<PAGE> 1
Registration No. 33-55330
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 11-K
---------
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
FOR THE PLAN FISCAL YEAR ENDED JANUARY 31, 1996
-------------------
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
-------------------
Sportmart, Inc.
1400 South Wolf Road
Suite 200
Wheeling, Illinois 60090
<PAGE> 2
SPORTMART, INC. INCENTIVE SAVINGS PLAN
ANNUAL REPORT FORM 11-K
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits . . . . . . . . . . . . . . . . . . . . 3-4
Statement of Changes in Net Assets Available for Benefits. . . . . . . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11
SCHEDULES
Item 27a - Schedule of Assets Held for Investment Purposes . . . . . . . . . . . . . . . 12
Other schedules are omitted because the information is
contained in the financial statements or is not applicable
to the Sportmart, Inc. Incentive Savings Plan
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBIT
23 Consent of Coopers & Lybrand, L.L.P. . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
1
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of the Sportmart, Inc.
Incentive Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of the Sportmart, Inc. Incentive Savings Plan (the "Plan") as of
January 31, 1996 and January 29, 1995 and the related statement of changes in
net assets available for benefits for the year ended January 31, 1996. These
financial statements are the responsibility of the Plan'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 provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
January 31, 1996 and January 29, 1995, and the changes in net assets available
for benefits for the year ended January 31, 1996, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Item
27(a), Form 5500 - Schedule of Assets Held for Investment Purposes is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The Fund Information in
the statements of net assets available for benefits and changes in net assets
available for benefits are presented for purposes of additional analysis rather
than to present the net assets available for benefits and changes in net assets
available for benefits of each fund. The supplemental schedule and Fund
Information has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
The schedule of assets held for investment purposes that accompanies the Plan's
financial statements does not disclose the historical cost of certain plan
assets held by the Plan custodian. Disclosure of this information is required
by the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974.
COOPERS & LYBRAND, L.L.P.
Chicago, Illinois
July 19, 1996
2
<PAGE> 4
SPORTMART, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
JANUARY 31, 1996
<TABLE>
<CAPTION>
AMERICAN FIDELITY SPORTMART STOCK
T-NOTE RATE BALANCED MAGELLAN STOCK CASH PARTICIPANT
FUND FUND FUND FUND ACCOUNT LOANS TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $6,136 $ 6,136
Investments
Group annuity contract $885,371 885,371
Mutual funds $1,120,926 $1,911,317 3,032,243
Sportmart common stock
(cost of $277,165) $114,950 114,950
Participant loans $150,480 150,480
-----------------------------------------------------------------------------------------
Total investments 885,371 1,120,926 1,911,317 114,950 0 150,480 4,183,044
Receivables
Employee 15,882 17,407 30,309 9,615 73,213
Employer 3,494 3,617 5,910 2,191 15,212
Loan repayment 1,232 1,783 2,271 879 6,165
-----------------------------------------------------------------------------------------
Total receivables 20,608 22,807 38,490 0 12,685 0 94,590
-----------------------------------------------------------------------------------------
TOTAL ASSETS 905,979 1,143,733 1,949,807 114,950 18,821 150,480 4,283,770
LIABILITIES
Deferral refunds 5,175 15,634 31,032 51,841
-----------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,175 15,634 31,032 0 0 0 51,841
-----------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR BENEFITS $900,804 $1,128,099 $1,918,775 $114,950 $18,821 $150,480 $4,231,929
=========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
SPORTMART, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
JANUARY 29, 1995
<TABLE>
<CAPTION>
AMERICAN FIDELITY SPORTMART STOCK
T-NOTE RATE BALANCED MAGELLAN STOCK CASH PARTICIPANT
FUND FUND FUND FUND ACCOUNT LOANS TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $1,591 $1,591
Investments
Group annuity contract $778,523 778,523
Mutual funds $894,862 $1,497,862 2,392,724
Sportmart common stock
(cost of $246,052) $229,826 229,826
Participant loans $166,307 166,307
-----------------------------------------------------------------------------------------
Total investments 778,523 894,862 1,497,862 229,826 0 166,307 3,567,380
Receivables
Employee 13,387 15,578 27,216 5,203 61,384
Employer 2,875 3,265 5,185 1,133 12,458
Loan repayment 1,128 1,496 2,154 507 5,285
-----------------------------------------------------------------------------------------
Total receivables 17,390 20,339 34,555 0 6,843 0 79,127
-----------------------------------------------------------------------------------------
TOTAL ASSETS 795,913 915,201 1,532,417 229,826 8,434 166,307 3,648,098
LIABILITIES
Deferral refunds 3,062 4,756 21,395 29,213
-----------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,062 4,756 21,395 0 0 0 29,213
-----------------------------------------------------------------------------------------
NET ASSETS AVAILABLE
FOR BENEFITS $792,851 $910,445 $1,511,022 $229,826 $8,434 $166,307 $3,618,885
=========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
SPORTMART, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
AMERICAN FIDELITY SPORTMART STOCK
T-NOTE RATE BALANCED MAGELLAN STOCK CASH PARTICIPANT
FUND FUND FUND FUND ACCOUNT LOANS TOTAL
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Employee $206,605 $219,934 $345,876 $67,608 $840,023
Employer 44,464 46,544 70,287 14,700 175,995
Employee rollover 19,273 11,701 11,089 6,098 48,161
Transfers between funds 24,215 (2,236) (50,281) 31,018 (24,256) 21,540
Net gain from investments
in registered investment
companies 209,132 557,641 766,773
Net depreciation in
market value of investments (151,992) (151,992)
Interest income 27,076 11,654 38,730
-----------------------------------------------------------------------------------------
TOTAL ADDITIONS 321,633 485,075 934,612 (114,876) 58,052 33,194 1,717,690
DEDUCTIONS:
Distributions to participants 208,505 251,787 495,827 46,352 49,021 1,051,492
Deferral refunds 5,175 15,634 31,032 51,841
Other 1,313 1,313
-----------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 213,680 267,421 526,859 0 47,665 49,021 1,104,646
-----------------------------------------------------------------------------------------
NET INCREASE(DECREASE) 107,953 217,654 407,753 (114,876) 10,387 (15,827) 613,044
NET ASSETS AVAILABLE FOR BENEFITS
BEGINNING OF YEAR 792,851 910,445 1,511,022 229,826 8,434 166,307 3,618,885
-----------------------------------------------------------------------------------------
END OF YEAR $900,804 $1,128,099 $1,918,775 $114,950 $18,821 $150,480 $4,231,929
=========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
SPORTMART, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements of the Sportmart, Inc. Incentive Savings Plan
(the "Plan") are presented on the accrual basis of accounting. The Plan
amended its fiscal year end to January 31st effective for the Plan year
ending January 31, 1996. In prior years the Plan had a 52-53 week fiscal
year ending the Sunday closest to January 31st.
INVESTMENT VALUATION
The various Plan investment funds, except for the group annuity contract
which is valued at contract value, are valued at the quoted market value
on the last business day of the Plan's year. Dividend income is recorded
on the ex-dividend date and interest income is recorded as earned on an
accrued basis.
Purchases and sales of securities are recorded on a trade-date basis. The
Plan presents in the Statement of Changes in Net Assets Available for
Benefits, the net appreciation (depreciation) in the market value of its
investments, which consists of the realized gains or losses and the
unrealized appreciation (depreciation) of those investments.
DEFERRAL REFUNDS
Included in the Statements of Net Assets Available for Benefits and the
Statement of Changes in Net Assets Available for Benefits are amounts
representing employee contributions in excess of allowable contributions
as determined by IRS requirements. These amounts represent allowable
refunds necessary to maintain compliance with IRS requirements. The
deferral refunds are distributed to the participants as well as any
applicable investment gain or loss in accordance with the requirements of
ERISA within 45 days following the end of the plan year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make significant
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of financial statements and the reported amounts of additions and
deductions during the reporting period. Actual results could differ from
those of estimates.
2. PLAN DESCRIPTION
The following provides only general information. Participants should
refer to the Plan Agreement for a more complete description of the Plan's
provisions.
6
<PAGE> 8
SPORTMART, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
GENERAL
The Sportmart, Inc. Incentive Savings Plan, established February 1, 1987,
is a defined contribution plan created to provide retirement benefits for
employees of Sportmart, Inc. All eligible employees over age 21 who have
completed one year of service and work over 1,000 hours, as defined by the
Plan, are entitled to participate. Once employees are admitted into the
Plan, they remain in the Plan until termination of employment. Employees
become participants automatically on the next entry date following the
satisfying of the above eligibility requirements.
CONTRIBUTIONS AND VESTING
Eligible employees may make contributions on a tax-deferred basis at a
rate of 2% to 10% of compensation. These voluntary contributions may not
exceed limitations imposed by the Internal Revenue Service. For the
calendar year ended December 31, 1995, each participant's tax-deferred
contributions are limited to $9,240. The Company is obligated to match
one-third of the first 3% of each employee's compensation which is
contributed to the Plan. Participant accounts are fully vested at all
times.
If the Plan is terminated, participants or their beneficiaries are
entitled to 100% of the value of their accounts in all funds.
PARTICIPANT ACCOUNTS
As of January 31, 1996, participants' accounts were invested in the
following four funds (participants may allocate their contributions among
these investment options in 10% increments; however, no more than 30% may
be allocated to the Sportmart Stock Fund):
T-Note Rate Fund - This fund is an investment in a group annuity
contract with an insurance company for which the interest rate
is determined quarterly and is based on the five-year Treasury note
yield less 1.45%.
American Balanced Fund - This fund is invested primarily in a mutual
fund consisting of common stocks, preferred stocks, corporate bonds
and government bonds.
Fidelity Magellan Fund - This fund is invested primarily in a mutual
fund consisting of common stocks, convertible securities and other
securities with similar characteristics.
Sportmart Stock Fund - This fund is invested in shares of the
voting common stock and the Class A common stock, non-voting of
Sportmart, Inc.
Stock Cash Account - This represents contributions which have not
yet been invested in the Sportmart Stock Fund as of the Plan year
end.
7
<PAGE> 9
SPORTMART, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
Net income or loss resulting from investment activity for each quarter is
allocated to the participants' accounts based upon the beginning-of-the-
quarter balance, less any distributions during the quarter. Participants
may borrow funds from their contribution accounts, subject to a limit of
the least of 50% of such participants' total account balance, 100% of such
participant's before tax contribution account balance, or $50,000 reduced
by the highest outstanding loan balance in twelve months immediately
preceding the date of the loan. Interest, which is payable at the rate of
prime plus one percent, is credited to the account of the participant.
Repayment of the loan is required over a period not to exceed five years,
unless the loan is used to acquire a principal residence, in which case
the repayment is required over a period not to exceed ten years.
At January 31, 1996 and January 29, 1995, there were 906 and 807
participants, respectively, some of whom elected to invest in more than
one fund. Set forth below is the number of participants investing in each
fund.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
T-Note Rate Fund 594 532
American Balanced Fund 635 561
Fidelity Magellan Fund 715 622
Sportmart Stock Fund 356 359
</TABLE>
There were 109 and 137 inactive participants in the Plan at January 31,
1996 and January 29, 1995, respectively. These inactive participants had
account balances, but were not contributing to the Plan as of the
respective Plan year end. The value of these inactive participant
accounts for which withdrawal has not been requested, included in Net
Assets Available For Benefits, was $106,996 as of January 31, 1996 and
$138,487 as of January 29, 1995.
PAYMENT OF BENEFITS
Upon termination of service, a participant may elect to receive a lump sum
distribution, equal to the value of the account, or annual installments,
as selected by the participant with certain constraints, not to exceed
fifteen years.
Amounts allocated to accounts of individuals who have elected to withdraw
from the Plan but have not yet been paid at January 31, 1996 and January
29, 1995 aggregate to $158,080 and $74,330, respectively. Although these
amounts are not reported as a liability for financial statements prepared
in conformity with generally accepted accounting principles, the
Department of Labor requires that this amount be reported as a liability
on Form 5500 as noted in the reconciliation below:
8
<PAGE> 10
SPORTMART, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
A reconciliation between the 1996 Form 5500 and the accompanying statement
of net assets available for plan benefits is as follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Net assets available for plan
benefits (Form 5500) $4,073,849
Add: Benefit claims payable 158,080
----------
Net assets available for plan
benefits (financial statements) $4,231,929
==========
</TABLE>
A reconciliation between the 1996 Form 5500 and the accompanying statement
of changes in net assets available for plan benefits is as follows:
<TABLE>
<CAPTION>
1996
----
<S> <C>
Payments to participants (Form 5500) $1,135,242
Less: Net increase in
benefit claims payable 83,750
----------
Payments to participants
(financial statements) $1,051,492
==========
</TABLE>
3. INVESTMENTS
Funds are deposited with third party brokerage custodians, who are
responsible for investing the funds according to participants' elections.
All securities are registered in the name of the Plan. Mesirow
Financial is currently the custodian of the Sportmart Stock Fund and
Nationwide Insurance Company is custodian of the T-Note Fund, American
Balanced Fund and the Fidelity Magellan Fund. Administration fees of
approximately $13,300 were paid by Sportmart, Inc. for the Plan during
the year ended January 31, 1996.
Investments that represented five percent or more of total assets on
January 31, 1996 and January 29, 1995 were:
9
<PAGE> 11
SPORTMART, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1996 1995
MARKET MARKET
VALUE VALUE
------ ------
<S> <C> <C>
Group Annuity Contract
T-Note Rate Fund $885,371 $778,523
Mutual Funds
American Balanced Fund $1,120,926 $894,862
Fidelity Magellan Fund $1,911,317 $1,497,862
Equity Securities
Sportmart Stock Fund $114,950 $229,826
</TABLE>
4. GROUP ANNUITY CONTRACT
The T-Note Rate Fund is a guaranteed investment contract invested in group
annuity contracts with an insurance company. The fund earns interest
income based upon an interest rate equal to the 5 Year Treasury note
yield, calculated at the beginning of each calendar quarter, less 1.45%.
The average yield on assets as of January 31, 1996 was 4.14% and the
return on assets for the year ended January 31, 1996 was 4.73%. The
group annuity contracts are valued at contract value which the company
believes approximates fair value as the contracts are revalued each
calendar quarter based on Treasury notes and are guaranteed by a major
financial institution.
Certain employer initiated events (plan termination, mergers, etc.) are
not eligible for book value disbursements and may cause liquidation of all
or a portion of the fund at a market value adjustment.
5. TAX STATUS
The Internal Revenue Service has determined and informed Sportmart, Inc.
by a letter dated April 16, 1996, that the Plan dated February 1, 1987 is
qualified under Internal Revenue code Section 401(a) and the trust
established under the Plan is tax-exempt under Internal Revenue Code
Section 501(a). The Plan trustees believe that the Plan is currently
designed and operated in compliance with the applicable requirements of
the Internal Revenue Code.
Participants will not be subject to income tax on Sportmart, Inc. matching
contributions, before-tax contributions made on their behalf by Sportmart,
Inc., or earnings credited to their accounts, until withdrawn or
distributed.
6. CONCENTRATIONS OF RISK
The Plan maintains cash balances at several banks in the United States.
Account balances are insured by the Federal Deposit Insurance Corporation
up to $100,000. The Plan also maintains investment balances with
financial organizations in Chicago, Illinois and Columbus, Ohio. Account
balances are insured by the Securities Investor Protection Corporation up
to $500,000.
10
<PAGE> 12
SPORTMART, INC. INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
7. PLAN TERMINATION PRIORTIES
The Company has not expressed any intent to terminate the Plan, however,
it is free to do so, subject to the provisions set forth by ERISA. In the
event of plan termination, the Trustees will distribute to each
participant their accounts in a single lump sum cash payment. The
Trustees shall exercise discretion in a nondiscriminatory manner regarding
distributions upon termination.
8. RISKS AND UNCERTAINTIES
The Plan provides for various investment options in any combination of
Sportmart stock, fixed income securities and mutual funds. Investment
securities are exposed to various risks, such as interest rate, market and
credit. Due to the level of risk associated with certain investment
securities and the level of uncertainty related to changes in the value of
investment securities, it is at least reasonably possible that changes in
risks in the near term would materially affect participants' account
balances and the amounts reported in the statement of net assets
available for benefits and the statement of changes in net assets
available for benefits. The T-Note Rate Fund invests in a group annuity
contract with Nationwide Insurance Company. The underlying value of the
contract is subject to the credit worthiness of the institution issuing
the contract. Nationwide was rated AA+ by Standard and Poor's insurance
rating services.
11
<PAGE> 13
SPORTMART, INC. INCENTIVE SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
JANUARY 31, 1996
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT,
IDENTITY OF ISSUE, INCLUDING MATURITY DATE,
BORROWER, LESSOR OR RATE OF INTEREST, COLLATERAL
SIMILAR PARTY PAR OR MATURITY VALUE COST MARKET VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sportmart, Inc. Voting Common Stock; $.01
par value - 5,900 shares $62,917 $30,237
Class A Common Stock, Non
Voting; $.01 par value -
25,100 shares 214,248 84,713
Nationwide Life Group Annuity Contract with
Insurance Co. T-Note an interest rate based on
Rate Fund the five year Treasury Note
yield 885,371 885,371
American Balanced Fund Mutual Fund - 598,806 units 1,120,926* 1,120,926
Fidelity Magellan Fund Mutual Fund - 1,114,203 units 1,911,317* 1,911,317
Participant Loans Loans bearing interest at
rates ranging from 7% to 11% 0 150,480
TOTAL INVESTMENTS -------------------------
$4,194,779 $4,183,044
=========================
</TABLE>
*The custodian is unable to provide the cost of assets.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Sportmart, Inc. Incentive Savings Plan
07/26/96 /S/ LARRY J. HOCHBERG
- --------- ------------------------------
Date Larry J. Hochberg, Trustee of the Sportmart, Inc.
Incentive Savings Plan
13
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Sportmart, Inc.
registration statement on Form S-8 (No. 33-55330) of our report dated July 19,
1996 on our audits of the financial statements and supplemental schedule of
the Sportmart, Inc. Incentive Savings Plan as of January 31, 1996 and January
29, 1995 and for year ended January 31, 1996, which report is included in this
annual report on Form 11-K.
COOPERS & LYBRAND, L.L.P.
Chicago, Illinois
July 24, 1996
14
