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, 1997
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
Sportmart, Inc.
1400 South Wolf Road
Suite 200
Wheeling, Illinois 60090
<PAGE>
SPORTMART, INC. INCENTIVE SAVINGS PLAN
ANNUAL REPORT FORM 11-K
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
TABLE OF CONTENTS
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
<PAGE>
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, 1997 and 1996 and the related Statement of
Changes in Net Assets Available for Benefits for the year ended
January 31, 1997. These financial statements are the responsibility
of the Plan's Trustees. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the Net Assets Available for
Benefits of the Plan as of January 31, 1997 and 1996, and the Changes
in Net Assets Available for Benefits for the year ended January 31,
1997, 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 is 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.
COOPER & LYBRAND, L.L.P.
Chicago, Illinois
July 16, 1997
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<TABLE>
SPORTMART, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
JANUARY 31, 1997
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 $4,399 $ 4,399
Investments at contract value:
Group annuity contract $851,101 851,101
Investments at fair market value:
Mutual funds $1,235,180 $2,168,035 3,403,215
Sportmart common stock
(cost of $279,690) $113,713 113,713
Participant loans $81,140 81,140
Total investments 851,101 1,235,180 2,168,035 113,713 0 81,140 4,449,169
Receivables
Employee 16,580 20,103 38,204 4,264 79,151
Employer 5,693 6,874 12,960 1,447 26,974
Loan repayment 346 894 1,761 3,524 6,525
Total receivables 22,619 27,871 52,
TOTAL ASSETS 873,720 1,263,051 2,220,960 113,713 13,634 81,140 4,566,218
LIABILITIES
Deferral refunds 3,020 8,041 14,549 25,610
TOTAL LIABILITIES 3,020 8,041 14,549 0 0 0 25,610
NET ASSETS AVAILABLE FOR BENEFITS $870,700 $1,255,010 $2,206,411 $113,713 $13,634 $81,140 $4,540,608
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SPORTMART, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
JANUARY 31, 1996
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 at contract value:
Group annuity contract $885,371 885,371
Investments at fair market value:
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.
<PAGE>
<TABLE> SPORTMART, INC. INCENTIVE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED JANUARY 31, 1997
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 $187,271 $233,069 $406,306 $44,904 $871,550
Employer 44,123 51,523 87,9
Employee rollover 29,229 13,407 14,124 $ 2,106 58,866
Transfers between funds 196 21,167 (3,141) 31,739 (32,021) (17,940) 0
Net gain from investments in group
annuity contract 26,825 26,825
Net gain from investments in registered
investment companies 126,908 218,856 345,764
Net appreciation(depreciation) in market
value of investments (35,082) (35,082)
Interest income
TOTAL ADDITIONS 287,644 446,074 724,133 (1,237) 23,677 (9,751) 1,470,540
DEDUCTIONS:
Distributions to participants 314,728 311,122 421,948 28,864 59,589 1,136,251
Deferral refunds 3,020 8,041 14,549 25,610
TOTAL DEDUCTIONS 317,748 319,163 436,497 0 28,864 59,589 1,161,861
NET INCREASE(DECREASE) (30,104) 126,911 287,636 (1,237) (5,187) (69,340) 308,679
NET ASSETS AVAILABLE FOR BENEFITS
BEGINNING OF YEAR 900,804 1,128,099 1,918,775 114,950 18,821 150,480 4,231,929
END OF YEAR $870,700 $1,255,010 $2,206,411 $113,713 $13,634 $81,140 $4,540,608
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
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.
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 IRC within 75 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.
<PAGE>
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, 1996, each
participant's tax-deferred contributions are limited to
$9,500. 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, 1997, 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.
<PAGE>
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 its Sportmart
Stock Fund as of its Plan year end.
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, 1997 and January 31, 1996, there were
976 and 906 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>
1997 1996
<S> <C> <C>
T-Note Rate Fund 607 594
American Balanced Fund 679 635
Fidelity Magellan Fund 774 715
Sportmart Stock Fund 321 356
</TABLE>
There were 202 and 109 inactive participants in the
Plan at January 31, 1997 and January 31, 1996,
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 $562,886 as of January 31, 1997 and
$106,996 as of January 31, 1996.
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.
<PAGE>
Amounts allocated to accounts of individuals who have
elected to withdraw from the Plan but have not yet been
paid at January 31, 1997 and January 31, 1996
aggregate to $182,934 and $158,080, 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:
A reconciliation between the 1997 Form 5500 and the
accompanying statement of net assets available for plan
benefits is as follows:
<TABLE> 1997
<S> <C>
Net assets available for plan
benefits (Form 5500) $4,357,674
Add: Benefit claims payable 182,934
Net assets available for plan
benefits (financial statements) $4,540,608
</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. Sportmart,
Inc. incurred and paid indirect administration fees for the
Plan during the year ended January 31, 1997.
Investments that represented five percent or more of total
assets on January 31, 1997 and January 31, 1996 were:
<TABLE>
1997 1996
MARKET MARKET
VALUE VALUE
<S> <C> <C>
Group Annuity Contract
T-Note Rate Fund $851,101 $885,371
Mutual Funds
American Balanced Fund $1,235,180 $1,120,926
Fidelity Magellan Fund $2,168,035 $1,911,317
Equity Securities
Sportmart Stock Fund $113,713 $114,950
</TABLE>
<PAGE>
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, 1997 was 4.47%
and the return on assets for the year ended January 31,1997
was 4.61%. The group annuity contracts are valued at
contract value which the insurance 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.
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.
<PAGE>
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.
<PAGE>
<TABLE>
SPORTMART, INC. INCENTIVE SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
JANUARY 31, 1997
DESCRIPTION OF INVESTMENT,
IDENTITY OF ISSUE, INCLUDING MATURITY DATE, RATE
BORROWER, LESSOR OR OF INTEREST, COLLATERAL PAR
SIMILAR PARTY OR MATURITY VALUE COST MARKET VALUE
<S> <C> <C> <C>
Sportmart, Inc.** Voting Common Stock; $.01 par value -
4,600 shares $49,755 $15,813
Class A Common Stock, Non Voting;
$.01 par value - 35,600 shares 229,935 97,900
Nationwide Life Insurance Group Annuity Contract with an
Co. T-Note Rate Fund** interest rate based on the five year
Treasury Note yield 851,101 851,101
American Balanced Fund Mutual Fund - 576,570 units 1,235,180* 1,235,180
Fidelity Magellan Fund Mutual Fund - 1,098,819 units 2,168,035* 2,168,035
Participant Loans** Loans bearing interest at rates ranging
from 7% to 11% 0 81,140
TOTAL INVESTMENTS $4,534,006 $4,449,169
</TABLE>
* The custodian is unable to provide the cost of assets.
** Party at interest.
<PAGE>
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
7/30/97 /S/ JOHN A. LOWENSTEIN
Date John A. Lowenstein, Trustee of the
Sportmart, Inc. Incentive Savings Plan
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Sportmart,
Inc. registration statement of Form S-8 (No. 33-55330) of our report
dated July 16, 1997 on our audits of the financial statements and
supplemental schedules of the Sportmart, Inc. Incentive Savings Plan
as of January 31, 1997 and 1996 and for year ended January
31, 1997, which report is included in this annual report on Form 11-K.
COOPERS & LYBRAND, L.L.P.
Chicago, Illinois
July 30, 1997
