
opportunities.
In addition, we have made a substantial investment in hardware and
software, so that by early 1999 we will be fully internet capable. This
means we will be able to open new customer accounts, take orders, provide
product specifications, and communicate with our customers in every way
over the internet. We expect to be one of the first companies in our
industry to be able to completely service institutional accounts by way
of the internet. Our site is currently open and I invite you to visit us
at www.sportsupplygroup.com.
I am excited to be a part of the revitalized vision of success at Sport
Supply. With the company re-focused on its core business, our plan is to
become the most convenient and reliable one-stop sports equipment
supplier to the institutional market through catalog, direct and internet
sales channels. We have set very aggressive goals for the company and,
based on our accomplishments thus far, we have every reason to believe in
our success.
I, and everyone at Sport Supply, thank you for your continued support and
interest, and look forward to sharing with you our success in 1999 and
into the new century. In addition, our 1999 Annual Shareholder meeting
will be conducted January 29, 1999 at Bent Tree Country Club in Dallas,
Texas. We welcome you to attend and look forward to meeting you personally.
Respectfully,
/s/ John P. Walker
John P. Walker
President and Chief Operating Officer
