SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended: May 4, 1997
Commission File Number: 0-20672
SPORTMART, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2702213
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 South Wolf Road, Wheeling, Illinois 60090
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (847) 520-0100
Indicate by check mark whether the registrant 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).
Yes X No
Indicate by check mark whether the registrant has been subject to
such filing requirements for the past 90 days.
Yes X No
As of June 12, 1997, there were 5,148,833.5 shares of Voting
Common Stock, par value $.01, and 7,736,680.5 shares of Class A Common
Stock, par value $.01, of the registrant outstanding.
<PAGE>
SPORTMART, INC.
QUARTERLY PERIOD ENDED MAY 4, 1997
INDEX
PAGE(S)
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of May 4, 1997 and
February 2, 1997 . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations for the
thirteen weeks ended May 4, 1997 and April 28,
1996 . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Stockholders' Equity
for the thirteen weeks ended May 4, 1997 and
the fifty-three weeks ended February 2, 1997 . 3
Consolidated Statements of Cash Flows for the
thirteen weeks ended May 4, 1997 and April 28,
1996 . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . 7-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Consolidated Financial Statements
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MAY 4, 1997 AND FEBRUARY 2, 1997
(Amounts in thousands, except share data)
ASSETS May 4, February 2,
1997 1997
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 137 $ 2,816
Due from related parties 467 624
Merchandise inventories, net 152,343 162,913
Prepaid expenses and other assets 7,628 5,035
Income taxes receivable 964 11,044
Advertising co-op receivable, net 4,066 2,338
Assets held for sale 2,556 2,631
Deferred income taxes 6,300 6,300
Total current assets 174,461 193,701
Property and equipment, net 59,828 61,750
Other assets 3,818 3,868
Deferred income taxes 7,278 7,278
$245,385 $266,597
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit due 2001 $ 83,250 $ 93,175
Mortgage payable 775 -
Current portion of capitalized lease
obligations 315 307
Accounts payable 49,773 44,922
Accrued expenses:
Salaries and wages 3,078 3,338
Taxes other than income 5,785 8,049
Advertising 1,091 5,014
Reserve for store closings 12,374 16,319
Other 7,579 13,377
Total current liabilities 164,020 184,501
Capitalized lease obligations, net of
current portion 3,327 3,409
Other long-term liabilities 4,906 4,768
172,253 192,678
Commitments and contingencies - -
Stockholders' equity:
Preferred stock; $.01 par value;
5,000,000 shares authorized; none issued - -
Voting common stock; $.01 par value;
50,000,000 shares authorized 5,148,833
shares issued and outstanding on May 4,
1997 and February 2, 1997 52 52
Class A common stock, non-voting;
$.01 par value, 50,000,000
shares authorized; 7,736,680 and
7,694,734 shares issued and outstanding
on May 4, 1997 and February 2, 1997,
respectively 77 77
Additional paid-in capital 79,939 79,842
Cumulative translation adjustment (35) (36)
Retained earnings (6,901) (6,016)
Total stockholders' equity 73,132 73,919
$245,385 $266,597
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
<TABLE> SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
(Unaudited)
Thirteen Weeks Ended
May 4, April 28,
1997 1996
<S> <C> <C>
Net sales $103,932 $116,209
Cost of sales, including buying,
distribution and occupancy 81,311 90,590
Gross profit 22,621 25,619
Operating expenses:
Store 17,506 20,270
General and administrative 4,709 4,634
Store pre-opening - 117
Operating income 406 598
Other expense:
Interest expense, net (1,863) (1,966)
Other expense (18) (152)
(1,881) (2,118)
Loss from operations before income
taxes (1,475) (1,520)
Income tax benefit ( 590) (643)
Net loss $ (885) $ (877)
Net loss per share $ (.07) $ (.07)
Weighted average number of
common shares outstanding 12,848,265 12,800,028
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except share data)
(Unaudited)
<TABLE>
Voting Class A Additional Cumulative Total
Common Stock CommonStock Paid-in Translation Retained Stockholders'
Shares Amount Shares Amount Capital Adjustment Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 28, 1996 5,148,833 $ 52 7,625,538 $ 76 $ 79,637 $ (12) $ 21,043 $ 100,796
Issuance of 60,766 of Class A
common shares under
stock purchase plan - - 60,766 1 173 - - 174
Exercise of stock options - - 8,430 - 32 - - 32
Cumulative translation adjustment - - - - - (24) - (24)
Net loss, fiscal 1996 - - - - - - (27,059) (27,059)
Balances, February 2, 1997 5,148,833 52 7,694,734 77 79,8
Issuance of 41,946 of Class A
common shares under
stock purchase plan - - 41,946 - 97 - - 97
Cumulative translation adjustment - - - -
Net loss - - - - - - (885) (885)
Balances, May 4, 1997 5,148,833 $52 7,736,680 $77 $79,939 $ (35) $(6,901) $73,132
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
Thirteen Weeks Ended
May 4, April 28,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $ (885) $ (877)
Adjustments to reconcile net income to net cash
provided by (used in)operating activities:
Depreciation and amortization 2,723 2,797
Other adjustment - 68
Deferred income tax provision - (17)
Net decrease (increase) in assets:
Merchandise inventories 10,570 (11,977)
Prepaid expenses and other assets (2,593) 6,155
Income taxes receivable 10,080 -
Advertising co-op receivable (1,728) (275)
Other assets-noncurrent (127) (212)
Net increase (decrease) in liabilities:
Accounts payable 4,851 8,806
Accrued expenses (16,190) (10,367)
Other long-term liabilities 138 269
Net cash provided by (used in) operating
activities 6,839 (5,630)
Cash flows from investing activities:
Purchase of property and equipment (623) (5,892)
Purchase of assets held pending sale 75 (48)
Advances to related parties (46) (217)
Repayment of advances to related parties 203 358
Net cash used in investing activities (391) (5,799)
Cash flows from financing activities:
Proceeds from issuance of Class A common stock 97 173
Principal payments under capital lease obligations
and long-term debt (74) (1,502)
Proceeds from mortgage payable 775 -
Advances on lines of credit 37,762 58,900
Repayment on lines of credit (47,687) (43,807)
Net cash (used in) provided by financing
activities (9,127) 13,764
Net (decrease) increase in cash and cash equivalents (2,679) 2,335
Cash and cash equivalents at beginning of period 2,816 4,017
Cash and cash equivalents at end of period $ 137 $ 6,352
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
SPORTMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Sportmart, Inc. and Subsidiary (the "Company") operates in one
business segment which is the retail sporting goods business. As
of June 12, 1997, the Company operated 59 superstores located in
the United States. The eleven Canadian locations in the process
of liquidation as of February 2, 1997 have all been closed as of
June 12, 1997.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of
Sportmart Inc. and Sportdepot Stores Inc., its wholly-owned
subsidiary. Sportmart Canada, Inc. was incorporated in April 1994
and the first store in Canada opened in March 1995. In addition
Sportdepot Stores Inc. was incorporated in January 1995 as a
wholly-owned subsidiary of Sportmart Canada, Inc. In October
1995, Sportmart Canada, Inc. was amalgamated into Sportdepot
Stores Inc. All significant intercompany transactions and
balances have been eliminated.
Principles of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all
adjustments (consisting solely of normal recurring accruals)
necessary to present fairly the consolidated financial position of
Sportmart, Inc. and Subsidiary as of May 4, 1997 and February 2,
1997, and the consolidated results of its operations and its cash
flows for the thirteen week periods ended May 4, 1997 and April
28, 1996. Due to the seasonal nature of the business, results for
interim periods are not indicative of a full year's operations.
These consolidated financial statements should be read in
conjunction with the Company's audited financial statements for
the fiscal year ended February 2, 1997 included in the Company's
Form 10-K as filed on May 5, 1997 with the Securities and Exchange
Commission.
Net Loss Per Share
Net loss per share is based on 12,848,265 weighted average common
shares outstanding for the thirteen weeks ended May 4, 1997. Net
loss per share is based on 12,800,028 weighted average common
shares outstanding for the thirteen weeks ended April 28, 1996.
<PAGE>
3. Non-Recurring Items
During the fourth quarter of fiscal 1996, the Company recorded a
non - recurring pre-tax charge of $33.2 million of which
approximately $850,000 related to termination benefits. The
majority of the charge was related to costs associated with
exiting the Canadian market. Included in the original charge of
store closings was severance, lease buy-out costs, inventory
write-down costs, unamortized portions of nonrecoverable capital
improvements, as well as other miscellaneous exit costs. As of
May 4, 1997, the reserve is approximately $9.9 million due to the
payout of the lease costs and severance payments. The Company
believes the original estimates for these non-recurring costs
appear reasonable.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
The following table sets forth, for the periods indicated, certain
income statement data of the Company expressed as a percentage of net
sales and the number of stores open at the end of each period:
<TABLE>
Thirteen Weeks Ended
May 4, April 28,
1997 1996
<S> <C> <C>
Income statement data:
Net Sales 100.0% 100.0%
Cost of sales, including buying,
distribution and occupancy 78.2 78.0
Gross profit 21.8 22.0
Operating expenses:
Store expenses 16.9 17.4
General and administrative expenses 4.5 4.0
Store pre-opening expenses .1
Operating income .4 .5
Interest expense, net (1.8) (1.7)
Other expense - (.1)
Loss before income taxes (1.4) (1.3)
Income tax benefit (.6) (.6)
Net Loss (.8)% (.7)%
Number of stores at end of period 59 70
</TABLE>
Thirteen Weeks Ended May 4, 1997 Compared to Thirteen Weeks Ended
April 28, 1996
Net sales decreased from $116.2 million in the thirteen weeks ended
April 28, 1996 to $103.9 million in the thirteen weeks ended May 4,
1997, a 10.6% decrease. The net sales decrease in the thirteen weeks
ended May 4,1997 was primarily attributable to the Company's decision
to exit the Canadian market at the end of fiscal 1996.
<PAGE>
Net sales in comparable stores decreased 3% during the quarter ended
May 4, 1997. Management believes that comparable store sales have been
negatively effected by the continuing impact of competition and the
re-positioning of the Company into businesses that historically have
generated higher gross margins. The Company realized sales increases
during the quarter in golf, men's and women's sportswear, men's active
sportswear and cleated shoes. The apparel categories previously noted
represent areas where the Company has expanded its offerings of higher
margin private branded merchandise as part of its strategic re-
positioning. Nevertheless, the comparable store sales performance was
negatively impacted by soft sales of ski related merchandise during the
earlier part of the quarter and fitness products and in-line skates
throughout the quarter. In an effort to improve the overall sales
performance, the Company has increased planned advertising expenditures
during the second and fourth quarters of fiscal 1997. The increased
spending will be focused in broadcast and direct mail advertisements,
the latter of which is being spent to introduce the Company's enhanced
Play!Buy!Play program. This program is an improved frequent buyer
program which is designed to build customer loyalty and to aid in the
targeted marketing of the Company's best customers. Play!Buy!Play!
members receive preferred pricing on certain items, accumulate points
toward free gift certificates and receive advanced promotional mailings
and catalogs.
Gross profit after buying, distribution and occupancy costs decreased
$3.0 million during the quarter ended May 4, 1997 to $22.6 million, an
11.7% decrease, due to the lower sales volume. Gross profit, as a
percentage of net sales, decreased .2% primarily due to a slight
increase in buying and benefits costs and distribution center expenses
due to the lower sales volume.
Store expenses decreased from $20.3 million in the period ended April
28, 1996 to $17.5 million in the period ended May 4, 1997, a 13.8%
decrease. This decrease was primarily due to the closure of the eleven
Canadian locations. As a percentage of net sales, store expenses
decreased from 17.4% in the period ended April 28, 1996 to 16.9% in the
period ended May 4, 1997 primarily due to improved efficiencies in
overall store expense categories.
General and administrative expenses increased slightly from $4.6
million in the thirteen weeks ended April 28, 1996 to $4.7 million in
the thirteen weeks ended May 4, 1997, a 2.2% increase. As a percentage
of net sales, general and administrative expenses increased from 4.0%
in the period ended April 28, 1996 to 4.5% in the period ended May 4,
1997 due to the overall sales declines.
Operating income decreased slightly from $598,000 for the thirteen
weeks ended April 28, 1996 to $406,000 for the thirteen weeks ended May
4, 1997. Operating income also decreased slightly as a percentage of
net sales from .5% for the thirteen weeks ended April 28, 1997 to .4%
for the thirteen weeks ended May 4, 1997.
<PAGE>
Net interest expense decreased from $2.0 million for the thirteen weeks
ended April 28, 1996 to $1.9 million for the thirteen weeks ended May
4, 1997. This decrease is due to the lower debt level at the end of
the first quarter for fiscal 1997 as compared to fiscal 1996. Net
interest expense as a percentage of net sales increased slightly from
1.7% to 1.8% due to the lower sales volume. Other expense, as a
percentage of net sales, decreased slightly from .1% for the thirteen
weeks ended April 28, 1996 to 0.0% for the thirteen weeks ended May 4,
1997.
For the periods ended May 4, 1997 and April 28, 1996, the statements of
operations reflect a provision for federal, state and provincial
income taxes based on the Company's expected annual tax rates.
Liquidity and Capital Resources
As of May 4, 1997, the Company had working capital of $10.4 million as
compared to $9.2 million as of February 2, 1997. Net cash provided by
operating activities was $6.8 million for the thirteen weeks ended May
4, 1997 versus net cash used in operating activities of $5.6 million
for the thirteen weeks ended April 28, 1996. The primary differences
between the $6.8 million net cash provided by operations during the
thirteen weeks ended May 4, 1997 and the $5.6 million net cash used in
operations in the prior year is related to changes in merchandise
inventories, income tax receivable, accounts payable and accrued
expenses. The Company experienced a $10.6 million decrease in
merchandise inventories from February 2, 1997 to May 4, 1997 in
contrast to the $12.0 million increase during the same period in the
prior year as a result of the Company's efforts to reduce average per
store inventories plus the elimination of the Canadian inventory due to
the exiting of this market. The decrease in income taxes receivable of
$10.1 million is due to the receipt of federal income tax refunds
related to the net operating loss carryback. The primary difference
between the $4.9 million increase in accounts payable from February 2,
1997 to May 4, 1997 and the $8.8 million increase during the same
period in the prior year is due to the lower inventory level. Finally,
the primary difference between the $16.2 million decrease in accrued
expenses from February 2, 1997 to May 4, 1997 and the $10.4 million
decrease during the same period in the prior year is due to a decrease
in the reserve for closing the Canadian locations.
Net cash used in investing activities decreased from $5.8 million in
fiscal 1996 to $391,000 in fiscal 1997. The net cash used in investing
activities in fiscal 1997 was primarily the result of $623,000 in
capital expenditures partially offset by $203,000 of repayment of
advances to related parties. The net cash used in investing activities
in fiscal 1996 was primarily the result of $5.9 million in capital
expenditures.
Net cash used in financing activities for the first thirteen weeks of
fiscal 1997 of $9.1 million was primarily due to $9.9 million net
repayments on the lines of credit. The net cash provided by financing
activities in fiscal 1996 of $13.8 million was primarily due to $15.1
million net advances on the lines of credit.
<PAGE>
The Company has available a $135.0 million revolving credit agreement
with a syndicate of banks. This revolving line of credit funds both
seasonal and general capital requirements. In order to comply with
Emerging Issues Task Force Issue No. 95-22 regarding classification of
certain debt instruments, the borrowings under this revolving line of
credit have been classified as current liabilities. However, based on
the terms of the agreement and the Company's business plan, the
Company believes the amount outstanding under the revolving line of
credit will be due and payable in September 2001. This revolving line
of credit requires the maintenance of minimum net worth and a maximum
debt to inventory ratio. As of May 4, 1997, the Company was in
compliance with all covenants of this agreement. In June 1997, the
Company amended this credit agreement to lower the minimum net worth
requirement in order to provide the Company with greater operating
flexibility. As of June 12, 1997, approximately $79.4 million in cash
borrowings and $4.5 million in letters of credit (to support imported
merchandise and certain real estate transactions) were outstanding
under this line of credit.
The Company's primary on-going cash requirements for fiscal 1997 relate
to capital expenditures relating to the improvement of existing
operations. The Company may open one store during fiscal 1997. The
capital expenditures related to this opening are estimated to be
approximately $750,000. In addition, the Company plans on investing
approximately $4.8 million in the renovation of existing stores and
distribution centers and approximately $1.4 million to upgrade its
management information systems. As of May 4, 1997 the Company had
invested approximately $600,000 in capital expenditures related to the
renovation of existing locations and upgrades to its management
information systems. The Company expects to be able to fund its
working capital requirements and expansion plans with a combination of
anticipated cash flows from operations, bank borrowings and normal
trade credit agreements.
Foreign Currency and Interest Rate Risk Management
Derivative financial instruments are utilized by the Company to reduce
interest rate and foreign currency exchange risks. The Company does
not use derivatives for speculative trading purposes.
In March 1995, the Company entered into an interest rate swap
agreement, a form of derivative, with a major financial institution.
This agreement became effective in August 1995 and expires in August
1998. This agreement effectively converts $10.0 million of its
floating rate bank debt (based on LIBOR plus a fee determined by
financial performance) to a fixed rate of 7.54% (plus the same fee) and
requires settlement on a quarterly basis. The difference in interest
between the fixed rate and effective LIBOR interest rate is recognized
as an adjustment to interest expense in the period incurred.
During April, 1997, the Company entered into an interest rate cap
agreement to reduce its exposure to fluctuations in interest rates.
The Company has an interest rate cap on $25,000,000 of its revolving
line of credit which expires in one year and places a ceiling on LIBOR
at 6.0%.
<PAGE>
During the course of operating in Canada, the Company entered into
foreign currency contracts to hedge intercompany loans and other
commitments in currencies other than its Canadian subsidiary's
functional currency. During the course of closing down operations in
Canada, the Company has continued to enter into such contracts.
Realized and unrealized gains and losses arising from these foreign
currency contracts are recognized in income as offsets to gains and
losses resulting from the underlying hedged transaction. As of May 4,
1997, the Company had approximately $9.1 million of open foreign
currency contracts with various settlement dates prior to September,
1997.
Seasonality and Inflation
The second and fourth fiscal quarters, which respectively include
Father's Day and Christmas, have historically contributed the greatest
volume of net sales and income before taxes to the Company. For fiscal
years 1996 and 1995, the second and fourth fiscal quarters combined
accounted for approximately 56% and 58%, respectively, of the Company's
fiscal year net sales. In both fiscal 1996 and 1995, the fourth fiscal
quarter was significantly impacted by the non-recurring charges and
discontinued operations; however, typically, the second and fourth
quarters account for substantially all of the Company's income before
taxes. In contrast, the Company has consistently experienced net
losses in the third quarter and it anticipates that such trend may
continue through fiscal 1997. Inventory levels, which gradually
increase beginning in February, generally reach their peak in November
and then fall to their lowest level following the December holiday
season. Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that
inflation has had a material effect on the results of operations during
the thirteen weeks ended May 4, 1997.
Private Securities Litigation Reform Act of 1995
The statements which are not historical facts contained in this
Quarterly Report on Form 10-Q are forward looking statements that
involve risks and uncertainties. The risks and uncertainties contained
in the Quarterly Report include but are not limited to, product demand
and market acceptance risks, the effect of economic conditions
g e n e rally, and retail and sporting goods business conditions
specifically, the impact of competition, development of private brand
products, customer acceptance of the Four Worlds concept,
commercialization and technological difficulties, capacity and supply
constraints or difficulties, the results of financing efforts, changes
in consumer preferences and trends, the adequacy of reserves for
discontinued operations, the ability to settle lease obligations for
closed stores, the effect of the Company's accounting policies, weather
conditions, and other risks detailed in the Company's Securities and
Exchange Commission filings. The words projected , believes ,
estimates used in this Quarterly Report as they relate to the Company
or its Management are generally intended to identify such forward
looking statements.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
Exhibit 10.55 - Fourth Amendment to Credit Agreement
between Registrant and BT Commercial
Corporation
Exhibit 11 - Statement regarding computation of
loss per share.
Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SPORTMART, INC.
Date: June 18, 1997 By: /S/ ANDREW S. HOCHBERG
Andrew S. Hochberg, Chief Executive
Officer
Date: June 18, 1997 By: /S/ THOMAS T. HENDRICKSON
Thomas T. Hendrickson, Executive Vice
President and
Chief Financial
Officer
<PAGE>
EXHIBIT 11
SPORTMART, INC. AND SUBSIDIARY
COMPUTATION OF LOSS PER SHARE
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
Thirteen Weeks Ended
May 4, April 28,
1997 1996
<S> <C> <C>
Financial statement computations:
Loss from operations before income taxes $(1,475) $ (1,520)
Income tax benefit (590) (643)
Net loss (885) (877)
Net loss per share:
Shares used in primary loss per share computation:
Weighted average shares outstanding 12,848 12,800
Net additional shares assuming options exercised and
proceeds used to purchase treasury shares (1) - -
Common and common equivalent shares 12,848 12,800
Primary loss per share $ (.07) $ (.07)
Shares used in fully diluted loss per share computation:
Weighted average shares outstanding 12,848 12,800
Net additional shares assuming options exercised and
proceeds used to purchase treasury shares (1) - -
Common and common equivalent shares 12,848 12,800
Fully diluted loss per share $ (.07) $ (.07)
</TABLE>
(1) Certain common stock equivalents are antidilutive;therefore, they
are not included in the calculation.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1998
<PERIOD-END> MAY-04-1997
<CASH> 137,032
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 152,342,831
<CURRENT-ASSETS> 174,460,068
<PP&E> 99,727,447
<DEPRECIATION> (39,899,271)
<TOTAL-ASSETS> 245,384,578
<CURRENT-LIABILITIES> 164,020,258
<BONDS> 0
0
0
<COMMON> 128,856
<OTHER-SE> 73,002,580
<TOTAL-LIABILITY-AND-EQUITY> 245,384,578
<SALES> 103,846,854
<TOTAL-REVENUES> 103,932,317
<CGS> 81,311,465
<TOTAL-COSTS> 81,311,465
<OTHER-EXPENSES> 22,233,178
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,862,462
<INCOME-PRETAX> (1,474,788)
<INCOME-TAX> (589,716)
<INCOME-CONTINUING> (885,072)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (885,072)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT to Credit Agreement (the "Amendment") is
made as of this 6th day of June, 1997, by and among Sportmart, Inc.
("Borrower"), BT Commercial Corporation, as agent (in its capacity as
agent, "Agent") and BT Commercial Corporation (in its capacity as
lender, "BTCC"), Sanwa Business Credit Corporation ("Sanwa"), LaSalle
National Bank ("LaSalle"), Fleet Capital Corporation ("Fleet"), Heller
Financial, Inc. ("Heller"), National Bank of Canada ("NBC"), American
National Bank and Trust Company of Chicago ("American National") and
IBJ Schroder Bank and Trust Company ("IBJ"), as Lenders (BTCC, Sanwa,
LaSalle, Fleet, Heller, NBC, American National and IBJ referred to
collectively as "Lenders")
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders are parties to that certain
Credit Agreement dated as of September 6, 1996 as amended by that
certain Consent and First Amendment to Credit Agreement dated as of
November 21, 1996, that certain Consent and Second Amendment dated as
of January 17, 1997 and that certain Third Amendment to Credit
Agreement dated as of March 26, 1997 (as so amended, the "Credit
Agreement"); and
WHEREAS, Borrower has requested that Agent and Lenders provide
for certain amendments to the Credit Agreement as more fully set forth
herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and subject to the terms and conditions
hereof, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, all
capitalized terms shall have the meaning given to them in the Credit
Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 Section 8.1 of the Credit Agreement is hereby amended
by deleting such section in its entirety and inserting the
following in lieu thereof:
"8.1 Consolidated Book Net Worth. The Borrower shall
maintain Consolidated Book Net Worth of not less than
$70,000,000 at all times."
2.2 All other provisions of the Credit Agreement shall
remain unchanged.
SECTION 3. CONDITION PRECEDENT. The effectiveness of this
Amendment is expressly conditioned upon the payment by Borrower, on
the date hereof, to Agent for the benefit of Lenders, of an amendment
fee in the amount of $200,000.
<PAGE>
SECTION 4. REAFFIRMATION BY BORROWER. Borrower hereby
represents and warrants to Agent and Lender that (i) the
representations and warranties set forth in Section 6 of the Credit
Agreement are true and correct on and as of the date hereof, except to
the extent (a) that any such representations or warranties relate to a
specific date, or (b) of changes thereto as a result of transactions
for which Agent and Lenders have granted their consent; (ii) Borrower
is on the date hereof in compliance with all of the terms and
provisions set forth in the Credit Agreement as hereby amended; and
(iii) upon execution hereof no Default or Event of Default has
occurred and is continuing or has not previously been waived.
SECTION 5. FULL FORCE AND EFFECT. Except as herein amended, the
Credit Agreement and all other Credit Documents shall remain in full
force and effect.
SECTION 6. COUNTERPARTS. This Amendment may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment on the day and year specified above.
BORROWER:
SPORTMART, INC.
By: /S/ Thomas T. Hendrickson
Title: Executive Vice President
& Chief Financial Officer
AGENT:
BT COMMERCIAL CORPORATION
By: /S/ Frank Fazio
Title: Vice President
LENDERS:
BT COMMERCIAL CORPORATION
By: /S/ Frank Fazio
Title: Vice President
SANWA BUSINESS CREDIT CORPORATION
By: /S/ Lawrence J. Placek
Title: Vice President
LASALLE NATIONAL BANK
By: /S/ Todd J. Lanscioni
Title: First Vice President
FLEET CAPITAL CORPORATION
By: /S/ Robert J. Lund
Title: Vice President
HELLER FINANCIAL, INC.
By: /S/ Linda G. Peddle
Title: Account Executive
<PAGE>
NATIONAL BANK OF CANADA
By: /S/ Bruce Waldorsen & C.F. Martin,Jr.
Title: Vice President/Vice President
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /S/ Paul C. Carlisle
Title: First Vice President
IBJ SCHRODER BANK AND TRUST COMPANY
By: /S/ Robert R. Wallace
Title: Vice President
<PAGE>
