UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934. (NO FEE REQUIRED EFFECTIVE OCTOBER 7, 1996)
For the fiscal year ended January 31, 1997
[ ] 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 NO. 1-13322
JUMBOSPORTS INC.
(Exact name of registrant as specified in its charter)
FLORIDA 52-1643157
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4701 W. HILLSBOROUGH AVENUE
TAMPA, FLORIDA 33614
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 886-9688
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
--------------------------------------- -----------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
-------------------
4 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2000
----------------------------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 7, 1997, was $119.5 million. The number of shares of
the registrant's common stock outstanding as of March 7, 1997, was 20,339,409.
<TABLE>
Documents Incorporated by Reference
-----------------------------------
<S> <C>
Proxy Statement for Annual Meeting of Stockholders to be held June 4, 1997........................Part III
</TABLE>
================================================================================
<PAGE>
As used in this Annual Report on Form 10-K/A, unless the context requires
otherwise, the terms the "Company" and "JumboSports" refer to JumboSports Inc.
and its operating subsidiaries.
PART 1
ITEM 1. BUSINESS
GENERAL
JumboSports is a specialty retailer of quality name brand sporting
equipment, athletic footwear and apparel, operating 85 big-box sporting goods
superstores in 65 markets and 29 states. The Company's business strategy is to
offer its customers the best overall value in sporting goods through a wide
assortment of quality name brand merchandise, superior customer service and
competitive prices. The Company's superstores average approximately 50,000 gross
square feet. JumboSports has located stores in Standard Metropolitan Statistical
Areas with populations as small as 200,000 and as large as 3,000,000.
As of January 31, 1997, the Company employed approximately 5,000 people.
None of the Company's associates are covered by collective bargaining
agreements. The Company believes that its relationships with its associates are
good. Over the past 5 years, the Company has experienced significant growth,
almost quadrupling its store base from 24 to 85 and gross square footage from
997,000 to 4,257,000. During Fiscal 1996, new management halted store expansion
activity in order to concentrate on developing the infrastructure necessary to
better manage its business.
The infrastructure improvements include: a single name for all its stores
in order to create brand identity and achieve certain advertising efficiencies;
a comprehensive information management system which integrates store operations,
merchandising, distribution and financial management; a centralized
cross-docking facility to reduce costs and enhance inventory management; and a
focused strategy of operating stores in markets in which the Company can achieve
desired market share along with advertising and operating efficiencies.
No new stores are currently planned to open in fiscal 1997; however, the
Company has re-instituted activities to insure new stores begin opening again in
fiscal 1998. The Company is currently developing a new prototype which will be
incorporated into an existing store this fall. The prototype will then be used
for all future new stores as well as store remodels. The Company believes it has
established a reputation with the consumer as a premier retailer of hard-lines
(equipment required to participate in sports and recreational activities ie:
baseball bats, footballs, etc.) sporting goods. While an emphasis on improving
soft-lines (athletic, team logo and casual apparel and athletic and casual
footwear) presentations will be inherent in the prototype, the new design will
not abandon a hard-lines emphasis.
The Company's merchandising strategy is to offer both breadth and depth of
selection in quality name brand sporting goods in each of its product
categories. Each store offers approximately 70,000 stock keeping units ("SKUs")
across 23 major departments and over 200 subdepartments. The Company believes
that its customer service levels and merchandise presentation allow it to offer
quality name brands, some of which are not currently carried by other sporting
goods competitors. The Company's target customer ranges from the frequent sports
enthusiast to the casual sporting goods customer.
The sporting goods retail business is seasonal in nature with the fourth
quarter (Christmas selling season) representing approximately 30% of sales for a
JumboSports store that is open for the entire year. The average maturity and
geographic dispersion of the Company's store base may impact this percentage in
the future. The Company operates in one business segment. See Item 6, Selected
Financial Data, for financial information.
INDUSTRY AND COMPETITION
Management believes that certain characteristics and competitive factors of
the sporting goods industry make it particularly well suited for the Company's
big-box format. These characteristics and factors include a large and growing
market, fragmented competition, limited assortments offered by traditional
outlets for sporting goods, customer preference for one-stop shopping
convenience and the growing importance of delivering value to the
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customer through selection, service and price. There are over 180 metropolitan
markets across the country that fit the Company's target criteria.
The Company purchases merchandise from over 1,000 vendors. In fiscal 1996,
the fifty highest volume vendors represented almost 60% of total merchandise
purchased. Nike, Inc. being the Company's largest vendor accounted for 13.5% of
total merchandise purchased. The Company does not maintain any long-term or
exclusive commitments or arrangements to purchase from any vendor. The Company
is one of the largest customers for many of its vendors.
While JumboSports' competition differs by market, management generally
classifies its competition within one of the following categories:
Traditional and Specialty Sporting Goods Retailers. This category includes
traditional sporting goods chains (e.g., Gart Brothers, Oshman's), specialty
sports stores (e.g., Foot Locker, Champs) and local sporting goods retailers
(e.g., local independent stores, pro shops). These stores typically range in
size from the small 1,000 square foot pro shops to the larger 20,000 square foot
traditional sporting goods chains. The traditional and specialty sporting goods
retailers are primarily located in regional malls, strip shopping centers, local
country clubs and resorts. The traditional chains and local sporting goods
stores typically carry a varied assortment of merchandise; however, the size of
their stores limits the breadth and depth of selection. The specialty stores and
pro shops often carry a wide assortment of one specific product category, such
as athletic shoes, fishing gear, golf or tennis equipment. In general, the
traditional and specialty sporting goods retailers offer a more limited
selection at higher prices than JumboSports.
Mass Merchandisers. This category includes discount stores (e.g., Wal-Mart,
Kmart) and department stores (e.g., Sears). These stores range in size from
approximately 50,000 to 200,000 square feet and are primarily located in
regional malls and strip shopping centers in markets across the country.
Sporting goods merchandise and apparel represent only a portion of the total
merchandise sales in these stores and generally reflect a more limited selection
with fewer high quality name brands. Although generally price competitive, these
stores have limited customer service since the store personnel generally lack
technical expertise in selling sporting goods.
Big-Box Sporting Goods Chains. This category includes the "category killer"
sporting goods retailers (e.g. Sports Authority, SportMart) more directly
comparable to JumboSports. The big-box stores range in size from 35,000 to
100,000 square feet and offer a selection of sporting goods merchandise and
apparel of 50,000 to 125,000 sku's. These stores compete on selection and depth
of high quality merchandise and on the basis of price; certain operators are
able to attract higher-end brands not carried by other competitive channels of
distribution.
The Company believes that although it will continue to face competition
from retailers in all three of the categories referred to above, over the long
term the most significant competition will be from the big-box sporting goods
retailers. Of the Company's 85 stores, approximately 28 do not presently face
competition from such big-box sporting goods retailers. Management expects it
will face additional competition in new and existing markets from big-box stores
over the next few years.
ENVIRONMENTAL
Compliance with federal, state and local environmental laws and regulations
has not had, and is not expected to have, a material effect on the capital
expenditures, earnings and competitive position of the company.
ITEM 2. PROPERTIES.
As of January 31, 1997, the Company operated 85 retail stores in 29 states
(9 in Florida, 2 in Alabama, 1 in Arkansas, 3 in Arizona, 1 in California, 3 in
Colorado, 1 in Delaware, 3 in Georgia, 2 in Illinois, 2 in Iowa, 2 in Indiana, 2
in Kansas, 3 in Kentucky, 5 in Louisiana, 4 in Michigan, 1 in Mississippi, 1 in
Missouri, 4 in North Carolina, 2 in Nebraska, 1 in Nevada, 3 in New York, 5 in
Ohio, 3 in Oklahoma, 1 in Pennsylvania, 3 in South Carolina, 5 in Tennessee, 8
in Texas, 4 in Virginia and 1 in Wisconsin) and its Corporate Headquarters in
Tampa, Florida. The Company owns 60 stores and leases the other 25 of its 85
retail stores. Two of the 25 leases are capital leases. The primary lease terms
are for 10 to 20 years, with options to renew ranging from two to four
additional five-year terms.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is from time to time involved in routine litigation incidental
to the conduct of its business. The Company believes that no such currently
pending routine litigation to which it is a party will have a material adverse
effect on its financial condition or results of operations.
In March 1995, two identical actions were filed against the Company, its
executive officers and certain of its directors. During fiscal 1995, the two
actions were merged into one class action suit. The complaint purportedly
brought on behalf of purchasers of the Company's common stock from July 14, 1994
through March 13, 1995 ("the class period"), asserted claims under the federal
securities laws, and alleged that the Company artificially inflated the price of
its common stock during the class period. On October 21, 1996, the parties
submitted a stipulation of settlement without admission of liability to the
court. By the terms of the settlement, a class will be certified by the court
and pro rata payments in the total amount of $6,250,000 will be made to the
class members submitting claims. Of this amount, $3,375,000 will be funded by
the Company's insurance carrier and the balance funded by the Company. These
payments have already been deposited in an escrow account subject to final
approval of the settlement by the court. On February 28, 1997, the United States
District Court, Middle District of Florida, entered an order preliminarily
approving the settlement and scheduling a hearing for final approval on June 5,
1997. As of the date of this report, no objections have been made to the
settlement.
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.
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "JSI". Prior to February 20, 1997, the stock was traded under the
symbol "WON". The following table reflects the range of high and low selling
prices of the Company's Common Stock by quarter over the past two fiscal years.
<TABLE>
<CAPTION>
Fiscal 1995 High Low
-------------- ------ ------
<S> <C> <C>
First Quarter 24.000 11.125
Second Quarter 15.000 10.250
Third Quarter 13.875 7.000
Fourth Quarter 8.875 5.000
Fiscal 1996 High Low
-------------- ------ ------
First Quarter 8.250 4.250
Second Quarter 10.500 6.625
Third Quarter 9.875 6.750
Fourth Quarter 10.125 6.000
</TABLE>
The Company did not pay any dividends during the last two fiscal years (see
Management's Discussion & Analysis - Liquidity and Capital Resources regarding
dividend prohibitions). The approximate number of stockholders of record as of
January 31, 1997 was 335, and as of that date, the Company estimates that there
were approximately 6,300 beneficial owners holding stock in nominee or "street"
name.
During fiscal 1996 certain officers of the Company purchased shares of the
Company's common stock, which purchases the Company facilitated by providing
"stock purchase assistance loans" at the then current federal long-term rate
(within the meaning of Section 1274 (d) (1) (A) of the Internal Revenue Code of
1986, as amended),
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pursuant to the terms of such officers' employment agreements. These stock
purchase transactions were as follows: 50,000 shares at $5.000 per share on
April 30, 1996; 30,000 shares at $6.875 per share on June 28, 1996; 31,000
shares at $7.375 per share on January 10, 1996, and 6,600 shares at $6.875 per
share on August 21, 1996. All of these sales of the Company's common stock were
exempt from registration under Section 4 (2) of the Securities Act of 1933.
5
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
January 31, January 30, January 29, January 28, January 31,
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
"Fiscal Year" "1992" "1993" "1994" "1995" "1996"
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Sales $ 167,355 $ 239,301 $ 383,600 $ 525,762 $ 624,019
Cost of sales including buying
and occupancy costs 125,486 177,242 283,908 395,208 505,062
----------- ----------- ----------- ----------- -----------
Gross profit 41,869 62,059 99,692 130,554 118,957
Selling, general and administrative expenses 29,022 42,779 69,207 106,233 124,918
Vesting of performance shares 908(1)
Non-recurring and other charges 2,096 22,568
----------- ----------- ----------- ----------- -----------
Income (loss) from operations 11,939 19,280 30,485 22,225 (28,529)
Interest expense, net 3,263 863 4,815 11,254 19,890
----------- ----------- ----------- ----------- -----------
Income (loss) before provision (benefit)
for income taxes and extraordinary item 8,676 18,417 25,670 10,971 (48,419)
Provision (benefit) for income taxes 3,206 7,101 9,775 3,975 (17,875)
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item 5,470 11,316 15,895 6,996 (30,544)
Extraordinary item (less applicable
income tax benefit) (417)(2) (181)(2)
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 5,053 $ 11,316 $ 15,714 $ 6,996 $ (30,544)
=========== =========== =========== =========== ===========
Net income (loss) per share
before extraordinary item $ 0.39(3) $ 0.62(4) $0.84(4) $ 0.35(4) (1.53)(4)
Net income (loss) per share $ $0.36(3) $ 0.62(4) $0.83(4) $ 0.35(4) (1.53)(4)
Average number of shares outstanding 13,987,924 18,120,103 18,844,412 20,062,155 19,984,993
Ratio of earnings to fixed charges 2.88 5.96 3.61 1.61 N/M
SELECTED OPERATING DATA:
Stores open at end of period 24 39 56 80 85
Total gross square feet of store space 977,000 1,699,450 2,626,600 3,996,920 4,257,000
Average gross square feet per store (5) 40,708 43,576 46,904 49,962 50,082
Comparable store sales increase (6) 11.6% 8.0% 9.6% 1.7% 0.1%
Capital expenditures $ 5,003 $ 55,331 $ 89,610 $ 60,738 $ 15,236
BALANCE SHEET DATA:
Working Capital $ 70,464 $ 101,046 $ 167,498 $ 190,974 $ 158,678
Total assets 133,858 233,220 389,852 484,843 525,586
Long-term debt, less current maturities 4,070 78,457 167,703 234,557 294,325
Total stockholders' equity 105,462 117,379 180,122 187,530 159,624
</TABLE>
(1) A non-recurring non-cash expense ($567 net of tax or $0.04 per share),
representing the unamortized balance of performance shares. These shares
vested upon the Company's initial public offering ("IPO") of Common Stock
in September 1992.
(2) The extraordinary item for the fiscal years ended January 31, 1993 and
January 29, 1995 relate to early redemption premiums incurred in connection
with the prepayment of certain liabilities.
(3) The Company had a material change in its capital structure as a result of
its IPO on September 16, 1992. See Note 10 of Notes to Consolidated
Financial Statements.
(4) The November 1993 issuance of 4 1/4% Convertible Subordinated Notes Due
2000 did not have a dilutive effect in Fiscal 1993, Fiscal 1994, Fiscal
1995 or Fiscal 1996. See Note 5 of Notes to Consolidated Financial
Statements.
(5) Average gross square feet per store represents the average square feet of
total store space at the end of each fiscal year.
(6) A store's sales growth is included in the comparable store sales
calculation after its twelfth full month of operation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Management's Discussion and Analysis contains forward-looking
statements. These forward-looking statements are subject to the inherent
uncertainties in predicting future results and conditions. Certain factors could
cause actual results to differ materially from those projected in these
forward-looking statements.
GENERAL
RESULTS OF OPERATIONS
The following table sets forth certain data as a percentage of sales for
the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------
January 29, 1995 January 28, 1996 January 31,1997
----------------------------------------------------
"Fiscal Year" "1994" "1995" "1996"
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Cost of sales
including buying
and occupancy costs 74.0 75.2 80.9
----- ----- -----
Gross profit 26.0 24.8 19.1
Selling, general and
administrative expenses 18.0 20.2 20.0
Non-recurring and other charges .4 3.7
----- ----- -----
Income (loss) from operations 8.0 4.2 (4.6)
Interest expense, net 1.3 2.1 3.2
----- ----- -----
Income (loss) before provision (benefit)
for income taxes and
extraordinary item 6.7 2.1 (7.8)
Provision (benefit) for income taxes 2.5 0.8 (2.9)
----- ----- -----
Income (loss) before extraordinary
item 4.2 1.3 (4.9)
Extraordinary item (less applicable tax
benefit) (0.1)
---- ----- -----
Net income (loss) 4.1% 1.3% (4.9)%
==== ===== =====
</TABLE>
In the second quarter of Fiscal 1996 the Company recorded one-time charges
of $55 million. The components are as follows:
<TABLE>
<S> <C>
Cost of Sales:
Inventory write down for shrink
and obsolete and slow moving merchandise $32.4
-----
Non-recurring and other charges:
Disposition of and impairment of
underperforming assets 11.4
Charges for certain loss contingencies 3.0
Other charges 8.2
-----
22.6
-----
Total $55.0
=====
</TABLE>
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The inventory write-down for shrink and obsolete and slow moving
merchandise of $32.4 million was comprised of a $24.3 million charge for the
write-down of inventory below cost and an additional $8.1 million charge for
merchandise inventory shrinkage. The Company recorded the inventory write-down
to correctly state the value of discontinued, obsolete and slow moving inventory
at a net realizable market value. The inventory for which these reserves were
established was sold during fiscal 1996. The establishment of these reserves did
not result in additional cash payments.
The $11.4 million charge for impairment of underperforming assets was
attributable to the write-off of undesirable retail sites and impairment of
other sites of $5.2 million and the write-off of assets as the result of
organizational changes of $6.2 million. The establishment of these reserves did
not result in additional cash payments.
The write-off of undesirable retail sites was for new store projects that
were deemed undesirable. The sites were deemed undesirable based on proforma
operating income projections. The operating income projections revealed sites
which, in the opinion of new management, would not achieve or maintain the
Company's minimum requirements for return on investment.
The charge for impairment of other sites was for nearly-completed retail
sites that were also deemed undesirable based on proforma operating income
projections. The impairment was determined based on the net realizable sale
value of the sites. The establishment of these reserves did not result in
additional cash payments.
Charges for certain loss contingencies relate to the October 1996
submission of settlement with no admission of liability to the court by the
Company and the plaintiffs in two pending class action suits. The class action
suits asserted claims under the federal securities laws and alleged the Company
artificially inflated the price of its common stock during the class period,
July 14, 1994 through March 13, 1995. By the terms of the settlement, a class
will be certified by the court and prorata payments in the total amount of
$6,250 will be made to the class members submitting claims. Of this amount,
$2,875 will be funded by the Company and the remainder funded by the Company's
insurance carrier.
Other charges were attributable to costs incurred in the February
management change for severance and related charges $1,800, for employee benefit
program changes $4,300 and for other charges $2,100. Cash payments of $900 were
paid in fiscal 1996 and an additional $900 of cash payments will be realized in
future periods.
FISCAL 1996 COMPARED WITH FISCAL 1995
During fiscal 1996, the Company opened five new stores compared to 24
opened in fiscal 1995. At the end of fiscal 1996, the Company operated a total
of 85 stores in 29 states.
Sales increased to $624.0 million, a 19% increase over the $525.8 million
in the prior year. Same store sales increased by 0.1%, with the new stores
contributing to the remainder of the total increase. The 19.0% increase was
bolstered by an inventory clearance sale the Company started in the middle of
June 1996 running through November 1996. The inventory clearance sale was to
sell-through discontinued, slow moving or obsolete inventory. Sales below cost
for the inventory clearance sale were $36.0 million, with an original inventory
cost value of $68.4 million.
Gross profit for fiscal 1996 was $119.0 million, or 19.1% of sales, as
compared to $130.6 million, or 24.8% of sales in fiscal 1995. The decrease in
gross margin percentage is primarily attributable to an inventory write-down in
the second quarter of $32.4 million, or 5.2% of sales.
The following table illustrates the impact of clearance merchandise sales
and inventory write-down on the reported gross margin:
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<TABLE>
<CAPTION>
Dollars in millions
Fiscal 1995 Fiscal 1996
$ % $ %
- - - -
<S> <C> <C> <C> <C>
Reported gross margin $130.6 24.8% $119.0 19.1%
Effect of the $32.4 million
inventory write-down 32.4 5.2%
Effect of selling $36.0 million
of clearance merchandise at
zero gross profit 1.4%
------ ----- ------ -----
Adjusted gross margin $130.6 24.8% $151.4 25.7%
====== ===== ====== =====
</TABLE>
In addition to the $32.4 million inventory write-down, the Company incurred
a $22.6 million charge in the second quarter of the fiscal 1996 for
non-recurring and other charges discussed above. In fiscal 1995, the Company
incurred non-recurring and one-time charges of $2.1 million related to
management changes and the relocation of one store.
Selling, general and administrative expenses in fiscal 1996 were $124.9
million, or 20.0% of sales, as compared to $106.2 million, or 20.2% of sales in
fiscal 1995. The decrease as a percentage of sales was the result of a 67 basis
point reduction in payroll and payroll related expenses and slight improvements
in operational expenses offset by increases in one-time administrative costs
related to the installation of the new information management system, a new
labor scheduling system, the centralized cross-docking facility and certain
professional fees and relocation expenses associated with personnel additions.
Loss from operations was $28.5 million, or 4.6% of sales in fiscal 1996 as
compared to income from operations of $22.2 million, or 4.2% of sales in fiscal
1995. The loss in the current year is attributable to the $55 million in charges
discussed above.
The Company's interest expense, net increased to $19.9 million, or 3.2% of
sales, in fiscal 1996, from $11.3, or 2.1% of sales, in fiscal 1995.
Approximately one-third of the increase was the result of lower capitalized
interest and two-thirds was the result of increased borrowings on the Company's
revolving credit facility. The primary reason for increased borrowings was due
to the refinancing of an off-balance sheet lease facility (Tax Retention
Operating Lease) into the Company's revolving credit facility. The Company had
also entered into $100,000 of interest rate Collars which impacted Interest
Expense in fiscal 1996 by $15.
For fiscal 1996 the Company's income tax benefit was $17.9 million, with an
effective tax benefit rate of 36.9%, compared to a tax expense of $4.0 million
with an effective tax rate of 36.2% in the prior year.
The Company posted a net loss of $30.5 million, or (4.9)% of sales, as
compared to net income of $7.0 million, or 1.3% of sales, in the prior fiscal
year. The net loss for the current year was attributable to $55 million of
charges as discussed above, resulting in a net charge after-tax of $34.6
million.
The Company consistently reviews its merchandising strategy and promotions
to maximize store sales and productivity. The development of formalized training
programs and concentration on customer services are areas the Company believes
will enhance sales and operating performance. Management believes that through
the implementation of a "labor scheduling" model and periodic operating expense
and merchandising statistics review meetings, the Company has begun a change in
the organizational culture to continue to focus on improving operating results
FISCAL 1995 COMPARED WITH FISCAL 1994
During fiscal 1995, the Company opened 24 new stores compared to 17 new
store openings in fiscal 1994. At the end of fiscal 1995, the Company operated
80 stores in 27 states. Sales increased to $525.8 million, a 37% increase over
the $383.6 million in the prior year. Of this increase, 1.7% was derived from
comparable stores sales growth, while 35.3% was derived from the 41 stores with
no sales in the corresponding months of the prior year.
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Gross profit for fiscal 1995 was $130.6 million, or 24.8% of sales, as
compared to $99.7 million, or 26.0% of sales in fiscal 1994. The decrease in
gross margin percentage is primarily attributable to lower merchandise margins
in the first fiscal quarter, and an increase in buying and occupancy costs as a
percentage of sales throughout the year.
Selling, general and administrative expenses in fiscal 1995 were $108.3
million, or 20.6% of sales as compared to $69.2 million, or 18.0% of sales, in
fiscal 1994. This increase as a percentage of sales was primarily attributable
to higher store labor costs and media spending, as well as certain one time
charges related to management changes occurring in February 1996 and the
relocation of one store in fiscal 1995.
Income from operations was $22.2 million, or 4.2% of sales, a decrease of
27.2% from the $30.5 million, or 8.0% of sales, in fiscal 1994. The lower income
from operations was a result of both lower merchandise margins and increased
operating expenses.
The Company's interest expense, net increased to $11.3 million in fiscal
1995 from $4.8 million in fiscal 1994. This increase was the result of increased
borrowings on the Company's $200 million unsecured line of credit in order to
fund working capital and capital expenditure requirements for new store
construction, along with interest expense on the Company's $74.8 million of 4
1/4% Convertible Subordinated Notes Due in 2000, which were issued in November
1993.
The Company's income tax expense decreased in fiscal 1995 to $4.0 million
from $9.8 million in fiscal 1994. The Company's effective tax rate was 36.2% in
fiscal 1995 compared to 38.1% in fiscal 1994. The primary reasons for the rate
decrease were a lower blended federal income tax rate, as well as a lower
blended state income tax rate due to state tax planning initiatives.
The Company's income in fiscal 1995, before extraordinary item, was $7.0
million. This is a decrease from fiscal 1994 income before extraordinary item of
$15.9 million. This decrease was a result of factors previously discussed.
In fiscal 1994, the Company incurred a $0.2 million extraordinary item (net
of tax) related to the early extinguishment of debt. As a result, the Company
had net income of $7.0 million in fiscal 1995 compared to $15.7 million in
fiscal 1994.
ACCOUNTING STANDARDS
In 1995 the Financial Accounting Standards Board issued FAS 123,
"Accounting for Stock Based Compensation", effective for fiscal years beginning
after December 15, 1995. FAS 123 encourages, but does not require, companies to
recognize compensation expense based on fair value grants of stock, stock
options and other equity instruments to employees. Although expense recognition
for employee stock-based compensation is not mandatory, FAS 123 requires
non-adopting companies to disclose proforma net income and earnings per share.
The Company has elected to continue to account for its stock based plans under
APB No. 25, "Accounting for Stock Issued to Employees." Proforma adjustments to
net income and earnings per share are shown in Note 10 to the Consolidated
Financial Statements.
In 1995 the Financial Accounting Standards Board issued FAS 121,
"Accounting for Impairment of Long-Lived Assets to be Disposed of." Effective
for years beginning after December 15, 1995, FAS 121 requires that long-lived
assets and certain intangibles to be held and used by the Company be reviewed
for impairment. In conducting its review, management considers, among other
things, its current and expected operating cash flows together with a judgment
as to the fair value the Company could receive upon sale of its investment.
Based on this review, the Company recorded a $5.2 million pre-tax charge as part
of the $22.6 million charge it took in the second quarter of fiscal 1996.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements have been to support capital
investment for the opening of new stores, to purchase inventory for new stores,
to meet seasonal working capital needs, and to retire indebtedness. The
Company's working capital needs have been funded through a combination of
external financing (including long-term debt and proceeds from the Company's IPO
in 1992, proceeds from the issuance of 4 1/4% Convertible Subordinated Notes in
1993, and proceeds from a two million share common stock offering in 1994),
internally generated funds and credit terms from vendors. Historically, the
Company's working capital needs peak in the fourth fiscal quarter.
Operating activities in fiscal 1996 provided cash of $13.2 million compared
to cash usage of $8.8 million in fiscal 1995. The improvement was primarily due
to decreased inventories associated with the inventory clearance sale during the
second and third quarters of the current fiscal year.
Net cash of $11.8 million was used in investing activities during fiscal
1996 compared to $59.8 million net cash used in investing activities in fiscal
1995. The decrease was primarily related to a reduction in new construction. In
the current year, the Company completed construction on five new stores. In the
prior year, the Company had completed 24 stores and had five others under
construction at year end. In fiscal 1995, the Company utilized a Tax Retention
Operating Lease "TROL" financing facility for new store construction on eight of
the 24 stores opened during fiscal 1995. In fiscal 1996, the Company utilized
the TROL facility for new store construction on three of the five stores opened.
The total commitment utilized through June 6, 1996 was $58.1 million. The
purpose of the TROL was to provide off-balance sheet financing of new store site
and development costs at attractive rates.
Cash flows used in financing activities were $25 in fiscal 1996 as compared
to $67.3 million provided in fiscal 1995. The decrease in cash provided by
financing activities in fiscal 1996 was primarily due to less borrowing activity
on the Company's revolving line of credit from the prior year, the result of
lower investing activities for new stores and increased cash from the second
quarter inventory clearance. The TROL commitment utilized through June 6, 1996
was refinanced as part of the Company's $271 million revolving line of credit on
June 6, 1996. Participants in the TROL facility and the revolving line of credit
were virtually identical. The refinancing of the revolving line of credit
involved securing the facility with the assets of the Company. The amount
outstanding under the TROL was included in the new revolving line of credit and
the TROL assets were used as additional collateral under the amended agreement.
As of January 31, 1997, the Company had $2.8 million of long-term capital
lease obligations, $12.9 million of long-term mortgage obligations, $74.8
million of 4 1/4% Convertible Subordinated Notes, and $204.0 million in
borrowings under its $271 million revolving credit facility. The $271 million
revolver matures June 1998 and contains customary events of default and a number
of customary covenants, including restrictions on liens and sales of assets,
prohibitions on dividends and certain changes in control, and maintenance of
certain financial ratios. As of January 31, 1997 the Company was in compliance
with all bank covenants.
The revolving credit facility bears interest on outstanding balances, at
the Company's option, at the lender's prime rate plus 1%, or LIBOR plus 2%,
subject to a maximum 50 basis point increase or a 75 basis point decrease based
on certain predetermined criteria.
The Company's total anticipated capital expenditures are expected to be
less than $22 million for fiscal 1997 (including amounts for new store
expansion, improvements in existing stores, and other capital expenditures).
Management believes that its current cash position together with amounts
available under its $271 million revolving credit facility and net cash provided
by operating activities will be sufficient to fund anticipated capital
expenditures and working capital requirements for the upcoming year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by this item is contained in the Consolidated
Financial Statements and Supplementary Data are set forth in Item 14A.
11
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Coopers & Lybrand L.L.P. ("Coopers & Lybrand") served as the accountants
for the fiscal year ended January 31, 1997, and the Board of Directors has
reappointed them to act as the public accountants for the fiscal year ending
January 30, 1998. Previously, the firm of Deloitte & Touche LLP ("Deloitte &
Touche") served as the Company's accountants. Deloitte & Touche did not resign,
decline to be reappointed, nor did its report on the Company's financial
statements for fiscal 1995 or fiscal 1994 contain an adverse opinion, disclaimer
of opinion, qualifications or modification. Furthermore, the Company did not
experience any disagreements with Deloitte & Touche on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. The decision to change accountants and the selection of Coopers &
Lybrand was recommended by the Audit Committee and approved by the Board of
Directors in fiscal 1996, as part of the overall management restructuring that
occurred in February and March, 1996.
A representative of Coopers & Lybrand is expected to be present at the
Annual Meeting of Stockholders and will have the opportunity to make a
statement, if Coopers & Lybrand so elects, and to respond to appropriate
questions from stockholders.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Directors: The information required by this Item is incorporated
herein by reference to "Election of Directors-Certain Information
Regarding Director Nominees" on pages 5 and 6 of the Company's 1997
Proxy Statement
(b) Executive Officers and Significant Employees of the Registrant: The
information required by this Item is incorporated herein by reference
to "Executive Officers of the Company" on page 9 of the Company's
1997 Proxy Statement.
(c) Compliance with Section 16(a) of the Securities Exchange Act of 1934:
The information required by this Item is incorporated herein by
reference to "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 26 of the Company's 1997 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated herein by reference
to "Additional Information Concerning Directors-Directors' Fees" on page 7, and
"Executive Compensation" on pages 10 through 11, of the Company's 1997 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated herein by reference
to "Security Ownership of Certain Beneficial Owners and Management" on pages 2
and 3 of the Company's 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated herein by reference
to "Certain Relationships and Related Transactions" on page 25 of the Company's
1997 Proxy Statement.
12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT ON FORM 10-K:
(1) FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Reports of Independent Accountants.......................F-1, F-2
Consolidated Balance Sheets...................................F-3
Consolidated Statements of Operations.........................F-4
Consolidated Statements of Stockholders' Equity...............F-5
Consolidated Statements of Cash Flows.........................F-6
Notes to the Consolidated Financial Statements................F-7
</TABLE>
(2) ALL SCHEDULES HAVE BEEN INCLUDED AS AN EXHIBIT OR THE INFORMATION IS
INCLUDED ELSEWHERE IN THE FINANCIAL STATEMENTS OR NOTES THERETO
INCORPORATED BY REFERENCE IN ITEM 8 OF THIS ANNUAL REPORT ON FORM 10-K.
(3) EXHIBITS - SEE EXHIBIT INDEX ON PAGE 13
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Registrant during the quarter
ended January 31, 1997.
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No
<S> <C> <C>
Financial Statements - see index on page 10.
Financial Statement Schedules - see index on page 10.
2.1 Plan and Agreement of Merger
2.2 Amendment to the Plan and Agreement of Merger
3.1 Certificate of Incorporation of JumboSports Inc.
3.2 Bylaws of JumboSports Inc.
# 4.1 Specimen Common Stock Certificate
4.4 Supplemental Indenture Agreement
[ ] 4.2 Specimen of Debt Security
[ ] 4.3 Indenture between JumboSports Inc. and Barnett Banks
Trust Company, National Association, as Trustee
* 10.1 Employment Agreement dated September 14, 1989, by and
between the Company's predecessor and Jim W. Bradke, as
amended on July 22, 1992
* 10.2 Form of Indemnification Agreement by and between the Company
and each Director
# 10.3 1989 Stock Incentive Plan, as amended through June 23, 1994
* 10.4 Registration Rights Agreement
[ ] 10.5 Waiver and Clarification Agreement
* 10.6 Form of Stock Option Agreement pursuant to the 1989 Stock
Incentive Plan for options granted to Officers prior to the
Company's Initial Public Offering
* 10.7 Form of Key Man Insurance Policy on each Officer's life in favor
of beneficiaries designated by the respective Officer
* 10.8 Officers' Medical Reimbursement Plan
* 10.9 Management Cash Bonus Plan
+ 10.10 $285 Million Credit Agreement dated as of June 4, 1996,
between JumboSports Inc., as Borrower, the Lenders Named Therein as
Lenders, Barnett Bank of Tampa, as Administrative Agent and L/C
Issuer and NationsBank of Florida, National Association as
Documentation Agent, as amended by the First Amendment thereto
dated November 6, 1996
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
* 10.11 Form of Stock Option Agreement pursuant to the 1989 Stock
Incentive Plan for options granted to employees on and after the
Company's Initial Public Offering
[ ] 10.12 Form of Stock Option Agreement pursuant to the 1989 Stock
Incentive Plan for options granted to Directors
# 10.13 Employee Stock Purchase Plan, as amended through November 14,
1994
# 10.14 Executive Retirement Savings Plan
+ 10.15 Participation Agreement dated as of May 10, 1995, among
Sports & Recreation, Inc., as Construction Agent and Lessee, First
Security Bank of Utah, N.A., not individually, except as
expressly stated therein, but solely as Owner Trustee under the
S&R Trust 1995-1, and NationsBank of Florida, N.A., as Holder
and as Administrative Agent for the Lenders, and the First
Amendment thereto dated July 28, 1995
= 10.16 Employment Agreement dated February 6, 1996, by and between
JumboSports Inc. and Stephen Bebis
= 10.17 Letter Agreement dated March 1, 1996, by and between
JumboSports Inc. and Robert J. Wittman
= 10.18 Letter Agreement dated April 5, 1996, by and between
JumboSports Inc. and Raymond P. Springer
11 Weighted Average Shares Outstanding Calculation
12 Computation of Ratio of Earnings to Fixed Charges
13 1996 Annual Report to Stockholders - except for the portions of
that report expressly incorporated by reference into this Annual
Report on Form 10-K, the Company's 1996 Annual Report to
stockholders is not deemed filed as part of this filing
= 21 List of Subsidiaries
o 23.1 Consent of Coopers & Lybrand L.L.P.
= 23.2 Consent of Deloitte & Touche LLP
27 Financial Data Schedule (Edgar filing-only)
99.1 Report of Coopers and Lybrand L.L.P.
99.2 Schedule II - Valuation and Qualifying Accounts
99.3 Articles of Merger of JumboSports Inc. and Sports & Recreation Reincorporation, Inc.
99.4 Certificate of Ownership and Merger of JumboSports Inc. and Sports &
Recreation Reincorporation, Inc.
99.5 Certificate of Ownership and Merger of Sports & Recreation Macro
Sports, Inc.
</TABLE>
15
<PAGE>
- ----------------------------
<TABLE>
<S> <C>
# Incorporated by reference to exhibits included in the Company's Annual
Report on Form 10-K for the fiscal year ended January 29, 1995.
* Incorporated by reference to exhibits included in the Company's
Registration Statement of Form S-1 (Registration Statement No. 33-50098).
[ ] Incorporated by reference to exhibits included in the Company's Annual
Report on Form 10-K/A for the fiscal year ended January 30, 1994
+ Incorporated by reference to exhibits included in the Company's Quarterly
Report on Form 10-Q for the quarter ended October 27, 1996.
o Incorporated by reference to page F-1 of this Annual Report on Form 10-K.
= Incorporated by reference to exhibits included in the Company's Annual
Report on Form 10-K for the fiscal year ended January 28, 1996.
</TABLE>
16
<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, on April 24, 1997.
JumboSports Inc.
(Registrant)
By: /s/ JACK E. BUSH
------------------------------
Jack E. Bush, Chairman and
Chief Executive Officer
(Principal Executive Officer)
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
registrant and in the capacities and on the date indicated above.
By: /s/ JACK E. BUSH
----------------------------------
Jack E. Bush, Chairman and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ RAYMOND P. SPRINGER
----------------------------------
Raymond P. Springer, Executive
Vice President and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
By: /s/ JACK E. BUSH
----------------------------------
Jack E. Bush, Director
By: /s/ HAL COMPTON
----------------------------------
Hal Compton, Director
By: /s/ SAMUEL NORTHROP, JR.
----------------------------------
Samuel Northrop, Jr., Director
By: /s/ STEVEN RAYMUND
----------------------------------
Steven Raymund, Director
By: /s/ CHRIS T. SULLIVAN
----------------------------------
Chris T. Sullivan, Director
By: /s/ RONALD L. VAUGHN
----------------------------------
Ronald L. Vaughn, Director
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of JumboSports Inc.
We have audited the accompanying consolidated balance sheet of JumboSports Inc.
and subsidiaries (the "Company") as of January 31, 1997 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year ended January 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
January 31, 1997 and the results of its operations and its cash flows for the
year ended January 31, 1997, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Tampa, Florida
March 21, 1997
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of JumboSports Inc.
We have audited the accompanying consolidated balance sheet of JumboSports Inc.
(formerly known as Sports & Recreation, Inc.) and subsidiaries (the "Company")
as of January 28, 1996 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the two fiscal years in the
period ended January 28, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 28, 1996
and the results of its operations and its cash flows for each of the two years
in the period ended January 28, 1996, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Tampa, Florida
March 22, 1996
F-2
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT FOR SHARE DATA)
January 28, January 31,
ASSETS 1996 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,590 $ 4,944
Accounts receivable, net 7,184 2,338
Inventories 236,234 201,090
Prepaid expenses and other assets 2,039 4,495
Income tax receivable 11,386
Deferred tax asset 1,586
-------- --------
Total current assets 249,047 225,839
-------- --------
Property and equipment, net 218,269 282,651
Other assets:
Cost in excess of fair value of net assets acquired, net 11,487 11,145
Other 6,040 5,951
-------- --------
Total other assets 17,527 17,096
-------- --------
Total assets $484,843 $525,586
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 497 $ 185
Accounts payable 44,328 37,050
Accrued expenses 6,910 16,462
Other 4,537 13,464
Deferred income tax liability 1,801
-------- --------
Total current liabilities 58,073 67,161
Deferred rent and other long-term liabilities 2,096 4,476
Revolving credit agreement 157,000 203,995
Long-term debt less current maturities 2,807 15,580
Deferred income taxes 2,587
Convertible subordinated notes 74,750 74,750
-------- --------
Total liabilities 297,313 365,962
-------- --------
Commitments and contingencies (Notes 3, 4 and 6)
Stockholders' equity:
Common stock, $.01 par value, 100,000,000 shares authorized, 19,769,059 and
20,339,409 shares issued and outstanding,
respectively 198 203
Additional paid-in capital 147,006 149,639
Retained earnings 40,326 9,782
-------- --------
Total stockholders' equity 187,530 159,624
-------- --------
Total liabilities and stockholders' equity $484,843 $525,586
======== ========
</TABLE>
See Notes To The Consolidated Financial Statements.
F-3
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Sales $383,600 $525,762 $624,019
Cost of sales including buying
and occupancy costs 283,908 395,208 505,062
-------- -------- --------
Gross profit 99,692 130,554 118,957
Selling, general and administrative expenses 69,207 106,233 124,918
Non-recurring and other charges 2,096 22,568
-------- -------- --------
Income (loss) from operations 30,485 22,225 (28,529)
Interest expense, net 4,815 11,254 19,890
-------- -------- --------
Income (loss) before provision (benefit) for
income taxes and extraordinary item 25,670 10,971 (48,419)
Provision (benefit) for income
taxes 9,775 3,975 (17,875)
-------- -------- --------
Income (loss) before extraordinary item 15,895 6,996 (30,544)
Extraordinary item (less applicable income tax
benefit of $111) (181)
-------- -------- --------
Net income (loss) $ 15,714 $ 6,996 $(30,544)
======== ======== ========
Primary and fully diluted
earnings per common share
Income (loss) before extraordinary item $ 0.84 $ 0.35 $ (1.53)
Extraordinary item (0.01)
-------- -------- --------
Net income (loss) per share $ 0.83 $ 0.35 $ (1.53)
======== ======== ========
</TABLE>
See Notes To The Consolidated Financial Statements.
F-4
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- paid-in Retained
Shares Par Value capital earnings Total
---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 30, 1994 11,796,335 $ 118 $ 99,645 $ 17,616 $117,379
Issuance of common stock 2,023,902 20 46,805 46,825
Three-for-two stock split 5,902,680 59 (59)
Tax benefit of exercise of options 204 204
Net income 15,714 15,714
---------- --------- -------- -------- --------
Balance, January 29, 1995 19,722,917 197 146,595 33,330 180,122
Issuance of common stock 46,142 1 294 295
Tax benefit of exercise of options 117 117
Net income 6,996 6,996
---------- --------- -------- -------- --------
Balance, January 28, 1996 19,769,059 198 147,006 40,326 187,530
Issuance of common stock 570,350 5 1,600 1,605
Tax benefit of exercise of options 1,033 1,033
Net loss (30,544) (30,544)
---------- --------- -------- -------- --------
Balance, January 31, 1997 20,339,409 $ 203 $149,639 $ 9,782 $159,624
========== ========= ======== ======== ========
</TABLE>
See Notes To The Consolidated Financial Statements.
F-5
<PAGE>
JUMBOSPORTS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Fiscal Fiscal Fiscal
1994 1995 1996
-------- -------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ 15,714 $ 6,996 $(30,544)
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation 4,187 6,258 8,656
Gain on asset sales (179) (478)
Amortization of cost in excess of the fair value of
net assets acquired 342 342 342
Deferred loan cost and other amortization 439 509 1,048
Deferred loan cost write off 292
Non-recurring and other charges 2,096 22,568
Increase in deferred tax asset (1,586)
Increase (decrease) in deferred income tax expense 2,297 1,255 (4,388)
Decrease (increase) in accounts receivable (1,925) (595) 2,589
Decrease (increase) in inventories (68,608) (42,548) 35,144
Increase in prepaid expenses (474) (483) (2,000)
Increase in income tax receivable (11,386)
Decrease (increase) in other assets (2,420) 235 (1,818)
Increase (decrease) in accounts payable (130) 14,161 (7,278)
Increase (decrease) in accrued expenses 727 1,455 (133)
Increase (decrease) in other current liabilities 1,072 2,472 (300)
Increase in deferred rent and other long term liabilities 623 273 2,380
Increase (decrease) in income taxes payable 6 (1,029) 398
-------- -------- --------
Net cash provided (used) in operating activities (47,858) (8,782) 13,214
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (89,610) (60,738) (15,236)
Sale leaseback proceeds 2,150
Net collections under note receivable 332 462 31
Cash proceeds from sale of property 429 1,220
-------- -------- --------
Net cash used in investing activities (89,278) (59,847) (11,835)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net 46,825 295 1,118
Tax benefit of options exercised 204 117 1,033
Proceeds from mortgage financing 13,039
Net borrowings (repayments) under revolving credit agreements 89,721 67,279 (11,065)
Repayments of long term debt (372) (376) (578)
Loan and other financing costs (525) (3,572)
-------- -------- --------
Net cash provided (used) by financing activities 135,853 67,315 (25)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (1,283) (1,314) 1,354
-------- -------- --------
Cash and cash equivalents, beginning of period 6,187 4,904 3,590
-------- -------- --------
Cash and cash equivalents, end of period $ 4,904 $ 3,590 $ 4,944
======== ======== ========
Supplemental Disclosure Cash Flow Information Cash paid during year for:
Interest (net of amounts capitalized) $ 4,187 $ 10,589 $ 19,482
Income taxes $ 7,472 $ 3,749 $ 40
</TABLE>
See Notes To The Consolidated Financial Statements.
F-6
<PAGE>
JUMBOSPORTS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
JumboSports Inc. and its subsidiaries (the "Company") previously Sports &
Recreation, Inc., operates 85 retail sporting goods outlets in 29 states.
Periods Presented
In fiscal 1996, the Company changed to utilizing a 52 or 53 week fiscal
year ending on the Friday closest to the end of January, as compared to a 52 or
53 week fiscal year ending on the Sunday closest to the end of January. This
change in fiscal year caused fiscal year 1996 to be a 52 week and five day
period. The financial statements presented are for the 52 week periods ended
January 29, 1995 ("Fiscal 1994") and January 28, 1996 ("Fiscal 1995") and for
the 52 week and five day period ended January 31, 1997 ("Fiscal 1996").
Principles of Consolidation
The consolidated financial statements include the accounts of JumboSports
Inc. and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
Basis of Accounting
The use of estimates is inherent in the preparation of financial statements
in accordance with generally accepted accounting principles.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash equivalents.
Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market. The Company considers cost to include the direct cost of merchandise,
plus internal costs associated with merchandise procurement, storage, handling,
and distribution. Selling, general and administrative costs capitalized into
ending inventory were $6,254 and $5,128 in Fiscal 1995 and Fiscal 1996,
respectively.
Property and Equipment
Property is recorded at cost and includes interest on funds borrowed to
finance construction. Capitalized interest was approximately $1,869, $2,476 and
$135 in Fiscal 1994, Fiscal 1995 and Fiscal 1996, respectively. Depreciation and
amortization are provided using the straight-line method over the estimated
useful service lives of the related assets which range from three to 39.5 years.
Costs and related accumulated depreciation on assets retired or disposed of are
removed from the accounts and any gains or losses resulting therefrom are
credited or charged to operations.
Income Taxes
The Company provides for federal and state income taxes currently payable
as well as for those deferred because of timing differences between reporting
income and expenses for financial statement purposes and income and expenses for
tax purposes. Work Opportunity Tax credits were recorded as a reduction of
income taxes.
The Company uses the provisions of Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes". SFAS 109 requires
an asset and liability approach in accounting for income taxes. Under the asset
and liability method, deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates to apply to taxable income in the years which those temporary
differences are expected to be recovered or settled. The Company's
F-7
<PAGE>
differences relate primarily to the difference in carrying values of certain
assets and liabilities for book and tax reporting and the deferred income tax
liability resulting from the Company's change in fiscal 1991 from last-in,
first-out (LIFO) method of inventory valuation to the FIFO method. Under SFAS
109, the effective rate on deferred tax assets and liabilities of a change in
tax rates is recognized as income or expense in the period that includes the
enactment date.
Advertising Costs
Advertising costs are expensed the first time advertising takes place.
Included in selling, general and administrative expenses for Fiscal 1994, Fiscal
1995 and Fiscal 1996 are $6,897, $10,420 and $13,309, respectively, of
advertising expenses.
Deferred Loan Charges
Deferred loan charges represent fees paid in connection with the
acquisition of certain of the Company's debt. These charges are being amortized
using the interest method over the term of the related debt. Net deferred loan
costs were $2,223 and $2,217 in Fiscal 1995 and Fiscal 1996, respectively.
Impairment of Assets
FAS 121, "Accounting for Impairment of Long-Lived Assets to be Disposed of"
(FAS 121), effective for years beginning after December 15, 1995, required that
long-lived assets and certain intangibles to be held and used by the Company be
reviewed for impairment. In conducting its review, management considers, among
other things, its current and expected operating cash flows together with a
judgment as to the fair value the Company could receive upon sale of its
investment. Based on this review, the Company recorded a $5.2 million pre-tax
charge as part of the $22.6 million charge it took in the second quarter of
Fiscal 1996.
Cost in Excess of Fair Value of Net Assets Acquired
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over a 40 year
period. Accumulated amortization was $2,178 and $2,520 as of January 28, 1996
and January 31, 1997 respectively.
Fair Values of Financial Instruments
The carrying value of the Company's cash, receivables, accounts payable,
revolving credit agreement, and long term debt approximate their fair values.
The fair value of the convertible subordinated notes was approximately $44
million and $55 million at January 28, 1996 and January 31, 1997 respectively.
Risk Management Instruments
The Company, in connection with its revolving credit facility, has entered
into $100 million of interest rate collar agreements. These agreements qualify
for hedge accounting and are amortized to interest expense. The $100 million of
interest rate collars impacted interest expense in fiscal 1996 by $15.
The fair value of the Company's $100,000 of interest rate collar agreements
at year end was $150.
Earnings Per Common Share
Earnings per common and common equivalent shares are based on the weighted
average number of common and common equivalent shares outstanding during each
year as follows:
<TABLE>
<CAPTION>
Weighted Average
Year Shares Outstanding
-------------------------------
<S> <C>
Fiscal 1994 18,844,412
Fiscal 1995 20,062,155
Fiscal 1996 19,984,993
</TABLE>
F-8
<PAGE>
The weighted average number of shares outstanding for Fiscal 1994 have been
restated to reflect the three-for-two common stock split declared on August 24,
1994, in the form of a 50% stock dividend payable on or about September 26, 1994
(see Note 10).
Reclassifications and Restatements
Certain Fiscal 1994 and Fiscal 1995 amounts were reclassified or restated
to conform with the current year presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
January 28, January 31,
1996 1997
----------- -----------
<S> <C> <C>
Land $ 82,811 $100,336
Buildings 88,851 118,454
Furniture, fixtures and equipment 23,764 32,694
Leasehold improvements 28,963 44,809
Assets held under capital lease 4,700 2,129
Construction in-process 6,912 9,739
----------- -----------
Total property and equipment 236,001 308,161
Less accumulated depreciation and amortization 17,732 25,510
----------- -----------
Property and equipment, net $218,269 $282,651
----------- -----------
</TABLE>
NOTE 3 - REVOLVING CREDIT AGREEMENT
At January 31, 1997, the Company has a $271,000 secured revolving credit
facility (reduced from $285,000 as a result of certain mortgage financings and
property sales made during the year) which matures on June 4, 1998. During the
term of this agreement, the Company is restricted from declaring or paying any
cash dividends, making any other distributions on account of any class of its
stock (other than stock splits or stock dividends) or redeeming, purchasing,
retiring or otherwise acquiring directly or indirectly any shares of its stock,
except for fractional shares in connection with stock splits or stock dividends
and shares issued to employees to exercise outstanding options. Interest on this
borrowing accrues, at the Company's option, based upon the lender's prime rate
plus 100 basis points (9.25% at January 31, 1997) or LIBOR plus 200 basis points
(7.69% at January 31, 1997). Interest on advances under the prime rate is
payable quarterly in arrears. Interest on LIBOR rate advances is fixed and, at
the Company's option, is payable in arrears on 30, 60 or 90 day periods. The
revolving credit facility is collateralized by real and personal property. The
availability under the revolving credit facility is the lower of $271,000 or the
borrowing base. The borrowing base is a calculation based upon eligible assets:
real estate, inventories and equipment. As of January 28, 1996 and January 31,
1997 the Company had $157,000 and $203,995, respectively, outstanding and
$43,000 and $36,034, respectively, available under this agreement.
In conjunction with the revolving credit facility, the Company also entered
into a letter of credit sub-facility maturing on June 4, 1998. Commitments under
the letter of credit are limited to the lesser of $10,000 or the availability
under the revolving line of credit. At January 28, 1996 and January 31, 1997,
outstanding commitments under the letter of credit facility were $810 and
$2,065, respectively.
In conjunction with the revolving credit facility, the Company has entered
into $100 million of interest rate collar agreements. These agreements hedge
interest rate fluctuations by setting floor rates and ceiling rates on a
notional amount of $100 million.
The Company has $50 million of agreements with floor rates of 5.23% and
ceiling rates of 8.00% and $50 million of agreements with floor rates of 5.75%
and ceiling rates of 7.50%. All of these agreements terminate on various dates
in calendar year 1998.
F-9
<PAGE>
During Fiscal 1994, the Company consolidated and increased it existing
credit facilities into a $200,000 credit facility. As a result of this
renegotiation of the Company's credit facilities, the Company expensed $292
($181 net of tax) in unamortized deferred loan costs relating to the credit
facilities which existed prior to Fiscal 1994, which is included as an
extraordinary charge in the Company's Consolidated Statement of Operations for
Fiscal 1994.
As of January 31, 1997, the Company was in compliance with its credit
facility covenants.
<TABLE>
<CAPTION>
NOTE 4 - LONG-TERM DEBT
January 28, January 31,
1996 1997
----------- -----------
<S> <C> <C>
Obligations under real estate capital leases for two store
facilities with interest imputed at approximately 12.75%
per annum. The agreements require monthly payments of
$25 including interest through September 2012. $2,715 $ 2,748
Obligations under equipment capital leases with interest
imputed at rates ranging from 8.4% to 14% per annum.
The agreements require aggregate monthly payments of
approximately $40 including interest through March 1997 589 80
Mortgage obligations for four store facilities with interest
at 8.99% per annum. The agreement requires monthly
payments of $110 including interest through June 2008 12,937
------ -------
Total debt 3,304 15,765
Less current maturities 497 185
------ -------
Total long-term debt $2,807 $15,580
====== =======
</TABLE>
Future minimum payments under the capital lease and mortgage obligations
during the fiscal years subsequent to January 31, 1997 are as follows:
<TABLE>
<S> <C>
1997 $ 1,700
1998 1,639
1999 1,678
2000 1,678
2001 1,694
Thereafter 24,260
-------
TOTAL 32,649
Less amount
representing interest 16,884
-------
Present value of future
minimum lease payments 15,765
Less current maturities 185
-------
TOTAL $15,580
=======
</TABLE>
NOTE 5 - SUBORDINATED DEBT
During Fiscal 1993, the Company issued $74,750 in convertible subordinated
notes with interest at 4.25%. The notes require semi-annual interest payments
beginning May 1, 1994 through November 1, 2000, the date of maturity. The notes
are convertible into common stock of the Company at any time on or before
November 1, 2000, unless previously redeemed, at a conversion price of $25.50
per share, subject to adjustment in certain events.
F-10
<PAGE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Related Party Operating Leases
The Company leases six retail stores and its administrative office facility
from a formerly related partnership trust owned by the former CEO under
non-cancelable operating lease agreements expiring in various years through
2007, with options to renew ranging from three to four additional five year
terms. Under these agreements, monthly lease payments are required in addition
to contingent rents computed as a percentage of sales in excess of a specified
amount. Contingent rent paid for Fiscal 1994, Fiscal 1995 and Fiscal 1996 was
$79, $130 and $96 respectively. No contingent rent remained unpaid at January
29, 1995, January 28, 1996 or January 31, 1997 on these leases. Additionally,
the Company has paid security deposits of $140 in connection with these leases.
Additional Related Party Lease
The Company leases one store facility from an entity which is 80% owned by
the formerly related partnership trust owned by the former CEO discussed above.
The lease expires in 1997 with options to renew for four additional five year
terms and has been accounted for as an operating lease. The Company is required
to pay contingent rent computed as a percentage of sales in excess of a
specified amount. Contingent rent for Fiscal 1994, Fiscal 1995 and Fiscal 1996
was $62, $31 and $0, respectively. No contingent rent remained unpaid at January
29, 1995, January 28, 1996 or January 31, 1997 on this lease.
Tax Retention Operating Lease
On May 10, 1995, the Company entered into a Tax Retention Operating Lease
Agreement (the "TROL"), whereby an owner trust was formed for the sole purpose
of acquiring and/or constructing properties which will later be leased to the
Company as retail store locations. The TROL had an original aggregate facility
commitment of $70,000. However, effective October 10, 1995, the aggregate
facility commitment under the TROL agreement was increased to $85,000. Interim
rental payments were due under the agreement for the properties opened within
the first two years from the date of the TROL's inception, based upon a blended
interest rate being (i) the greater of the NationsBank prime rate or the Federal
Funds rate, plus 50 basis points, or (ii) the appropriate Eurodollar Rate plus a
variable margin (112.5 to 150 basis points) determined based upon certain
financial ratios of the Company. On June 4, 1996, the TROL was refinanced and
$58,058, the utilized commitment, was incorporated into the Company's revolving
credit facility. Accordingly, this transaction has been excluded from the
accompanying Consolidated Statement of Cash Flows for Fiscal 1996.
In fiscal 1995, the Company utilized a Tax Retention Operating Lease "TROL"
financing facility for new store construction on eight of the 24 stores opened
during fiscal 1995. In fiscal 1996, the Company utilized the TROL facility for
new store construction on three of the five stores opened. The total commitment
utilized through June 6, 1996 was $58.1 million. The purpose of the TROL was to
provide off-balance sheet financing of new store site and development costs at
attractive rates
Other Operating Leases
The Company has additional leases on 18 store facilities and two warehouses
with unrelated parties. These leases have terms ranging from 10 to 20 years,
with options to renew ranging from two to four additional five-year terms.
Additionally, certain store leases provide for contingent rent computed as a
percentage of sales in excess of a specified amount. No contingent rent was
incurred for Fiscal 1994 or Fiscal 1995 on these leases. Contingent rent of $8
was incurred for Fiscal 1996.
In addition to the facility leases, the Company has entered into various
leases for store fixtures, transportation equipment and data processing
equipment under operating lease agreements with terms ranging from three to five
years.
Rent expense under all operating lease agreements for each of the fiscal
periods presented is as follows:
F-11
<PAGE>
<TABLE>
<CAPTION>
Related Party Additional TROL & Other
Operating Related Party Operating
Year Leases Lease Leases
----------- ------------- ------------- ------------
<S> <C> <C> <C>
Fiscal 1994 $1,838 $232 $ 6,676
Fiscal 1995 1,917 630 10,054
Fiscal 1996 1,665 160 12,311
</TABLE>
Future minimum lease payments under all non-cancelable operating lease
agreements during the fiscal years subsequent to January 31, 1997 are as
follows:
<TABLE>
<S> <C>
1997 $10,143
1998 7,872
1999 6,943
2000 6,506
2001 6,481
Thereafter 47,499
-------
TOTAL $85,444
=======
</TABLE>
New Store Construction
The Company has previously utilized one construction agent as general
contractor for substantially all of its new store facilities. The agent worked
solely for the Company. Future construction will be subject to a competitive
bidding process.
NOTE 7 - EMPLOYEE BENEFIT PLANS
The Company has a qualified profit sharing and 401(k) savings plan (the
"Plan") covering all employees meeting certain eligibility requirements. The
Plan permits each participant to reduce his or her taxable compensation basis by
up to 15% and have the amount of such reduction contributed to the Plan. The
Company makes a matching contribution of 25% of the first 6% of compensation
deferred by each participant. In addition, in any year, the Company may
contribute to the Plan additional amounts determined by the Company's Board of
Directors at its sole discretion. Salary reduction contributions are immediately
vested in full; matching and discretionary contributions begin to vest after the
participant's third year of service and become fully vested after the
participant's seventh year of service. During fiscal years 1994, 1995 and 1996,
expense under the Plan was approximately $158, $81 and $62, respectively.
The Company has an Employee Stock Purchase Plan ("ESPP"). The ESPP allows
employees meeting certain eligibility requirements to purchase Company stock at
a 15% discount from the fair market value of the stock price.
NOTE 8 - INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1994 1995 1996
------ ------ ---------
<S> <C> <C> <C>
Current $7,478 $2,720 $(10,875)
Deferred 2,297 1,255 (7,000)
------ ------ --------
$9,775 $3,975 $(17,875)
====== ====== ========
</TABLE>
F-12
<PAGE>
The following is a schedule of the significant net deferred income tax
assets and liabilities as of January 28, 1996 and January 31, 1997:
<TABLE>
<CAPTION>
January 28, January 31,
1996 1997
----------- -----------
<S> <C> <C>
Net Current Deferred Income Tax Asset (Liability):
Inventory basis difference between tax and
financial reporting $(3,576) $(2,890)
Accrued expenses not deductible for tax
reporting until paid 1,775 5,912
Other 43
----------- -----------
Total current deferred income tax asset (liability), net (1,801) 3,065
----------- -----------
Net Non-Current Deferred Income Tax Asset (Liability):
Accelerated tax depreciation (2,721) (5,188)
Tax benefit carryovers 3,071
Accrued expenses not deductible for tax reporting
until paid 557
Other 134 81
----------- -----------
Total non-current deferred income tax, net (2,587) $(1,479)
----------- -----------
Total net deferred tax asset (liability) $(4,388) $ 1,586
=========== ===========
</TABLE>
At January 31, 1997, the Company had tax net operating loss ("NOL")
carryforwards of $400 for regular federal income tax purposes and $26,800 for
state income tax purposes. The federal NOL will expire, if unused, in the Year
2011 and the state NOL's will expire, if unused, in the Years 2001 through 2011.
In addition, the Company had tax credit carryforwards of $2,000 for alternative
minimum taxes, which are carried forward indefinitely The Company believes that
it is more likely than not that all of the NOL and tax credit carryforwards will
be utilized prior to their expiration.
The Company's income tax expense differed from the statutory federal rate
of 35% for Fiscal 1994, 34% for Fiscal 1995 and 34% for Fiscal 1996, as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1994 1995 1996
------ ------ ---------
<S> <C> <C> <C>
Income taxes (benefits) using the federal statutory rate $8,985 $3,730 $(16,462)
Increase in taxes resulting from:
State taxes 767 162 (1,937)
Goodwill amortization 120 116 130
Amortization of intangible assets (13)
Tax exempt interest income (4)
Targeted jobs tax credit (42) (33)
Other differences, net (38) 394
------ ------ --------
TOTAL $9,775 $3,975 $(17,875)
====== ====== ========
</TABLE>
F-13
<PAGE>
NOTE 9 - NON-RECURRING, ONE TIME CHARGES AND EFFECT OF MANAGEMENT CHANGE
In the second quarter of Fiscal 1996 the Company recorded one-time charges
of $55 million. The components are as follows:
<TABLE>
<S> <C>
Cost of Sales:
Inventory write down for shrink
and obsolete and slow moving merchandise $32.4
-----
Non-recurring and other charges:
Disposition of and impairment of
underperforming assets 11.4
Charges for certain loss contingencies 3.0
Other charges 8.2
-----
22.6
-----
Total $55.0
=====
</TABLE>
The disposition of and impairment of underperforming assets were
attributable to the write-off of undesirable retail sites and impairment of
other sites and the write-off of assets as the result of organizational changes.
Charges for certain loss contingencies relate to the October 1996
submission of settlement without admission of liability to the court by the
Company and the plaintiffs in two pending class action suits. The class action
suits asserted claims under the federal securities laws and alleged the Company
artificially inflated the price of its common stock during the class period,
July 14, 1994 through March 13, 1995. By the terms of the settlement, a class
will be certified by the court and prorata payments in the total amount of
$6,250 will be made to the class members submitting claims. Of this amount,
$2,875 will be funded by the Company and the remainder funded by the Company's
insurance carrier.
Other charges were attributable to costs incurred in the February
management change for severance and related charges $1,800, for employee benefit
program changes $4,300 and for other charges $2,100. Cash payments of $900 were
paid in fiscal 1996 and an additional $900 of cash payments will be realized in
future periods.
<TABLE>
<CAPTION>
Remaining reserves at year-end attributable to these charges were as
follows:
<S> <C>
Disposition and impairment of underperforming assets $3.0
Asset impairments the result of organizational changes 4.0
Other charges 5.2
Total remaining reserves $12.2
</TABLE>
F-14
<PAGE>
During Fiscal 1995, one of the Company's stores was relocated. As a result,
the remaining non-cancelable operating lease commitment attributable to the
original store location was accrued for in full, along with related sales and
property taxes, in the amount of $483.
In February 1996, the former CEO and Chairman stepped down from his
position as CEO. In conjunction with this departure, as well as the retainage of
the new President, Chairman, and CEO, certain charges for severance, bonuses,
legal and other related charges were recognized in Fiscal 1995 in the amount of
$1,500.
NOTE 10 - STOCKHOLDERS' EQUITY
The Company completed an initial public offering of 8,625,000 shares of
common stock on September 16, 1992 (the "IPO"), of which 6,270,000 were sold by
the Company and 2,355,000 by certain selling stockholders.
On July 22, 1992, an increase in the authorized number of shares of common
stock to 20,000,000 and a 3.764-for-1 split of the Company's common stock was
authorized by the Board of Directors.
On June 23, 1994, the Stockholders of the Company approved an amendment to
the Company's Certificate of Incorporation to increase the authorized number of
shares of common stock to 100,000,000.
On August 24, 1994, the Board of Directors declared a three-for-two stock
split in the form of a 50% stock dividend to shareholders of record as of
September 3, 1994, payable on or about September 26, 1994. All share and per
share data (other than share data in the Balance Sheets and Statements of
Stockholders' Equity) have been restated to give retroactive effect to the
stock-split for all years presented.
On October 6, 1994, the Company completed a secondary offering of 3,000,000
shares of common stock of which 2,000,000 were sold by the Company and 1,000,000
by certain selling stockholders. Net proceeds to the Company were $46,825.
The Company has a Stock Option Plan which was established on September 14,
1989 (the "1989 Plan"). The 1989 Plan provides that options be granted to
certain key employees and directors at exercise prices equal to not less than
50% of fair market value on the date the option is granted. All options granted
to date have been at fair market value on the date of the grant. Prior to Fiscal
1996, options granted to key employees generally became exerciseable after one
year in 25% increments per year and expire 10 years from the date of grant.
Options granted to key employees in Fiscal 1996 generally become excerciseable
at 40% after two years and 20% per year thereafter and expire 10 years from the
date of grant. Options granted to directors generally become fully exerciseable
after one year and expire 10 years from the date of grant. The Company has
reserved 2,212,212 shares for distribution under the 1989 Plan.
In March of 1996, the Company adopted an additional stock incentive plan,
the 1996 Stock Incentive Plan, for issuance of stock options to Company
employees who are not subject to the reporting requirements of Section 16 under
the Exchange Act (the "1996 Plan"). One million shares are reserved for issuance
under the 1996 Plan, and options to purchase a total of 552,538 shares were
granted to employees thereunder, as of January 31, 1997. Vesting provisions are
similar under both the 1989 Plan and the 1996 Plan. Options granted to employees
generally become exerciseable after one year in 25% increments per year and
expire 10 years from the date of grant.
F-15
<PAGE>
A summary of stock option activity related to the 1989 and 1996 Plans is as
follows:
<TABLE>
<CAPTION>
Weighted Avg.
Option Price Option
Shares Per Share Price
--------- ------------- -------------
<S> <C> <C> <C>
Outstanding January 30, 1994 1,266,074 $ 3.95 - 15.83 $ 8.39
Granted 320,250 24.33 - 29.33 22.74
Exercised (26,853) 3.95 - 15.83 4.61
Canceled or surrendered (26,598) 11.67 - 26.08 20.81
--------- -------------- ------
Outstanding January 29, 1995 1,532,873 $3.95 - 29.33 $11.23
Granted 394,150 7.38 - 11.63 11.30
Exercised (25,592) 3.95 - 15.83 4.28
Canceled or surrendered (55,640) 11.67 - 26.08 19.98
--------- -------------- ------
Outstanding January 28, 1996 1,845,791 $ 3.95 - 29.33 $11.08
Granted 1,317,204 4.38 - 9.75 6.65
Exercised (376,618) 3.95 - 5.00 4.62
Canceled or surrendered (677,709) $ 6.75 - 29.33 $16.45
--------- ============== ======
Outstanding January 31, 1997 2,108,668 $ 3.95 - 29.33 $ 7.74
========= ============== ======
Shares Exerciseable 627,931 $ 4.13
========= ======
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Financial
Accounts Standard No.123, "Accounting for Stock Based Compensation" ("FAS 123")
which is effective for fiscal years beginning after December 15, 1995. As
permitted by FAS 123, the Company has elected to continue to account for its
stock based plans under APB No. 25, "Accounting for Stock Issued to Employees".
If the Company had elected to recognize compensation expense for stock
options based on the fair value at grant date, consistent with the method
prescribed by FAS 123, net income and earnings per share would have been reduced
to the proforma amounts shown below:
<TABLE>
<CAPTION>
Fiscal Fiscal
1995 1996
------ ---------
<S> <C> <C>
Net income (loss)
As reported $6,996 $(30,544)
Proforma $6,438 $(33,437)
Earnings per share
As reported $ 0.35 $ (1.53)
Proforma $ 0.32 $ (1.67)
</TABLE>
The proforma amounts were determined using the Black-Scholes Valuation
Model with the following key assumptions: (i) a discount rate of 7.0% for 1995
and 1996; (ii) a volatility factor initially based on the average trading price
for the prior 18 months; (iii) no dividend yield; and (iv) an average expected
option life of four years.
In conjunction with the change in management as described in Note 9,
236,500 outstanding options with exercise prices ranging from $11.67 to $29.33
were canceled and reissued to the former CEO and Chairman at the then market
value of $5 per share. The options vest immediately and expire 5 years from the
date of grant. Additionally, 300,000 options were issued to the new President,
CEO and Chairman with an exercise price of $4.38, the market value on the date
of grant. The options vest 40% on the second anniversary of the date of the
grant and 20% each year thereafter and expire 10 years after the date of grant.
In addition to the above option activity and as a result of the February 1996
management change, options were canceled and re-issued to new management.
F-16
<PAGE>
NOTE 11 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial data for Fiscal 1996 and Fiscal 1995 is as
follows:
<TABLE>
<CAPTION>
First Second Third Fourth
--------- --------- -------- --------
<S> <C> <C> <C> <C>
1996
Net sales $143,658 $169,014 $136,798 $174,549
Gross profit 32,823 8,535 35,934 41,665
Net income (loss) (345) (33,233) 898 2,136
Primary and fully diluted earnings
per common share:
Net income (loss) $ (0.02) $ (1.67) $ 0.04 $ 0.12
======== ======== ======== ========
1995
Net Sales $110,742 $124,935 $117,909 $172,176
Gross profit 25,990 32,938 28,884 42,740
Net income 1,718 3,741 551 986
Primary and fully diluted earnings
per common share:
Net income $ 0.09 $ 0.19 $ 0.03 $ 0.05
======== ======== ======== ========
</TABLE>
F-17
EXHIBIT 2.1
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER, dated April 8, 1996 (the "Agreement"), is
entered into between SPORTS & RECREATION REINCORPORATION, INC., a Florida
corporation ("FLORIDA") and SPORTS & RECREATION, INC., a Delaware corporation
("SPORTS").
RECITALS
A. SPORTS has an aggregate authorized capital of 100,000,000 shares of
Common Stock, par value of $0.01 per share (the "SPORTS Common Stock"), of
which, as of March 15, 1996, 19,778,031 were duly issued and outstanding.
B. FLORIDA has an aggregate authorized capital stock of 100,000,000 shares
of Common Stock, par value of $0.01 per share (the "FLORIDA Common Stock"), of
which 19,778,031 shares have been duly issued and are now outstanding.
C. The respective Boards of Directors of FLORIDA and SPORTS believe that
the best interests of FLORIDA and SPORTS and their respective stockholders will
be served by the merger of SPORTS with FLORIDA under and pursuant to the
provisions of this Agreement and the Delaware General Corporation Law and the
Florida General Corporation Act.
AGREEMENT
In consideration of the Recitals and of the mutual agreements contained in
this Agreement, the parties hereto agrees as set forth below.
1. MERGER
SPORTS shall be merged with and into FLORIDA (the "MERGER").
2. SHAREHOLDER APPROVAL
Prior to the filing of this Agreement or a certificate of merger with the
Secretary of State of Delaware, or of Articles of Merger with the Secretary of
State of Florida, the majority of the outstanding shares of SPORTS entitled to
vote at the 1996 Annual Meeting of Stockholders of SPORTS shall have approved
this Agreement and the transaction contemplated hereby.
3. EFFECTIVE DATE
The Merger shall become effective immediately upon the later of the filing
of this Agreement or a certificate of merger with the Secretary of State of
Delaware in accordance with the Delaware General Corporation Law and the filing
of articles of merger with the Secretary of State of Florida in accordance with
the Florida General Corporation Act. The time of such effectiveness is hereafter
called the "Effective Date".
4. SURVIVING CORPORATION
FLORIDA shall be the surviving corporation of the Merger and shall continue
to be governed by the Laws of the State of Florida. On the Effective Date, the
separate corporate existence of SPORTS shall cease.
E-1
<PAGE>
5. NAME OF SURVIVING CORPORATION
On the Effective Date, the Articles of Incorporation of FLORIDA shall be
amended to change the name of FLORIDA to "SPORTS & RECREATION, INC."
6. CERTIFICATE OF INCORPORATION
Except as provided in Section 4, the Articles of Incorporation of FLORIDA
as they exist on the Effective Date shall be the Articles of Incorporation of
FLORIDA following the Effective Date, unless and until the same shall thereafter
be amended or repealed in accordance with the Laws of the State of Florida.
7. BYLAWS
The Bylaws of FLORIDA as they exist on the Effective Date shall be the
Bylaws of FLORIDA following the Effective Date, unless and until the same shall
be amended or repealed in accordance with the provisions thereof and the laws of
the State of Florida.
8. BOARD OF DIRECTORS AND OFFICERS
The members of the Board of Directors and the officers of SPORTS
immediately prior to the Effective Date shall be the members of the Board of
Directors and the officers, respectively, of FLORIDA following the Effective
Date, and such persons shall serve in such offices for the terms provided by Law
or in the Bylaws, or until their respective successors are elected and
qualified.
9. RETIREMENT OF OUTSTANDING FLORIDA STOCK
Forthwith upon the Effective Date, each of the 19,778,031 shares of the
FLORIDA Common Stock presently issued and outstanding shall be retired, and no
shares of FLORIDA Common Stock or other securities of FLORIDA shall be issued in
respect thereof.
10. CONVERSION OF OUTSTANDING SPORTS STOCK
Forthwith upon the Effective Date, each issued and outstanding share of
SPORTS Common Stock and all rights in respect thereof shall be converted into
one fully-paid and nonassessable share of FLORIDA Common Stock, and each
certificate representing shares of SPORTS Common Stock shall for all purposes be
deemed to evidence the ownership of the same number of shares of FLORIDA Common
Stock as are set forth in such certificate. Certificates of SPORTS Common Stock
presented for transfer following the Effective Date will be replaced with
certificates for the same number of shares of FLORIDA Common Stock.
11. STOCK OPTIONS, WARRANTS AND CONVERTIBLE DEBT
Forthwith upon the Effective Date, each stock option, stock warrant,
convertible debt instrument and other right to subscribe for or purchase shares
of SPORTS Common Stock shall be converted into a stock option, stock warrant,
convertible debt instrument or other right to subscribe for or purchase the same
number of shares of FLORIDA Common Stock, and each certificate, agreement, note
or other document representing such stock option, stock warrant, convertible
debt instrument or other right to subscribe for or purchase shares of SPORTS
Common Stock shall for all purposes be deemed to evidence the ownership of a
stock option, stock warrant, convertible debt instrument or other right to
subscribe for or purchase of FLORIDA Common Stock.
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12. RIGHTS AND LIABILITIES OF FLORIDA
At and after the Effective Date, and all in the manner of and as more fully
set forth in Section 607,1106 of the Florida General Corporation Act and Section
259 of the Delaware General Corporation Law, the title to all real estate and
other property, or any interest therein, owned by each of SPORTS and FLORIDA
shall be vested in FLORIDA without reversion or impairment; FLORIDA shall
succeed to and possess, without further act or deed, all estates, rights,
privileges, powers, and franchise, both public and private, and all of the
property, real, personal and mixed of each of SPORTS and FLORIDA without
reversion or impairment; FLORIDA shall thenceforth be responsible and liable for
all the liabilities and obligations of each SPORTS and FLORIDA; any claim
existing or action or proceeding pending by or against SPORTS or FLORIDA may be
continued as if the Merger did not occur or FLORIDA may be substituted for
SPORTS in the proceeding; neither the rights of creditors nor any liens upon the
property of SPORTS or FLORIDA shall be impaired by the Merger; and FLORIDA shall
indemnify and hold harmless the officers and directors of each of the parties
hereto against all such debts, liabilities and duties and against all claims and
demands arising out of the Merger.
13. TERMINATION
This Agreement may be terminated and abandoned by action of the respective
Boards of Directors of SPORTS and FLORIDA at any time prior to the Effective
Date, whether before or after approval by the stockholders of either or both of
the parties hereto.
14. AMENDMENT
The Boards of Directors of the parties hereto may amend this Agreement at
any time prior to the Effective Date; provided that an amendment made subsequent
to the approval of this Agreement by the stockholders of either of the parties
hereto shall not: (a) change the amount or kind of shares, securities, cash,
property or rights to be received in exchange for or on conversion of all or any
of the shares of the parties hereto, (b) change any term of the Articles of
Incorporation of FLORIDA, or (c) change any other terms or conditions of this
Agreement if such change would adversely affect the holders of any capital stock
of either party hereto.
15. REGISTERED OFFICE
The registered office of FLORIDA in the State of Florida is located at 501
East Kennedy Blvd., Suite 1700, Tampa, FL 33602, and Fowler, White, Gillen,
Boggs, Villareal and Banker, P.A. is the registered agent of FLORIDA at such
address.
16. INSPECTION OF AGREEMENT
Executed copies of this Agreement will be on file at the principal place of
business of FLORIDA at 4701 W. Hillsborough Avenue, Tampa, FL 33614. A copy of
this Agreement shall be furnished by FLORIDA, on request and without cost, to
any stockholder of either SPORTS or FLORIDA.
17. GOVERNING LAW
This Agreement shall in all respects be construed, interpreted and enforced
in accordance with and governed by the Laws of the State of Florida.
18. SERVICE OF PROCESS
On and after the Effective Date, FLORIDA agrees that it may be served with
process in Delaware in any proceeding for enforcement of any obligation of
SPORTS or FLORIDA arising from the Merger.
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19. DESIGNATION OF DELAWARE SECRETARY OF STATE AS AGENT FOR SERVICE OF
PROCESS
On and after the Effective Date, FLORIDA irrevocably appoints the Secretary
of State of Delaware as its agent to accept service of process in any suit or
other proceeding to enforce the rights of any stockholders of SPORTS or FLORIDA
arising from the Merger. The Delaware Secretary of State is requested to mail a
copy of any such process to FLORIDA at 501 East Kennedy Blvd., Suite 1700,
Tampa, FL 33602, Attention: Fowler, White, Gillen, Boggs, Villareal and Banker,
P.A.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to authority duly
granted by their respective Board of Directors, has caused this Plan and
Agreement of Merger to be executed, respectively, by its President and attested
by its Secretary.
SPORTS & RECREATION
REINCORPORATION, INC.
a Florida corporation
ATTEST: By: /s/ STEPHEN BEBIS
-----------------------
- ---------------------- Name: Stephen Bebis
Secretary Its: President
SPORTS & RECREATION, INC.
a Delaware corporation
By: /s/ STEPHEN BEBIS
ATTEST: ------------------------
Name: Stephen Bebis
- ---------------------- Its: President
Secretary
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EXHIBIT 2.2
AMENDMENT TO THE PLAN AND AGREEMENT OF MERGER
THIS AMENDMENT is made and entered into this 18th day of December, 1996, by
and between SPORTS & RECREATION, INC., a Delaware corporation ("SPORTS"), and
SPORTS & RECREATION REINCORPORATION, a Florida corporation ("FLORIDA"). All
terms not defined herein shall have the meanings ascribed to them in that
certain Plan and Agreement of Merger dated the 23rd day of April, 1996 (the
"Merger Agreement") by and between SPORTS and FLORIDA.
W I T N E S S E T H:
WHEREAS, SPORTS AND FLORIDA entered into the Merger Agreement dated the
23rd day of April, 1996 whereby SPORTS AND FLORIDA agreed to merge.
WHEREAS, the Shareholders of SPORTS approved the Merger Agreement at a
meeting of the shareholders on June 12, 1996.
WHEREAS, the Board of Directors of FLORIDA approved the Merger Agreement in
an Action by Written Consent of the Board of Directors on April 23, 1996.
WHEREAS, SPORTS and FLORIDA now desire to amend the Plan and Agreement of
Merger;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound thereby, agree to amend the Plan and Agreement of Merger as
follows:
Paragraph 5 of the Plan and Agreement of Merger shall be stricken and the
following paragraph shall be substituted in its place:
5. NAME OF SURVIVING CORPORATION
On the Effective Date, the Articles of Incorporation of Florida shall be
amended to change the name of FLORIDA to "Sports & Recreation, Inc." or such
other name that has been adopted by SPORTS prior to the Effective Date of the
merger.
THIS AMENDMENT is being entered into this 18th day of December, 1996.
SPORTS & RECREATION REINCORPORATION, INC.
By: /s/ STEPHEN BEBIS
---------------------------
Its: President
SPORTS & RECREATION, INC.
By: /s/ STEPHEN BEBIS
----------------------------
Its: President
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EXHIBIT 3.1
ARTICLES OF INCORPORATION OF SPORTS & RECREATION REINCORPORATION, INC.
ARTICLE I - NAME
The name of the corporation is "SPORTS & RECREATION REINCORPORATION, INC."
(hereinafter called the "Corporation").
ARTICLE II - ADDRESS OF PRINCIPAL OFFICE AND MAILING ADDRESS The address of the
principal office of the Corporation and the mailing address of the Corporation
are 4701 W. Hillsborough Avenue, Tampa, Florida 33614.
ARTICLE III - CAPITAL STOCK
The aggregate number of shares which the Corporation shall have the authority to
issue is 100,000,000 shares of Common Stock, par value $0.01 per share.
ARTICLE IV - INITIAL REGISTERED AGENT
The street address of the initial registered office of the Corporation is 501 E.
Kennedy Blvd., Tampa, Florida 33602; and the name of the initial registered
agent of the Corporation at that address is Fowler, White, Gillen, Boggs,
Villareal and Banker, P.A., Attn: David C. Shobe, Esq.
ARTICLE V - INCORPORATOR
The name and address of the person filing these Articles of incorporation is:
Stephen Bebis
4701 W. Hillsborough Avenue
Tampa, Florida 33614
ARTICLE VI - PURPOSE
The Corporation is organized for the purpose of engaging in any lawful act or
activity for which corporations may be organized under the Florida Corporation
Act.
ARTICLE VII - SPECIAL MEETINGS OF STOCKHOLDERS
The stockholders of the Corporation may only call a special meeting of
stockholders if the holders of at least 50% of all of the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting
sign, date and deliver to the corporation's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to be
held. In addition, the directors or any officer instructed by the directors may
call a special meeting of the stockholders.
ARTICLE VIII - BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws.
IN WITNESS WHEREOF, the undersigned incorporator has executed these Articles of
incorporation on April 19, 1996.
/s/ STEPHEN BEBIS
-------------------
Incorporator
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EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
JumboSports Inc.
(a Florida corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
corporation shall be signed by, or in the name of, the corporation by the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a Vice-President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all of the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
Florida Business Corporation Act ("FBCA"). Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or series shall be
noted conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance or
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the FBCA,
the Board of Directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of the stock of the
corporation shall be uncertificated shares. Within a reasonable time after the
issuance or transfer of any uncertificated shares, the corporation shall send to
the registered owner thereof any written notice prescribed by the FBCA.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
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4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the FBCA, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the corporation
by delivery to its registered office in the State of Florida, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
the FBCA, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action. In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion, or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights if there are two or more classes or series of shares of
stock or upon which or upon whom the FBCA confers such rights notwithstanding
that the certificate of incorporation may provide for more than one class or
series of shares of stock, one or more of which are limited or denied such
rights thereunder; provided, however, that no such right shall vest in the event
of an increase or a decrease in the authorized number of shares of stock of any
class or series which is otherwise denied voting rights under the provisions of
the certificate of incorporation, except as any provision of law may otherwise
require.
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7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such place,
within or without the State of Florida, as the directors may, from time to time,
fix. Whenever the directors shall fail to fix such place, the meeting shall be
held at the registered office of the corporation in the State of Florida.
- CALL. Annual meetings and special meetings may be called by the directors
or by any officer instructed by the directors to call the meeting. In accordance
with Article VII of the Articles of Incorporation the stockholders of the
Corporation may only call a special meeting of stockholders if the holders of at
least 50% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date, and deliver to the
corporation's secretary one or more written demands for the meeting prescribing
the purpose or purposes for which it is to be held.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the FBCA. Except as otherwise provided by the FBCA, a copy of the notice of
any meeting shall be given, personally or by mail, not less than ten days nor
more than sixty days before the date of the meeting, unless the lapse of the
prescribed period of time shall have been waived, and directed to each
stockholder at his record address or at such other address which he may have
furnished by request in writing to the Secretary of the corporation. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States Mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a new record date for the adjourned meeting. Notice need not be given to any
stockholder who submits a written waiver of notice signed by him before or after
the time stated therein. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting - the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary,
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shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after eleven (11) months from its date unless
such proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the corporation
generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and one voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots, or
consents, here and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holders thereof to one
vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority of
the votes cast except where the FBCA prescribes a different percentage of votes
and/or a different exercise of voting power, and except as may be otherwise
prescribed by the provisions of the Articles of Incorporation and these Bylaws.
In the election of directors, and for any other action, voting need not be by
ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the FBCA to
be taken at any annual or special meeting of stockholders, or any action which
may be taken at any annual or special meeting of stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing. Action
taken pursuant to this paragraph shall be subject to the provisions of Section
607.0704 of the FBCA.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITIONS. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors of the
corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
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2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Florida. The initial
Board of Directors shall consist of one person. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or the directors,
or, if the number is not fixed, the number shall be at least one. The number of
directors may be increased or decreased by action of the stockholders or the
directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the FBCA may otherwise require, in the interim between annual meetings of
stockholders or of special meetings of stockholders called for the election of
directors and/or for the removal of one or more directors and for the filling of
any vacancy in that connection, newly created directorships and any vacancies in
the Board of Directors, including unfilled vacancies resulting from the removal
of directors for cause or without cause, may be filled by the vote of a majority
of the remaining directors then in office, although less than a quorum, or by
the sole remaining director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the State
of Florida as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of
the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the FBCA, the vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board. The quorum and voting provisions herein stated shall not be construed
as conflicting with any provisions of the FBCA and these Bylaws which govern a
meeting of directors held to fill vacancies and newly created directorships in
the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
E-11
<PAGE>
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present
and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of the
Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the FBCA,
any director or the entire Board of Directors may be removed, with or without
cause, by the holders of a majority of the shares then entitled to vote at an
election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution of the Board, shall
have and may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 607.0825 of the
FBCA, and may authorize the seal of the corporation to be affixed to all papers
which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a Secretary,
a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairman of the Board, a Vice-Chairman of the Board, an Executive
Vice-President, one or more other Vice-Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers, and such other officers with such
titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform such
duties in the management and operation of the corporation as shall be prescribed
in the resolutions of the Board of Directors designating and choosing such
officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
E-12
<PAGE>
ARTICLE IV
INDEMNIFICATION OF OFFICERS; DIRECTORS,
EMPLOYEES AND AGENTS
1. The Corporation shall, to the fullest extent permitted by law, indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against liability incurred in connection with such proceeding, including any
appeal thereof, if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
proceeding by judgment, order, settlement, or conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner such person reasonably believed
to be in, or not opposed to, the best interests of the corporation or, with
respect to any criminal action or proceeding, had reasonable cause to believe
that such conduct was unlawful.
2. The corporation shall, to the fullest extent permitted by law, indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorney's fees) and amounts paid
in settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding , including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner the person
reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification shall be made under this subsection
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
3. To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in paragraphs 1. and 2., above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred in
connection therewith.
4. Any indemnification under paragraphs 1. and 2. above (unless ordered by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in paragraphs 1. and 2. above. Such
determination shall be made: (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such proceeding; or (b)
if such a quorum is not obtainable or, even if obtainable, by a majority vote of
a committee duly designated by the board of directors ( in which directors who
are parties may participate) consisting solely of two or more directors not at
the time parties to the proceeding; or (c) by independent legal counsel: (1)
selected by the board of directors as prescribed in paragraph (a) or the
committee prescribed in paragraph (b); or (2) If a quorum of the directors
cannot be obtained for paragraph (a) and the committee cannot be designated
under paragraph (b), selected by a majority vote of the full board of directors
(in which directors who are parties may participate); or (d) by shareholders by
a majority vote of a quorum consisting of shareholders who were not parties to
such proceeding or , if no such quorum is obtainable, by a majority vote of
shareholders who were not parties to such proceeding.
5. Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of
permissibility
E-13
<PAGE>
is made by independent legal counsel, persons specified in paragraph 4(c) shall
evaluate the reasonableness of expenses and may authorize indemnification.
6. Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding shall, to the fullest extent permitted by
law, be paid by the corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific cause upon receipt of an undertaking by, or on behalf of, such director
or officer to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the corporation as authorized in this Bylaw.
Such expenses incurred by other employees and agents shall be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
7. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in any official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
8. The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this Bylaw
or under the provisions of the FBCA.
9. For purposes of this Bylaw, references to "the corporation" shall
include, in addition to the corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had the power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation if its separate existence had continued.
10. All rights to indemnification and advancement of expenses under this
Bylaw shall be deemed to be provided by contract between the Corporation and the
director, officer, employee or agent who serves in such capacity at any time
while these Bylaws and other relevant provisions of the FBCA and other
applicable law, if any, are in effect.
11. The right to be indemnified or to the reimbursement or advancement of
expenses pursuant to this Bylaw is intended to be retroactive and shall be
available with respect to event or acts occurring prior to the adoption hereof,
and any repeal or modification of this Bylaw shall not diminish or adversely
affect any right of a director, officer, employee or agent of the corporation
with respect to any events or acts occurring prior to such repeal or
modification whether or not any action or proceeding based thereon or resulting
therefrom has been commenced or threatened against any such director, officer,
employee or agent prior to such repeal modification.
12. If the FBCA is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, officers, employees
or agents, then such person, in addition to the circumstances in which he is not
now personally liable, shall be free of liability to the fullest extent
permitted by the FBCA, as so amended.
13. For purpose of this Bylaw, reference to "other enterprises" shall
include employee benefit plans; reference to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, employee, or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner the person reasonably
believed to be in the interest of the participants and beneficiaries of any
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this Bylaw.
E-14
<PAGE>
14. If this Bylaw or any portion thereof shall be invalidated on any ground
by any court of competent jurisdiction, then the corporation shall nevertheless
indemnify each person as provided above as the expenses (including attorney's
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding and an action by the
corporation, to the full extent permitted by any applicable portion of this
Bylaw that shall not have been invalidated or by any other applicable law.
15. Indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or other final
adjudication establishes that such person's actions, or omissions to act, were
material to the cause of action so adjudicated and constitute: (a) A violation
of the criminal law, unless the director, officer, employee or agent had
reasonable cause to believe such conduct lawful and had no reasonable cause to
believe such conduct was unlawful; (b) A transaction from which such person
derived an improper personal benefit; (c) In the case of a director, an unlawful
distribution under Section 607.0834 of the FBCA; or (iv) Willful misconduct or a
conscious disregard for the best interests of the corporation in a proceeding by
or in the right of the corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
(b) Any repeal or modification of the foregoing paragraph (a) by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE V
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall
prescribe.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the FBCA, the power to amend, alter, or repeal these Bylaws and to
adopt new Bylaws may be exercised by the Board of Directors or by the
stockholders.
E-15
<PAGE>
EXHIBIT 4.4
SUPPLEMENTAL INDENTURE AGREEMENT
THIS SUPPLEMENTAL INDENTURE AGREEMENT is made and entered into this 14th
day of February, 1997, by and between SPORTS & RECREATION, INC., a Delaware
corporation ("PREDECESSOR"), and Sports & Recreation Reincorporation, Inc.
(subsequently referred to as JumboSports Inc. upon consummation of the name
change and reincorporation (the "Reincorporation Transaction") as specified in
the Plan and Agreement of Merger, as defined below), a Florida corporation
("SUCCESSOR"). Unless specifically defined herein, all capitalized terms shall
have the meanings ascribed to them in the Original Indenture (as defined below).
W I T N E S S E T H:
WHEREAS, PREDECESSOR and SUCCESSOR have entered into that certain Plan and
Agreement of Merger dated April 23, 1996, as amended on December 13, 1996 (the
"Plan and Agreement of Merger"), whereby PREDECESSOR has agreed to merge with
and into SUCCESSOR and SUCCESSOR has agreed to merge with PREDECESSOR and emerge
as the surviving entity, said Plan and Agreement of Merger, attached hereto as
Exhibit A, being incorporated by reference and made a part hereof as if fully
set forth herein;
WHEREAS, PREDECESSOR executed that certain Trust Indenture (the "Original
Indenture") related to the public offering of those certain 4-1/4% Convertible
Subordinated Notes Due 2000 (the "Securities").
WHEREAS, in accordance with Section 801 of the Original Indenture,
PREDECESSOR desires to expressly assume by this SUPPLEMENTAL INDENTURE
AGREEMENT, the due and punctual payment of the principal of (and premium, if
any) and interest on all the Securities and the performance of every covenant of
that certain Original Indenture on the part of PREDECESSOR to be performed or
observed and shall provide for conversion rights in accordance with Section 1211
of said Original Indenture.
NOW, THEREFORE, in consideration of the premises, which shall be deemed an
integral part of this Agreement and not as mere recitals hereto, and in
consideration of the mutual covenants, agreements and undertakings contained
herein and in the above-referenced Plan and Agreement of Merger and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound thereby, agree
as follows:
SUCCESSOR, on behalf of itself and its successors and assigns, does hereby
for itself, themselves, their respective successors and assigns expressly
assume, by this SUPPLEMENTAL INDENTURE AGREEMENT, the due and punctual payment
of the principal of (and premium, if any) and interest on all the Securities and
the performance of every covenant of that certain Original Indenture on the part
of PREDECESSOR to be performed or observed and shall provide for conversion
rights in accordance with Section 1211 of said Original Indenture. Specifically,
that the Holder of each Security then outstanding and such Person shall have the
right thereafter, during the period such Security shall be convertible as
specified in Section 1201 of the Original Indenture, to convert such Security
only into the kind and amount of securities, cash and other property receivable,
if any, upon completion of the Reincorporation Transaction by a holder of the
number of shares of Common Stock of PREDECESSOR into which such Security might
have been converted immediately prior to the Reincorporation Transaction,
subject to the limitations of Section 1211 of said Original Indenture.
This SUPPLEMENTAL INDENTURE AGREEMENT binds SUCCESSOR, its successors and
assigns, and the benefits and advantages of this SUPPLEMENTAL INDENTURE
AGREEMENT shall inure to the benefit of PREDECESSOR, its successors and assigns
and the Indenture Trustee, its successors and assigns.
E-16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
SPORTS & RECREATION, INC.
WITNESSES:
By: /s/ STEPHEN BEBIS
- -------------------------- -------------------------------------
Stephen Bebis, President
- --------------------------
"PREDECESSOR"
Sports & Recreation Reincorporation, Inc.
(JumboSports Inc. upon consummation of the
(the Reincorporation Transaction)
"SUCCESSOR"
- -------------------------- By: /s/ STEPHEN BEBIS
--------------------------------------
- -------------------------- Stephen Bebis, President
THE BANK OF NEW YORK, Successor to
Barnett Banks Trust Company,
National Association
By: /s/ SHARON L. ATKINSON
- -------------------------- ---------------------------------------
Sharon L. Atkinson,
- --------------------------
"TRUSTEE"
E-17
<PAGE>
EXHIBIT 11
JumboSports Inc.
Weighted Average Shares Outstanding Calculations
for the Year Ended January 31, 1997
<TABLE>
<S> <C>
PRIMARY
- -------
Weighted average common stock outstanding 19,984,993
Weighted average stock issued assuming exercise of stock options
using the treasury stock method at average market price N/A(1)
------------
Total weighted average shares outstanding 19,984,993
============
Net loss $(30,543,550)
============
Primary loss per share $ (1.53)
============
FULLY DILUTED
------------
Weighted average common stock shares outstanding 19,984,993
Weighted average stock issued assuming exercise of stock options
using the treasury stock method at the higher of average
market price or ending market price N/A(1)
Weighted average stock issued assuming the as adjusted method for
the 4 1/4% Convertible Subordinated Notes Due 2000 N/A(2)
------------
Total weighted average shares outstanding 19,984,993
============
Net loss as reported $(30,543,550)
Interest adjustment net of tax for the 4 1/4% Convertible
Subordinated Notes N/A(2)
------------
Net income as adjusted $(30,543,550)
============
Fully diluted earnings per share $ (1.53)
============
</TABLE>
(1) Not reported under GAAP as conversion would be anti-dilutive.
(2) Not reported under GAAP as conversion would be anti-dilutive, and
dilution less than 3%.
E-18
<PAGE>
EXHIBIT 12
JumboSports Inc.
Statements of Ratio of Earnings to Fixed Charges
(in thousands except ratio data)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Earning (loss) before tax $ 8,676 $18,417 $25,670 $10,971 $(48,419)
Fixed charges:
Interest 3,395 1,896 6,790 13,890 20,092
Interest portion of rent expense 1,232 1,818 3,045 3,956 1,214
------- ------- ------- ------- --------
Total fixed charges 4,627 3,714 9,835 17,846 21,306
------- ------- ------- ------- --------
Earnings plus fixed charges $13,303 $22,131 $35,505 $28,817 $(27,113)
======= ======= ======= ======= ========
Earnings plus fixed charges
to fixed charges 2.88 5.96 3.61 1.61 N/M
======= ======= ======= ======= ========
N/M - not meaningful
</TABLE>
E-19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JUMBOSPORTS INC. FOR THE YEAR ENDED JANUARY 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> JAN-29-1996
<PERIOD-END> JAN-31-1997
<CASH> 4,944
<SECURITIES> 0
<RECEIVABLES> 2,562
<ALLOWANCES> 0
<INVENTORY> 201,090
<CURRENT-ASSETS> 225,839
<PP&E> 308,161
<DEPRECIATION> 25,510
<TOTAL-ASSETS> 525,586
<CURRENT-LIABILITIES> 67,161
<BONDS> 74,750
0
0
<COMMON> 203
<OTHER-SE> 159,421
<TOTAL-LIABILITY-AND-EQUITY> 525,586
<SALES> 624,019
<TOTAL-REVENUES> 624,019
<CGS> 472,449
<TOTAL-COSTS> 505,062
<OTHER-EXPENSES> 147,486
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,890
<INCOME-PRETAX> (48,419)
<INCOME-TAX> (17,875)
<INCOME-CONTINUING> (30,544)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,544)
<EPS-PRIMARY> (1.53)
<EPS-DILUTED> (1.53)
</TABLE>
<PAGE>
EXHIBIT 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of JumboSports Inc.
In connection with our audit of the consolidated financial statements of
JumboSports Inc., as of January 31, 1997 and for the year ended January 31,
1997, which consolidated financial statements are included by reference into
this report, we have also audited the financial statement schedule listed in
Item 99 herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents,
fairly, in all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Tampa, Florida
March 21, 1997
E-21
<PAGE>
EXHIBIT 99.2
JUMBOSPORTS INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Year Ended
January 31, 1997
<TABLE>
<CAPTION>
Additional
Beginning Charge to Cost Ending
Balance and Expense Deductions (1) Balance
--------- -------------- -------------- -------
<S> <C> <C> <C> <C>
Year ended January 31, 1997
Allowance for doubtful accounts -- $ 273 -- $ 273
</TABLE>
(1) Write-offs and recoveries
E-22
<PAGE>
EXHIBIT 99.3
ARTICLES OF MERGER
OF
JumboSports Inc.
AND
Sports & Recreation Reincorporation, Inc.
To the Secretary of State
State of Florida
Pursuant to the provisions of the Florida Business Corporation Act, the
Florida wholly owned subsidiary business corporation and the foreign parent
business corporation named below do hereby adopt the following Articles of
Merger.
1. Annexed hereto and made a part hereof is the Plan and Agreement of
Merger, as amended, for merging JumboSports Inc. ("Sports") (formerly known as
Sports & Recreation, Inc. but which has adopted the new name pursuant to
another merger of even date herewith with a wholly owned Delaware subsidiary
known as Sports & Recreation Macro Sports, Inc.) into Sports & Recreation
Reincorporation, Inc. (the "Company") as approved by the Shareholders of Sports
on June 12, 1996.
2. The effective time and date of the merger herein provided for in the
State of Florida shall be the date and time when these Articles of Merger shall
be filed with the Secretary of State of the State of Florida.
3. Approval of the Plan and Agreement of Merger by the Shareholders of the
Company was not required because the Company was a wholly owned subsidiary of
Sports.
4. The merger of Sports with and into the Company is permitted by the laws
of Delaware, its jurisdiction of organization, and is in compliance with said
laws. The Plan and Agreement of Merger was adopted by the Board of Directors of
Sports on April 5, 1996 and was amended by the Board of Sports on December 18,
1996.
5. As to the Company, the aforesaid Plan of Merger was adopted in
accordance with the provisions of the Florida Business Corporation Act on April
23, 1996 and amended on December 13, 1996.
6. The Company will be the Surviving Corporation in the Merger and from and
after the effective time of the Merger will change its name to JumboSports Inc.
E-23
<PAGE>
EXHIBIT 99.4
CERTIFICATE OF OWNERSHIP AND MERGER
OF
"JumboSports Inc."
AND
Sports & Recreation Reincorporation, Inc.
It is hereby certified that:
1. The constituent business corporations participating in the merger
herein certified are:
(i) JumboSports Inc. (the "Corporation") (formerly known as Sports &
Recreation, Inc. but which has adopted the new name pursuant to another merger
of even date herewith with a wholly owned Delaware subsidiary known as Sports &
Recreation Macro Sports, Inc.), which is incorporated under the laws of the
State of Delaware; and
(ii) Sports & Recreation Reincorporation, Inc. ("FLORIDA"),
which is a wholly owned subsidiary of the Corporation which is incorporated
under the laws of the State of Florida.
2. A Plan and Agreement of Merger, as amended, has been approved, adopted,
certified, executed and acknowledged by each of the aforesaid constituent
corporations in accordance with the provisions of Section 253 of the General
Corporation Law of the State of Delaware, to wit, including the approval of the
shareholders of the Corporation as the non surviving parent obtained at the
annual shareholders' meeting of the Corporation on June 12, 1996, and by FLORIDA
in accordance with the laws of the State of Florida. A Copy of the resolutions
of the Board of Directors of the Corporation which were approved on December 18,
1996, when the name of the Corporation was still Sports & Recreation, Inc.,
which approves such merger and the Plan and Agreement of Merger, as amended, is
attached hereto as Exhibit A and incorporated by reference herein.
3. FLORIDA will be the surviving corporation in the merger herein certified
and will continue its existence as said surviving corporation under the name
JumboSports Inc. upon the effective date of said merger pursuant to the
provisions of the laws of the State of Florida.
4. The certificate of incorporation of FLORIDA is to be amended and changed
by reason of the merger herein certified by striking out Article I thereof,
relating to the name, and by substituting in lieu thereof the following Article
I:
The name of the corporation is JumboSports Inc.
5. The executed Plan and Agreement of Merger, as amended, between the
aforesaid constituent corporations is on file at the principal place of business
of the aforesaid surviving corporation, the address of which is as follows:
4701 West Hillsborough Avenue
Tampa, Florida 33614
6. A copy of the aforesaid Plan and Agreement of Merger, as amended, will
be furnished by the aforesaid surviving corporation, on request, and without
cost, to any stockholder of each of the aforesaid constituent corporations.
7. The aforesaid surviving corporation does hereby agree that it may be
served with process in the State of Delaware in any proceeding for enforcement
of any obligation of the Corporation, as well as for enforcement of any
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<PAGE>
obligation of said surviving corporation arising from the merger herein
certified including any suit or other proceeding to enforce the right, if any,
of any stockholder of the Corporation as determined in appraisal proceedings
pursuant to the provisions of Section 262 of the General Corporation Law of the
State of Delaware; does hereby irrevocably appoint the Secretary of State of the
State of Delaware as its agent to accept service of process in any such suit or
other proceedings; and does hereby specify the following as the address to which
a copy of such process shall be mailed by the Secretary of State of the State of
Delaware:
JumboSports Inc.
4701 W. Hillsborough Avenue
Tampa, FL 33614
8. The Agreement of Merger between the aforesaid constituent corporations
provides that the merger herein certified shall be effective upon the filing of
this Certificate of Ownership and Merger with the Secretary of State of the
State of Delaware and the filing of Articles of Merger with the Secretary of
State of the State of Florida.
IN WITNESS WHEREOF, the undersigned have caused this Certificate of
Ownership and Merger to be executed effective the 14th day of February, 1997.
JumboSports Inc.
By: /s/ STEPHEN BEBIS
---------------------------------
Name: Stephen Bebis
Title: Chairman, CEO and President
Sports & Recreation Reincorporation, Inc.
By: /s/ STEPHEN BEBIS
---------------------------------
Name: Stephen Bebis
Title: Chairman, CEO and President
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<PAGE>
EXHIBIT 99.5
CERTIFICATE OF OWNERSHIP AND MERGER
OF
SPORTS & RECREATION MACRO SPORTS, INC.
(a Delaware corporation)
INTO
SPORTS & RECREATION, INC.
(a Delaware corporation)
It is hereby certified that:
1. Sports & Recreation, Inc. (the "Corporation") is a business
corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
stock of Sports & Recreation Macro Sports, Inc. ("Sports Macro"), which is
also a business corporation of the State of Delaware.
3. On December 18, 1996, the Board of Directors of the Corporation
adopted the following resolutions to merge Sport & Recreation Macro Sports,
Inc. into the Corporation:
RESOLVED, that Sports Macro be merged into this Corporation (the
"Delaware Merger"), and that all of the estate, property, rights,
privileges, powers and franchises of Sports Macro be vested in and held
and enjoyed by this Corporation as fully and entirely and without change
or diminution as the same were before held and enjoyed by Sports Macro in
its name.
RESOLVED, that the Certificate of Ownership and Merger in the form
attached hereto as Exhibit B is hereby approved and that the appropriate
officers are authorized to execute, acknowledge and file the Certificate
with the State of Delaware.
RESOLVED, that as of the effective time of the Delaware Merger this
Corporation shall assume all of the obligations of Sports Macro.
RESOLVED, that as of the effective time of the Delaware Merger this
Corporation shall change its corporate name to JumboSports Inc.
RESOLVED, that the effective time of the Certificate of Ownership and
Merger setting forth a copy of these resolutions, and the time when the
merger therein provided for shall become effective, shall be the date and
time when the Certificate of Ownership and Merger is filed with the
Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Ownership and Merger to be executed effective as of the 14th day of February,
1997.
SPORTS & RECREATION, INC.
By: /s/ STEPHEN BEBIS
-------------------------------
Its Chairman, CEO & President
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