<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SPORT CHALET, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF SPORT CHALET]
June 30, 1997
Dear Shareholder:
On behalf of your Company, I want to cordially invite you to attend the
Annual Meeting of Sport Chalet, Inc., to be held at the Pasadena Hilton Hotel,
150 S. Los Robles Avenue, Pasadena, California 91101, on Thursday, August 7,
1997 at 9:00 a.m. PDST.
The principal business of the Meeting is the election of the Company's
Class 2 Director. The attached Notice of Annual Meeting and Proxy Statement
fully describes the business to be transacted.
The Directors and certain officers of the Company will be present to help
host the Meeting, respond to any questions that our shareholders may have, and
to discuss the Company's operating results and future. I therefore encourage
you to attend in order to meet your officers and Directors and to participate in
the business of the Meeting. However, if it is not possible for you to attend,
please sign, date and promptly return the enclosed proxy card immediately to
ensure that your shares will be voted.
Finally, you will find enclosed a 20% off coupon for your use at any of our
18 store locations. As in the past, I encourage you to try our stores and to
write me regarding your shopping experiences, what you liked about our stores
and any suggestions you may have for improvement.
Sincerely,
/s/ Norbert J. Olberz
Norbert J. Olberz
Chairman, Interim President and
Chief Executive Officer
<PAGE>
[LOGO OF SPORT CHALET]
_________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 7, 1997
_________________________________
Dear Shareholder:
The Annual Meeting of the Shareholders of Sport Chalet, Inc. will be held at
the Pasadena Hilton Hotel, 150 S. Los Robles Avenue, Pasadena, California 91101
Thursday, August 7, 1997 at 9:00 a.m., Pacific Daylight Standard Time. A Proxy
and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the following purposes:
1. To elect the Class 2 Director to serve for a three-year term expiring in
2000, or until his or her successor is elected and qualified.
2. To transact such other business as may properly come before the Meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on June 13, 1997 as the
record date for determining shareholders entitled to notice of and to vote at
the Meeting or any adjournments thereof. For a period of at least ten days prior
to the Meeting, a complete list of shareholders entitled to vote at the Meeting
shall be open to the examination of any shareholder during ordinary business
hours at the Company's executive offices at 920 Foothill Boulevard, La Canada,
California 91011.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT IN PERSON AT THE MEETING ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. AN ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED
FOR YOUR CONVENIENCE.
By order of the Board of Directors,
/s/ Howard K. Kaminsky
Howard K. Kaminsky
Secretary
La Canada, California
June 30, 1997
<PAGE>
PROXY STATEMENT
---------------
SPORT CHALET, INC.
920 FOOTHILL BOULEVARD
LA CANADA, CALIFORNIA 91011
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 7, 1997
SOLICITATION AND REVOCABILITY OF PROXY
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of Sport Chalet, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Shareholders to be held on August 7, 1997, or at any
adjournments thereof (the "Meeting").
Any shareholder who executes and delivers a Proxy may revoke it at any time
prior to its use upon (a) receipt by the Secretary of the Company of written
notice of such revocation; (b) receipt by the Secretary of the Company of a duly
executed Proxy bearing a later date; or (c) attending the meeting and requesting
that the Inspector of Elections return his or her Proxy prior to the taking of
any vote.
All shares represented by a Proxy in the accompanying form which is
properly signed, dated, returned and not revoked will be voted in accordance
with the instructions contained therein. Unless authority to vote for the
election of Director is withheld, Proxies will be voted for the Director
proposed by the Board. Discretionary authority is provided in the Proxy as to
any matters not specifically referred to in the Proxy. Management is not aware
of any other matters which are likely to be brought before the Meeting. However,
if any such matters properly come before the Meeting, it is understood that the
Proxy holder or holders are fully authorized to vote thereon in accordance with
his or their judgment and discretion.
The Company's Annual Report to Shareholders (the "Annual Report") for the
year ended March 31, 1997, including financial statements, is enclosed with this
Proxy Statement, which is being mailed to shareholders on or about June 30,
1997. The Annual Report does not constitute a part of this Proxy Statement.
The cost of soliciting Proxies in the accompanying form has been, or will
be, paid by the Company. In addition, banks, brokers and other custodians,
nominees and fiduciaries will be requested to forward copies of the Proxy
material and Annual Report to their principals and to request authority for the
execution of Proxies. The Company will reimburse such persons for their
reasonable expenses in so doing.
RECORD DATE AND VOTING
The Board of Directors has fixed the close of business, 5:00 p.m., Pacific
Daylight Standard Time, on June 13, 1997, as the record date for the
determination of shareholders entitled to notice of, and to vote at, the
Meeting. As of the record date of the Meeting there were outstanding 6,500,000
shares of Common Stock. The outstanding shares of Common Stock constitute the
only outstanding voting securities of the Company entitled to be voted at the
Meeting. Each holder of Common Stock is entitled to one vote for each share held
by such person with respect to each matter to be voted on at the Meeting. The
vote of a majority of the shares cast in person or by Proxy is required to elect
the Nominee for Director.
The presence at the Meeting by person or by Proxy, of the holders of a one-
third of the outstanding Common Stock, is necessary to constitute a quorum.
Votes cast by Proxy or in person at the Meeting will be tabulated by the
Inspector of Elections appointed for the Meeting to determine whether or not a
quorum is present. The Inspector of Elections will treat abstentions as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum, but as unvoted for purpose of determining the approval of
1
<PAGE>
any matter submitted to the shareholders for a vote. If a broker indicates on
the Proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
During fiscal 1997, Norbert J. Olberz, Chairman of the Board and Interim
President and Chief Executive Officer, owned approximately 72% of the Company's
outstanding Common Stock. Subsequently, in May 1997, Chairman Olberz' stock
holdings were transferred to the Olberz Family Trust, a revocable grantor trust
of which he and his wife, Irene, are Trustees. As a result, Chairman Olberz
through the Olberz Family Trust, is the Company's Principal Shareholder
("Principal Shareholder") and will have sufficient voting power to determine the
outcome of any matters submitted to the Company's shareholders for approval.
Thus, the Principal Shareholder has sufficient voting power to elect the Nominee
proposed by the Board of Directors and he will vote his shares in favor of the
election of such Nominee. In that event, the other shareholders will be unable
to elect any other Director.
ELECTION OF DIRECTORS
NOMINEE
The Amended and Restated Certificate of Incorporation of the Company
provides that the members of the Company's Board of Directors shall be
classified into three classes, as nearly equal in number as possible, each of
which is to serve three years, with one class being elected each year. The term
of the sole Class 2 Director expires with this Meeting.
Each shareholder is entitled to one vote per share held as of the record
date. Shareholders will not be allowed to cumulate their votes in the election
of Directors.
The Board of Directors has nominated John R. Attwood for election as the
sole Class 2 Director at this Meeting to serve for a three-year term expiring at
the annual meeting in 2000 or until his successor is elected and qualified. Mr.
Attwood currently is serving as the sole Class 2 Director and has consented to
serve for a new term.
The persons named in the enclosed form of Proxy, unless otherwise directed
therein, intend to vote such Proxy for the election of John R. Attwood as
Director for the term specified. The Proxies may also be voted for a substitute
nominee in the event John R. Attwood shall be unable to serve for any reason or
be withdrawn from nomination, a contingency not now anticipated.
2
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The following table, together with its footnotes, presents information
furnished by Mr. Attwood regarding his age, occupation, and business experience.
TABLE 1
CERTAIN INFORMATION REGARDING NOMINEE DIRECTOR
<TABLE>
<CAPTION>
Term to Director
Director's Name Age(1) Expire(1) Class Occupation/Background
--------------- ------ --------- -------- ---------------------
<S> <C> <C> <C> <C>
John R. Attwood................ 67 2000 2 Director since February 1993. Mr. Attwood is the
President of Attwood Enterprises, a consulting
business. He was the former Chairman of Coca-Cola
Bottling of Los Angeles and Senior Vice President and
a Group President at Beatrice Companies, Inc., the
parent company of Coca-Cola Bottling of Los Angeles
until his retirement in 1986. Mr. Attwood currently
serves on the board of directors of Verdugo Hills
Hospital, a non-profit organization.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION AS DIRECTOR, THE NOMINEE LISTED ABOVE.
_____________
(1) Fiscal year during which term expires
3
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OTHER DIRECTORS
The following persons will continue to serve as Directors of the
Company after the Meeting until their terms of office expire (as indicated
below) or until they resign or their successors are elected and qualified:
TABLE 2
CERTAIN INFORMATION REGARDING DIRECTOR NON-NOMINEES
<TABLE>
<CAPTION>
Term to Director Positions With the Company
Director's Name Age(1) Expire(1) Class and Principal Occupation(2)
--------------- ------ --------- -------- --------------------------
<S> <C> <C> <C> <C>
Eric S. Olberz................. 34 1999 1 Director since 1992. Mr. Olberz currently
is pursuing a Masters degree in Business
Administration. He was President and
owner of Camp 7, Inc., a soft goods
manufacturing operation located in Santa
Ana, California from July 1995 through
October 1996 and Vice Chairman of the
Company from October 1994 to July 1995,
Vice President from 1984 through October
1994 and Secretary from October 1992 to
July 1995. Mr. Olberz resigned as an
officer and employee concurrently with
Camp 7, Inc.Os acquisition of the
Company's soft goods manufacturing
operations in July 1995. Mr. Olberz is
the son of Norbert J. Olberz, the
Principal Shareholder.
Norbert J. Olberz.............. 72 1998 3 The Company's founder and Chairman of the
Board since it was founded in 1959 and
Interim President and Chief Executive
Officer since April 1995.
Kenneth Olsen.................. 79 1998 3 Mr. Olsen has been a Director of the
Company since June 1994. He served as
President and Chief Executive Officer of
the Vons Company, Inc., a leading grocery
store chain, from 1974 to 1983 at which
time he retired from full-time
responsibilities after thirty-eight years
with that company. Mr. Olsen currently
serves as a director of several non-profit
organizations.
</TABLE>
_______________
(1) Fiscal year during which term expires.
(2) Based on information provided to the Company by each Director.
4
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board formally met six times during the last fiscal year. The
Board's Audit and Compensation Committees, each currently comprised of non-
employee Directors Attwood, Olsen and Eric S. Olberz, both met six times,
respectively, during the fiscal year ending March 31, 1997. Each Director
attended each of the Board and Committee meetings, as appropriate. The Directors
also met informally with the Company's management during that fiscal year.
The Audit Committee, among other things, nominates the independent
auditors, reviews the financial statements and the report of independent
auditors, and reviews the scope and results of the Company's accounting
practices and internal accounting procedures. The Compensation Committee is
responsible for reviewing and recommending to the full Board of Directors the
material terms for executive officer employment and severance contracts and
annual compensation levels for executive officers not otherwise set by contract,
administering the Company's 1992 Incentive Award Plan (the "1992 Plan"),
establishing and periodically reviewing the Company's policies regarding non-
officer employee compensation and benefit policies, and other matters related to
compensation and evaluation of Company personnel.
COMPENSATION OF DIRECTORS
A. Cash Compensation. Directors who are employees of the Company are
compensated as officers of the Company and receive no separate compensation for
serving as Directors. For fiscal 1997, Directors received a $15,000 annual
retainer for attending or participating in up to six formal Board and/or
Committee meetings during the fiscal year plus an additional $2,500 for each
additional day they attend or participate in formal Board and/or Committee
meeting(s) and $500 for each day that they attend or participate in an informal
meeting with the Company's management. For fiscal 1998, the annual retainer
will be $18,000, the fee for additional meetings, $3,000 and $750 for
participation in informal meetings. Directors also may receive reimbursement of
expenses in attending meetings. For the fiscal year ended March 31, 1997, each
non-employee Director received as a Director, $16,000 in fees for attending
formal board meetings and two informal meetings.
In addition, Directors Attwood and Olsen have and will continue to
advise the Company regarding various areas in which they have significant
professional experience. These advisory services are in addition to the
services performed as Directors and, accordingly, each Director performing
advisory services will be entitled to additional compensation in an amount to be
negotiated from time to time by such Director and the Company and approved by a
majority of the disinterested Directors (i.e. those not performing advisory
services) in conformity with the Company's policies on conflicts of interest.
For the fiscal year ended March 31, 1997, Directors Attwood and Olsen received
$13,300 and $2,000, respectively, in compensation for services provided as a
consultant.
B. Directors' Stock Option Plan. Under the 1992 Plan, which is
described in detail later in this Proxy Statement, each non-employee Director is
granted automatically upon becoming a Director, Automatic Option Grants ("AOGs")
to purchase 3,000 shares of Common Stock at the fair market value on the grant
date. On each triennial date on which a non-employee Director is reelected to
the Board, AOGs for an additional 3,000 shares will be automatically granted to
the Director subject to an aggregate limit for any one non-employee Director of
options to acquire a total of 9,000 shares. All AOGs are exercisable one-third
upon grant and one-third on each of the first and second anniversaries of the
date of initial grant and all expire five years from the date of grant. In
accordance with the terms of the 1992 Plan, Directors Attwood and Olsen and
Director Eric S. Olberz each have been granted 6,000 AOGs.
5
<PAGE>
EXECUTIVE OFFICERS
The following persons are currently key executive officers of the
Company who are not identified in the Sections captioned "Election of Directors-
Nominees" or "Other Directors" and are "Named Officers" for purposes of the
Summary Compensation Table set forth below.
TABLE 3
CERTAIN INFORMATION REGARDING KEY OFFICERS
<TABLE>
<CAPTION>
Key Officer's Name Age Position With the Company and Background
------------------ --- ----------------------------------------
<S> <C> <C>
Dennis D. Trausch................... 47 Executive Vice President since June 1988. Since joining the
Company in 1976, Mr. Trausch has served in various positions
within the Company. He currently is responsible for all store
operations and leasing.
Howard K. Kaminsky.................. 39 Chief Financial Officer since joining the Company in 1985,
Senior Vice President - Finance since April 1997 and Secretary
since July 1995. Mr. Kaminsky was also the Company's Vice
President - Finance from January through April 1997 and
Treasurer from October 1992 through January 1997. Prior to
joining the Company, Mr. Kaminsky was employed in the auditing
division of Ernst & Young LLP. He is a Certified Public
Accountant and received his Bachelor of Science degree in
Business Administration from California State University,
Northridge.
Robert W. Haueter................... 45 Senior Vice President - Sales, Marketing and Merchandising
since January 1997. Previously, Mr. Haueter was the Company's
Vice President - Marketing since joining the Company in 1989.
Mr. Haueter spent the prior ten years as a senior aide in the
California legislature. During this period, he coordinated
marketing and strategy for several political campaigns.
</TABLE>
OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS
The following table, with footnotes, reflects the Company's best
knowledge based on information filed with the Securities and Exchange Commission
(the "Commission") and information provided directly by the persons named below,
of certain information as of June 13, 1997 regarding the amount of Common Stock
beneficially owned by each Director and Director Nominee of the Company, each
executive officer that is a "Named Officer" (see "Executive Compensation -
Compensation Tables"), all such Directors and executive officers as a group and
by each holder of more than five percent of the outstanding shares of the
Company's Common Stock. All shares shown in the table reflect sole voting and
investment power.
6
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TABLE 4
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
Shares
Name and Address Beneficially Percent of
of Beneficial Owner Position with Company Owned Class
------------------- --------------------- ----- -----
<S> <C> <C> <C>
Norbert J. Olberz......................... Chairman of the Board, Interim 4,660,979 72%
920 Foothill Boulevard President and Chief Executive
La Canada, California 91011 Officer
John R. Attwood........................... Director 8,000(1) *
200 West Glenoaks Boulevard
Glendale, California 91202
Eric S. Olberz............................ Director 269,666(2) 4%
920 Foothill Boulevard
La Canada, California 91011
Kenneth Olsen............................. Director 9,000(3) *
920 Foothill Boulevard
La Canada, California 91011
Dennis D. Trausch......................... Executive Vice President 15,886(4) *
920 Foothill Boulevard
La Canada, California 91011
Howard K. Kaminsky........................ Senior Vice President, Chief 21,306(4) *
920 Foothill Boulevard Financial Officer and
La Canada, California 91011 Secretary
Robert W. Haueter......................... Senior Vice President-Sales, 15,451(5) *
920 Foothill Boulevard Marketing and Merchandising
La Canada, California 91011
All Directors and executive officers
as a group (7 persons).................... -------- 5,000,288 76%
______________
</TABLE>
* Represents less than one percent
(1) Includes vested AOGs to purchase 6,000 shares of Common Stock.
(2) Includes vested AOGs to purchase 3,000 shares of Common Stock and does not
include non-vested AOGs granted to Director Eric S. Olberz to purchase 3,000
shares of Common Stock.
(3) Includes vested AOGs to purchase 4,000 shares of Common Stock and does not
include non-vested AOGs granted to Director Olsen to purchase 2,000 shares
of Common Stock.
(4) Includes vested AOGs to purchase 14,400 shares of Common Stock and does not
include non-vested options granted to Named Officer to purchase 57,600
shares of Common Stock.
(5) Includes vested AOGs to purchase 12,000 shares of Common Stock and does not
include non-vested options granted to Mr. Haueter to purchase 48,000 shares
of Common Stock.
7
<PAGE>
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Compensation Committee Report on executive compensation is set forth in
the following section below. As previously mentioned, the Compensation Committee
currently is comprised of three non-employee Directors of the Company, Directors
Attwood, Olsen and Eric S. Olberz. Only Eric S. Olberz is a former officer or
employee of the Company or any of its subsidiaries or affiliates. See "Table 2"
Certain Information Regarding Director Non-Nominees.
The Compensation Committee makes recommendations to and reviews in detail
aspects of executive compensation with the full Board of Directors, which has
the ultimate responsibility for all compensation decisions. During fiscal year
ended March 31, 1997, the Principal Shareholder and Eric S. Olberz, former Vice
Chairman and Secretary, served on the Board of Directors.
COMPENSATION COMMITTEE REPORT OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors ("Committee") has
provided the following report on executive compensation.
A. COMPENSATION POLICY AND EXECUTIVE COMPENSATION
This Committee is responsible for reviewing and making recommendations as
to the annual compensation of the Company's executive officers, including such
components as annual cash compensation, short and long term incentives, and
supplemental benefits.
The Company's compensation policy is based on linking executive
compensation to the Company's objectives of growth through increased earnings
and maximizing long-term shareholder value. This policy traditionally has been
carried out through a compensation program consisting of salaries and short and
long term incentives. The Committee monitors compensation levels for comparable
retail companies and evaluates annual compensation on the basis of these
compensation trends and the performance of the Company in order to determine
whether adjustments to base salaries and bonuses, or both, are appropriate.
With few exceptions, the Company traditionally has not had formal
employment agreements with any of its executive officers, and currently none of
its executive officers have entered into formal contracts. However, the
Company's recent practice has been to enter into formal severance agreements
with departing executives. The various elements of the Company's overall
compensation program are more fully discussed below.
B. ANNUAL SALARY AND BONUS
Annual compensation for Messrs. Olberz, Trausch, Kaminsky, and Haueter
(collectively, the "Executive Management Group") consists of a base salary and
an annual bonus. During the fiscal year ended March 31, 1997, the annual base
salaries for Messrs. Olberz, Trausch, Kaminsky and Haueter, respectively, were
$250,000, $145,000, $135,000 and $120,000. For the fiscal year ended March 31,
1998, their base salaries will be $275,000, $160,000, $160,000 and $150,000,
respectively.
The Company's policy is to pay bonuses to its Executive Management Group
based on a percentage of the Company's net income before taxes and accruals for
bonuses. Starting in fiscal 1996, the Company adopted a bonus plan under which,
subject to an overall maximum, the executive officers earn a bonus as a
percentage of their base compensation, if the Company meets the profit objective
set by the Committee at the beginning of the fiscal year. If the profit
objective is met or exceeded, the CEO, EVP, CFO and Senior VP-Merchandising each
are entitled to receive a bonus equal to 35%, 30%, 30% and 25%, respectively, of
their annual base compensation. If 90% or more, but less than 100% of the profit
objective is achieved, these executives receive 50% of a full annual bonus plus
5% for each full percentage point above 90% achieved. During fiscal 1997, the
profit objective was exceeded and each of above identified executives earned a
full
8
<PAGE>
bonus. In addition, the Committee recommended and the Board of Directors
granted an additional discretionary bonus to the CEO, EVP, CFO, and Senior VP-
Merchandising bringing their total bonuses for fiscal 1997 to 50%, 36%, 39% and
40% of their base respective base salaries. The summary of the base salaries and
bonuses paid to the Executive Management Group during the last three years is
set forth in the Summary Compensation Table (Table 5).
The base salaries for the Executive Management Group, as compared with the
base salary for similar executives, traditionally has been significantly below
the surveyed market average. This result reflects the Committee's philosophy
that a significant portion of the overall annual compensation package provided
to the Executive Management Group be based on a bonus program reflecting the
Company's earnings performance during the referenced period.
While a significant portion of the overall annual compensation package
continues to be based on a bonus program tied to the Company's earnings
performance, starting in fiscal 1996, a greater proportion of overall
compensation is now derived from the executives' base salary and an overall cap
is placed on the maximum bonus which is paid annually to each executive. These
adjustments conformed the Company's executive compensation policy more closely
with existing market practices and provide a more stable compensation level. The
Committee believes the base salaries will now be sufficiently competitive to
allow the Company to attract and retain well-qualified executives. Past survey
results support the Committee's conclusion that while executive base salaries
are still below the competitive market, if the Company performs to profit levels
similar to those achieved in Fiscal 1997, the Executive Management Group's total
compensation under this program falls within an acceptable range of industry
averages for the defined labor market.
C. LONG TERM COMPENSATION
On March 1, 1996, the Company granted non-qualified stock options ("NQSOs")
to certain employees, including Executive Management Group other than Chairman
Olberz, in accordance with its 1992 Incentive Awards Plan. Messrs. Trausch,
Kaminsky and Haueter received NQSOs for 72,000, 72,000, and 60,000 shares of
Common Stock, respectively, exercisable at $2-3/8 per share and vesting at a
rate of 20% per year over five years. The Committee believes NQSOs provide a
valuable incentive to achieve long-term growth and maximum shareholder value by
linking compensation benefits to the long-term growth in the Company's stock
value. More specific information on option grants is shown in Tables 5 and 7
below of this Proxy Statement.
The Committee has concluded that it is inappropriate at this time to offer
its key executives supplemental benefit programs other than the 401K plan which
will be made available to all employees including executive officers, in fiscal
1998 (see the discussion under the caption "Incentive Compensation Plans"
below). Instead, the focus will remain on a short-term and long-term incentive
based program in order to achieve the Company's objectives of a greater earnings
capacity and long-term growth in share value. The Compensation Committee will
continue to review the Company's overall executive compensation program
periodically and, if appropriate, adjust existing compensation levels or
policies in order to meet market demands or changing corporate objectives.
D. CHIEF EXECUTIVE OFFICER COMPENSATION
Committee believes that the $250,000 base salary paid to Mr. Olberz as
Chairman, Interim President and Chief Executive Officer during fiscal 1997
should be adjusted to $275,000 for fiscal 1998 and as adjusted will be
reasonable when compared to the comparable companies whose chairmen are actively
involved in day to day operations. His participation in the executive bonus
program appropriately exemplifies the Company's pay-for-performance philosophy,
since the value of this element of his compensation package will be determined
by the Company's profitability during the period he serves as the Company's
President and Chief Executive Officer. However, Chairman Olberz has not been
provided with any longer-term incentives, because, in the Committee's view, his
significant stock holdings in the
9
<PAGE>
Company already provide sufficient motivation for him to achieve long-term
profitability and to maximize shareholder value.
The profit objective for fiscal 1997 established by the Compensation
Committee at the beginning of the year was pre-tax and pre-bonus profit of
$3,800,000. The Company exceeded this objective with pre-tax and pre-bonus
profit of $4,135,000. Accordingly, Mr. Olberz became entitled to a full bonus of
35% of his base compensation or $87,500. In addition, the Committee recommended
and the Board granted a discretionary bonus to Mr. Olberz of 15% of base
compensation or $37,500 for his role in leading the Company back to
profitability from the loss in fiscal 1996 and flat earnings in fiscal 1995.
Thus, Mr. Olberz' total compensation for fiscal 1997 was $375,000, of which
$125,000 was by way of performance bonus.
E. TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Internal Revenue Code of 1986 was amended in 1993 in order to limit the
deductibility for federal income tax purposes of non-performance based
compensation in excess provided to certain executive officers. As the Company's
current compensation structure does not provide for or contemplate annual
compensation to any executive in excess of the $1,000,000 threshold, the
limitations placed on tax deductions will be inapplicable to the Company in the
foreseeable future.
Compensation Committee
JOHN R. ATTWOOD
ERIC S. OLBERZ
KENNETH OLSEN
June 30, 1997
INCENTIVE COMPENSATION PLANS
On April 1, 1990, the Board of Directors of the Company adopted a Stock
Appreciation Rights Plan (the "1990 Plan") authorizing the grant of Stock
Appreciation Rights ("SARs") to key Company employees. These SARs entitled the
holder upon exercise to receive cash in an amount equal to 0.11% of three times
the increase in aggregate book value of the Company from the grant date.
The purpose of the 1990 Plan was to provide an incentive to key employees
in a position to contribute to the successful operations of the Company by
linking a portion of such employees' compensation directly to the increase in
the Company's aggregate book value through the issuance of the SARs. In October
1992, the Board adopted the 1992 Plan which authorized the granting of certain
incentive awards including new SARs, NQSOs, incentive stock options ("ISOs"),
AOGs to non-employee Directors, restricted stock, dividend equivalents, and PAs.
Pursuant to the terms of the 1992 Plan, the SARs granted under the 1990 Plan
were converted to PAs at a conversion price established under the 1992 Plan and
the 1990 Plan was terminated.
Each PA granted in the conversion entitled the holder on exercise to the
cash equivalent of 0.0011 times the difference between three times the book
value of the Company on the grant date of the original SAR and three times the
book value on the date of exercise, excluding such increase as is attributable
to the offering or any subsequent equity offering, and will otherwise be subject
to the same terms and conditions as the original SAR it replaces. Prior to
Fiscal 1993, 22 SARs had been issued to certain executives under the 1990 Plan.
In Fiscal 1993, these SARs were converted into 22 PAs including three, five and
one PAs to Messrs. Trausch, Kaminsky and Haueter, respectively, all of which
were exercised during Fiscal 1996 resulting in payments to Messrs. Trausch,
Kaminsky, and Haueter, respectively, of $37,041, $61,461 and $11,797. Currently,
no PAs are outstanding.
10
<PAGE>
A total of 600,000 shares of Common Stock have been authorized and reserved
for stock options to be granted under the 1992 Plan. The 1992 Plan provides for
the grant of ISOs as defined in Section 422 of the Internal Revenue Code of
1986, as amended, to employees of the Company. The 1992 Plan also provides for
the grant of NQSOs to the Company's officers, employees or consultants thereof.
An ISO may have certain tax advantages for the optionee as compared to a NQSO.
The exercise price of the ISOs may not be less than 100% of the fair market
value of the Company's Common Stock on the date of grant or 110% of such fair
market value in the case of holders of more than 10% of the Company's Common
Stock. The exercise price of the NQSOs may not be less than 100% of the fair
market value of the Company's Common Stock on the date of grant. Shares subject
to an option granted under the 1992 Plan may be purchased for cash and/or its
equivalent, including shares of Common Stock. The ISOs and NQSOs expire ten
years after the date of grant, with the exception of ISOs held by a holder of
10% or more of the outstanding Common Stock, which expire five years after the
date of grant.
The Company granted NQSOs covering 378,000 shares of Common Stock under the
1992 Plan to certain employees immediately prior to the Company's initial public
offering in November 1992. Of this amount, NQSOs for 72,000, 72,000, and 48,000
shares, respectively, were granted to Messrs. Trausch, Kaminsky, and Haueter.
These NQSOs were exercisable at the Company's initial public offering price of
$9.25 and vested at a rate of 20% per year over five years.
The Board of Directors authorized the issuance on March 1, 1996 of NQSOs to
certain of the Company's officers and these officers, including Messrs. Trausch,
Kaminsky and Haueter, agreed to terminate the existing NQSOs that they had
received prior to the Company's initial public offering in March, 1996. Mr.
Haueter also received NQSOs covering 12,000 additional shares of Common Stock.
NQSOs covering 222,000 shares of Common Stock remain outstanding as of the date
of this Proxy Statement. See Table 7 of this Proxy Statement.
Under the 1992 Plan, a total of 30,000 shares of Common Stock have been
reserved for grant of AOGs to non-employee Directors of the Company. AOGs
granted to Board of Directors members are discussed herein under the Section
captioned "Compensation of Directors."
In January 1997, the Board of Directors adopted an employee retirement
savings plan under Section 401(k) of the Internal Revenue Code 1986 as amended
(the "401K Plan") pursuant to which eligible employee participants make
voluntary contributions through payroll deductions which are matched, in part,
by the Company's contributions. Such contributions can be utilized by the
participant to purchase interests in certain mutual funds or shares of the
Company's Common Stock. The purpose of the 401K Plan is to (i) provide eligible
employees with the opportunity to increase their current savings and future
retirement income and (ii) to encourage continuous employment and employee
loyalty by facilitating investments in the Company's Common Stock beginning in
fiscal 1998.
Each employee is eligible to participate in the 401K Plan on the first day
of the pay period coincident with the semi-annual eligibility computation period
during which he or she shall perform at least 1,000 hours or one year of
service. There are currently approximately 600 employees of the Company who will
be eligible to participate in the 401K Plan. The eligible employee may make an
annual contribution equal to from 2% up to and including 15% of their salary
compensation. The Company will make a matching contribution of 25% of the first
4% of an eligible employee's deferrals.
To maintain qualified status under the federal tax law, the 401K Plan must
satisfy nondiscrimination tests which limit contributions of or on behalf of
"highly compensated employees", as such term as defined in the federal tax laws.
To prevent violation of these nondiscrimination tests, the maximum employee
contribution percentages under the 401K Plan may be changed from time to time
and/or certain highly compensated employees may be required either prospectively
or retroactively to reduce the amount of their contributions. The maximum
investments of any plan participant in Company stock cannot exceed 25% of their
total deferral contributions.
11
<PAGE>
Participating employees generally will not have current taxable income for
federal income tax purposes as a result of their own qualified elective deferral
or the Company's contributions, or earnings of increments thereon, until actual
distributions are made from the 401K Plan to the employee participants.
Contributions by the Company generally are deductible from the Company's gross
income for federal income tax purposes, within prescribed statutory limits.
SUMMARY COMPENSATION TABLE
The following table sets forth, for the 1997, 1996, and 1995 fiscal years,
the cash compensation paid or accrued by the Company, as well as other
compensation paid or accrued for such year, as to the Company's Chief Executive
Officer during this period, Norbert J. Olberz and to each of the other key
executive officers (collectively "Named Officers") for which disclosure is
required.
TABLE 5
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
---------------------------------------- -----------------------------------------
All Other
Name and Principal Position Fiscal Year ($) Salary ($) Bonus(1) (#) Options/SARS(2) Compensation(3)
--------------------------- ------------ ---------- ------------ ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Norbert J. Olberz, Chairman of the 1997 250,000 125,000 -0- -0-
Board, Interim President and Chief 1996 243,750 -0- -0- -0-
Executive Officer 1995 250,000 -0- -0- -0-
Dennis D. Trausch, Executive Vice 1997 145,000 52,000 -0- -0-
President 1996 141,375 -0- 72,000 37,041
1995 93,500 12,400 -0- -0-
Howard K. Kaminsky, Senior Vice 1997 135,000 52,000 -0- -0-
President-Finance, Chief Financial 1996 131,625 -0- 72,000 61,461
Officer, and Secretary 1995 80,400 12,400 -0- -0-
Robert W. Haueter, Senior Vice 1997 120,000 48,000 -0- -0-
President-Sales, Marketing, and 1996 117,000 -0- 60,000 11,797
Merchandising 1995 70,800 12,400 -0- -0-
</TABLE>
__________________________
(1) All named executive officers were entitled to receive bonuses based on the
Company's net income for fiscal 1996 and 1997. Other than Norbert J.
Olberz, all named executive officers were entitled to such bonuses in fiscal
1995.
(2) Represents NQSOs issued to key executive officers during fiscal 1996. See
the discussion above under the heading "Incentive Compensation Plans."
(3) Represents payments made to Messrs. Trausch, Kaminsky and Haueter upon
exercise of their respective PAs. See the discussion above under the
heading "Incentive Compensation Plans"
12
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of the Company's total return to
shareholders from November 19, 1992, the date on which the Company's Common
Stock was first registered under the Securities Exchange Act of 1934, to March
31, 1997, as compared to total return for the MG Industry Group 529 Index and
the NASDAQ Market Index for the same period. This comparison assumes $100.00
was invested on November 19, 1992 in the Company's Common Stock under both
indexes.
TABLE 6
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
11/19/92 3/31/93 3/31/94 3/31/95 3/31/96 3/31/97
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sport Chalet Inc. 100.00 74.67 48.00 42.67 24.00 26.67
- ------------------------------------------------------------------------------------------------------------------------------
Peer Group(1) 100.00 101.36 108.43 118.34 161.69 150.12
- ------------------------------------------------------------------------------------------------------------------------------
NASDAQ Market Index 100.00 108.54 125.44 133.08 179.00 200.26
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
___________________
(1) Peer group chosen was Media General Industry Group 529 - Other Importers,
Wholesalers and Retailers.
13
<PAGE>
OPTIONS GRANTED IN FISCAL 1997
No stock options were granted to Named Officers during Fiscal 1997
OPTION EXERCISES AND YEAR END VALUE
The following table sets forth information with respect to the Named Officers
concerning the exercise of options during Fiscal 1997 and unexercised options
held at fiscal year end.
TABLE 7
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND 1997 FISCAL YEAR-END OPTION VALUE
Number of Value of Unexercised
Unexercised Options In-the-Money Options at
Shares Acquired Value Held at Fiscal Year End (#) Fiscal Year End (1)
Name on Exercise (#) Realized Exercisable/Unexercisable Excercisable/Unexercisable
- ---- --------------- -------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Norbert J. Olberz............. -0- -0- 0/0 N/A
Dennis D. Trausch............. -0- -0- 14,400/57,600 1,800/7,225
Howard K. Kaminsky............ -0- -0- 14,400/57,600 1,800/7,225
Robert W. Haueter............. -0- -0- 12,000/48,000 1,500/6,000
</TABLE>
____________________
(1) Represents the difference between the closing price of the Company's Common
Stock on March 31, 1997 in excess of the exercise price of the options
multiplied by the number of shares subject to exercisable and unexercised
options, respectively.
CERTAIN TRANSACTIONS
From time to time the Company has transacted business with entities in
which its management or the Principal Shareholder of the Company have an
interest.
SOFT GOODS PURCHASES
During February 1995, the Company's management formally recommended
that the Company's soft goods manufacturing operations (the "Manufacturing
Operations") be discontinued and liquidated. In response to Management's
recommendation, Camp 7, Inc., a corporation owned by then Vice Chairman and
Secretary Eric S. Olberz, purchased the assets used by the Company in its
Manufacturing Operations in June 1995. Mr. Olberz resigned his positions as an
employee and the Company's Vice-Chairman and Secretary effective upon the
completion of the sale. The Company purchased soft goods products from Camp 7
(as well as other qualified vendors), until Camp 7 sold its assets to a
unrelated third party purchaser in October, 1996.
14
<PAGE>
PROPERTY LEASES
The Company currently leases from the Principal Shareholder its corporate
office space in La Canada, its warehouse and distribution facility in Montclair
and Pomona, and its stores in La Canada and Huntington Beach. The Company has
incurred rental expense of $1.5 million, $1.4 million, $1.6 million payable to
the Principal Shareholder in Fiscal 1997, 1996, and 1995, respectively. The
Company believes that the occupancy costs to the Company under each lease are no
higher than those which would be charged by an unrelated third party under
similar circumstances.
A portion of the property in La Canada leased by the Company from the
Principal Shareholder was, until the late 1970s, used as a gas station and
contained underground storage tanks. In June 1991, petroleum hydrocarbon
pollution at the site was detected in connection with the removal of the
underground storage tanks. The Company received regular approval of a site
investigation work plan for the property and in April 1997 the Company was
notified that no further action related to the underground storage tank release
will be required at this time. The Principal Shareholder has agreed to indemnify
the Company against all investigation and remediation costs relating to the
property.
GENERAL
REQUIRED COMMISSION FILINGS
Based on Company records and other information, the Company believes
that all Commission filing requirements applicable to its Directors and officers
with respect to the Company's fiscal year ended March 31, 1997 were complied
with, except that certain monthly reports on Form 4 were filed late by Messrs.
Haueter and Kaminsky and Eric S. Olberz.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be considered at the 1998 Meeting of
Shareholders must be received by the Corporate Secretary of the Company not less
than sixty days nor more than ninety days prior to August 6, 1998.
FORM 10-K
The Company will furnish without charge to each person whose Proxy is being
solicited, upon request of any such person, a copy of the Annual Report to
Shareholders of the Company on Form 10-K for the fiscal year ended March 31,
1997 as filed with the Securities and Exchange Commission, including the
financial statements. Such report was filed with the Securities and Exchange
Commission on or about June 30, 1997. Requests for copies of such reports should
be directed to Sport Chalet, Inc., Attention: Mr. Robert Haueter, 920 Foothill
Boulevard, La Canada, California 91011.
Please date, sign and return the enclosed Proxy at your earliest convenience in
the enclosed envelope. No postage is required for mailing in the United States.
A prompt return of your Proxy will be appreciated.
By Order of the Board of Directors,
/s/ Howard K. Kaminsky
Howard K. Kaminsky
Secretary
15
<PAGE>
- --------------------------------------------------------------------------------
SPORT CHALET, INC.
920 FOOTHILL BOULEVARD
LA CANADA, CALIFORNIA 91011
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 7, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned shareholder(s) hereby appoints Norbert J. Olberz and Kenneth
Olsen, and each of them, with power of substitution, as attorneys and proxies
for and in the name and place of the undersigned, and hereby authorizes them
to represent and to vote all of the shares of Common Stock of SPORT CHALET,
INC. to be held of record as of June 13, 1997 which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of SPORT CHALET, INC.
to be held on August 7, 1997 at the Pasadena Hilton Hotel, 150 S. Los Robles
Avenue, Pasadena, California 91101, at 9:00 a.m. PDST, and at any adjournment
thereof.
(Continued and to be signed on other side)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your votes
as in this
example [X]
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES AND FOR PROPOSAL 2.
1. Election FOR WITHHOLD
For nominee listed below [_] [_]
(except as marked to the contrary below)
Withhold Authority to vote
for the nominee listed below
John R. Attwood (term to expire in 2000)
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
IMPORTANT: PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE
I PLAN TO ATTEND THE ANNUAL MEETING. [_]
Dated:
- ------------------------------------- ------------------------------
Signature
Dated:
- ------------------------------------- ------------------------------
Signature (if held jointly)
NOTE: SIGNATURE SHOULD AGREE WITH NAME HEREON. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, OR CORPORATE OFFICER, PLEASE
GIVE FULL TITLE AS SUCH. ALL JOINT OWNERS SHOULD SIGN. IF YOU SIGN FOR A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AN AUTHORIZED PERSON.
- --------------------------------------------------------------------------------
