<PAGE> 1
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, 1998
SPORTMART, INC. INCENTIVE SAVINGS PLAN
GART SPORTS COMPANY
1000 BROADWAY
DENVER, COLORADO 80203
<PAGE> 2
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
ANNUAL REPORT FORM 11-K
FOR THE FISCAL YEARS ENDED JANUARY 31, 1998 AND 1997
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT................................................... 1
FINANCIAL STATEMENTS
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS:
January 31, 1998........................................................ 3
January 31, 1997........................................................ 4
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS:
For the Year Ended January 31, 1998..................................... 5
For the Year Ended January 31, 1997..................................... 6
NOTES TO FINANCIAL STATEMENTS.............................................. 7
SUPPLEMENTAL SCHEDULE
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES ................ 14
SIGNATURES..................................................................... 15
EXHIBIT
23 - CONSENT OF KPMG PEAT MARWICK LLP
</TABLE>
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
THE TRUSTEES
THE SPORTMART, INC. INCENTIVE SAVINGS PLAN
GART SPORTS COMPANY:
We have audited the accompanying statement of net assets available for benefits
of the Sportmart, Inc. Incentive Savings Plan (Plan) as of January 31, 1998, and
the related statement of changes in net assets available for benefits for the
year then ended. 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 audit. The accompanying financial statements of
Sportmart, Inc. Incentive Savings Plan as of January 31, 1997, were audited by
other auditors whose report thereon dated July 16, 1997, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Plan as
of January 31, 1998 and the changes in net assets available for benefits for the
year then ended in conformity with generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Item 27a -
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 supplemental schedule is the
responsibility of the Plan's management. The Fund Information in the statement
of net assets available for benefits and the statement of changes in 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 have been subjected to the auditing procedures applied in the audit
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
as of and for the year ended January 31, 1998.
1
<PAGE> 4
The schedule of assets held for investment purposes that accompanies the Plan's
financial statements does not disclose the historical cost of certain plan
assets held by the Plan's custodian. Disclosure of this information is required
by the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974.
The Plan has not presented a schedule of reportable transactions (transactions
in excess of 5 percent of the current value of plan assets at the beginning of
the year). Disclosure of this information is required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
June 19, 1998
2
<PAGE> 5
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
T-Note American Fidelity Gart Sports Stock
Rate Balanced Magellan Company cash
Fund Fund Fund Stock Fund account
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ -- -- -- -- 3,889
Investments:
Investments at contract value - Group annuity 907,100 -- -- -- --
contract
Investments at fair market value:
Mutual funds -- 1,599,227 2,521,136 -- --
Gart Sports Company common stock -- -- -- 110,412 --
(cost of $100,355)
Participant loans -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total investments 907,100 1,599,227 2,521,136 110,412 --
Receivables:
Employee 7,816 12,378 19,609 -- --
Employer 1,629 2,378 3,820 -- --
Loan repayment 1,410 2,976 3,919 -- --
Receivable from Sportmart, Inc. -- -- -- -- --
Employees Profit Sharing Plan
Other -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total receivables 10,855 17,732 27,348 -- --
---------- ---------- ---------- ---------- ----------
Net assets available for benefits $ 917,955 1,616,959 2,548,484 110,412 3,889
========== ========== ========== ========== ==========
<CAPTION>
Profit
Participant Sharing
loans Plan Fund Total
---------- ---------- ----------
<S> <C> <C> <C>
Cash and cash equivalents -- -- 3,889
Investments:
Investments at contract value - Group annuity -- -- 907,100
contract
Investments at fair market value:
Mutual funds -- -- 4,120,363
Gart Sports Company common stock -- -- 110,412
(cost of $100,355)
Participant loans 98,897 -- 98,897
---------- ---------- ----------
Total investments 98,897 -- 5,236,772
Receivables:
Employee -- -- 39,803
Employer -- -- 7,827
Loan repayment -- -- 8,305
Receivable from Sportmart, Inc. -- 4,839,153 4,839,153
Employees Profit Sharing Plan
Other -- 20,482 20,482
---------- ---------- ----------
Total receivables -- 4,859,635 4,915,570
---------- ---------- ----------
Net assets available for benefits 98,897 4,859,635 10,156,231
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
JANUARY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
T-Note American Fidelity Sportmart Stock
Rate Balanced Magellan Stock cash Participant
Fund Fund Fund Fund account loans
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ -- -- -- -- 4,399 --
Investments:
Investments at contract value - Group annuity contract 851,101 -- -- -- -- --
Investments at fair market value:
Mutual funds -- 1,235,180 2,168,035 -- -- --
Sportmart common stock (cost of $279,690) -- -- -- 113,713 -- --
Participant loans -- -- -- -- -- 81,140
--------- --------- --------- --------- --------- ---------
Total investments 851,101 1,235,180 2,168,035 113,713 -- 81,140
Receivables:
Employee 16,580 20,103 38,204 -- 4,264 --
Employer 5,693 6,874 12,960 -- 1,447 --
Loan repayment 346 894 1,761 -- 3,524 --
--------- --------- --------- --------- --------- ---------
Total receivables 22,619 27,871 52,925 -- 9,235 --
--------- --------- --------- --------- --------- ---------
Total assets 873,720 1,263,051 2,220,960 113,713 13,634 81,140
Deferral refunds 3,020 8,041 14,549 -- -- --
--------- --------- --------- --------- --------- ---------
Total liabilities 3,020 8,041 14,549 -- -- --
--------- --------- --------- --------- --------- ---------
Net assets available for benefits $ 870,700 1,255,010 2,206,411 113,713 13,634 81,140
========= ========= ========= ========= ========= =========
<CAPTION>
Total
---------
<S> <C>
Cash and cash equivalents 4,399
Investments:
Investments at contract value - Group annuity contract 851,101
Investments at fair market value:
Mutual funds 3,403,215
Sportmart common stock (cost of $279,690) 113,713
Participant loans 81,140
---------
Total investments 4,449,169
Receivables:
Employee 79,151
Employer 26,974
Loan repayment 6,525
---------
Total receivables 112,650
---------
Total assets 4,566,218
Deferral refunds 25,610
---------
Total liabilities 25,610
---------
Net assets available for benefits 4,540,608
=========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
T-Note American Fidelity Gart Sports Stock
Rate Balanced Magellan Sportmart Company cash
Fund Fund Fund Stock Fund Stock Fund account
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Contributions:
Employee $ 188,231 278,138 419,601 -- -- 39,401
Employer 39,815 55,065 82,738 -- -- 8,324
Employee rollover 1,316 41,782 35,338 -- -- 1,144
Transfers between funds (26,554) 169,340 (137,718) (70,877) 110,412 (40,748)
Receivable from Sportmart, -- -- -- -- -- --
Inc. Employees Profit
Sharing Plan
Net gain from investments in 27,798 -- -- -- -- --
group annuity contract
Net gain from investments in -- 184,989 424,419 -- -- --
registered investment
companies
Net depreciation in market -- -- -- (31,937) -- --
value of investment
Interest income -- -- -- -- -- --
Other income, net -- -- -- -- -- (1,249)
----------- ----------- ----------- ----------- ----------- -----------
Total additions 230,606 729,314 824,378 (102,814) 110,412 6,872
Deductions -
Distributions to participants 183,351 367,365 482,305 10,899 -- 16,617
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 47,255 361,949 342,073 (113,713) 110,412 (9,745)
Net assets available for benefits:
Beginning of year 870,700 1,255,010 2,206,411 113,713 -- 13,634
----------- ----------- ----------- ----------- ----------- -----------
End of year $ 917,955 1,616,959 2,548,484 -- 110,412 3,889
=========== =========== =========== =========== =========== ===========
<CAPTION>
Profit
Participant Sharing
loans Plan Fund Total
----------- ----------- -----------
<S> <C> <C> <C>
Additions:
Contributions:
Employee -- -- 925,371
Employer -- -- 185,942
Employee rollover -- -- 79,580
Transfers between funds (3,855) -- --
Receivable from Sportmart, -- 4,839,153 4,839,153
Inc. Employees Profit
Sharing Plan
Net gain from investments in -- -- 27,798
group annuity contract
Net gain from investments in -- -- 609,408
registered investment
companies
Net depreciation in market -- -- (31,937)
value of investment
Interest income 7,782 -- 7,782
Other income, net -- 20,485 19,233
----------- ----------- -----------
Total additions 3,927 4,859,635 6,662,330
Deductions -
Distributions to participants (13,830) -- 1,046,707
----------- ----------- -----------
Net increase (decrease) 17,757 4,859,635 5,615,623
Net assets available for benefits:
Beginning of year 81,140 -- 4,540,608
----------- ----------- -----------
End of year 98,897 4,859,635 10,156,231
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 8
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED JANUARY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
T-Note American Fidelity Sportmart
Rate Balanced Magellan Stock
Fund Fund Fund Fund
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Additions:
Contributions:
Employee $ 187,271 233,069 406,306 --
Employer 44,123 51,523 87,988 --
Employee rollover 29,229 13,407 14,124 2,106
Transfers between funds 196 21,167 (3,141) 31,739
Net gain from investments in group annuity contract 26,825 -- -- --
Net gain from investments in registered investments companies -- 126,908 218,856 --
Net depreciation in market value of investments -- -- -- (35,082)
Interest income -- -- -- --
---------- ---------- ---------- ----------
Total additions 287,644 446,074 724,133 (1,237)
Deductions:
Distributions to participants 314,728 311,122 421,948 --
Deferral refunds 3,020 8,041 14,549 --
---------- ---------- ---------- ----------
Total deductions 317,748 319,163 436,497 --
---------- ---------- ---------- ----------
Net increase (decrease) (30,104) 126,911 287,636 (1,237)
Net assets available for benefits:
Beginning of year 900,804 1,128,099 1,918,775 114,950
---------- ---------- ---------- ----------
End of year $ 870,700 1,255,010 2,206,411 113,713
========== ========== ========== ==========
<CAPTION>
Stock
cash Participant
account loans Total
---------- ---------- ----------
<S> <C> <C> <C>
Additions:
Contributions:
Employee 44,904 -- 871,550
Employer 10,273 -- 193,907
Employee rollover -- -- 58,866
Transfers between funds (32,021) (17,940)
Net gain from investments in group annuity contract -- -- 26,825
Net gain from investments in registered investments companies -- -- 345,764
Net depreciation in market value of investments -- -- (35,082)
Interest income 521 8,189 8,710
---------- ---------- ----------
Total additions 23,677 (9,751) 1,470,540
Deductions:
Distributions to participants 28,864 59,589 1,136,251
Deferral refunds -- -- 25,610
---------- ---------- ----------
Total deductions 28,864 59,589 1,161,861
---------- ---------- ----------
Net increase (decrease) (5,187) (69,340) 308,679
Net assets available for benefits:
Beginning of year 18,821 150,480 4,231,929
---------- ---------- ----------
End of year 13,634 81,140 4,540,608
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 9
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1998 AND 1997
- --------------------------------------------------------------------------------
(1) PLAN DESCRIPTION
The following description of the Sportmart, Inc. Incentive Savings Plan
(Plan) provides only general information. Participants should refer to
the Plan Agreement for a more complete description of the Plan's
provisions.
GENERAL
The Plan was established by Sportmart, Inc. effective February 1, 1987,
for the benefit of its employees and beneficiaries. The Plan is a
participant directed defined contribution plan. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). All eligible employees over age 21 who have completed one year
of service and over 1,000 hours worked, 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.
MERGER OF SPORTMART, INC. EMPLOYEES PROFIT SHARING PLAN INTO THE
SPORTMART, INC. INCENTIVE SAVINGS PLAN
Effective December 31, 1997, Sportmart, Inc. merged the Sportmart, Inc.
Employees Profit Sharing Plan (the Profit Sharing Plan) into the Plan.
Any residual interest and dividends earned on the Profit Sharing Plan
investments from the effective termination date to the actual date of
transfer will be reported as additions to the Plan. Income earned on
assets of the Profit Sharing Plan subsequent to December 31, 1997 are
reported as a receivable and addition to the Plan and are included in
other receivables and other income, net. The fair value of all assets
in the Profit Sharing Plan at December 31, 1997 totaled $4,839,153 and
is reported as a receivable in the Plan's statement of net assets
available for benefits at January 31, 1998. Participants may
self-direct their proportionate share of the Profit Sharing Plan assets
to the investment options of the Plan during 1998 when the Profit
Sharing Plan investments are liquidated and the balances are
transferred to the Plan.
ACQUISITION OF SPORTMART, INC. BY GART SPORTS COMPANY AND PLAN MERGER
On January 9, 1998, Sportmart, Inc. was acquired by Gart Sports
Company. In conjunction with the acquisition, outstanding shares of
voting and non-voting Sportmart, Inc. common stock at January 9, 1998
were exchanged for Gart Sports Company common stock based upon a
conversion ratio of 0.165014 to one. The Company expressed an intent to
merge the Plan into the Gart Bros. Sporting Goods Company Profit
Sharing and 401(k) Plan. While the Company has not terminated the Plan,
it is free to do so, subject to the provisions set forth by ERISA.
7
<PAGE> 10
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) PLAN DESCRIPTION (CONTINUED)
CONTRIBUTIONS AND VESTING
Eligible employees may make contributions on a tax-deferred basis at a
rate of 2% to 10% of compensation. These tax-deferred contributions are
limited annually ($9,500 for the calendar years ended December 31, 1997
and 1996) under the Internal Revenue Code (IRC). Sportmart, Inc. was
obligated to match one-third of the first 3% of each employee's
compensation which was contributed to the Plan. All employee and
Sportmart, Inc. contributions ceased effective January 9, 1998 in
conjunction with the acquisition. Participant accounts are fully vested
at all times.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions, allocations of the Company's contributions and Plan
earnings, and charged with an allocation of administrative expenses.
Allocations are based on participant compensation or account balances.
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. The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account.
INVESTMENT OPTIONS
As of January 31, 1998, 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 Gart Sports Company 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% points.
American Balanced Fund - This fund is a balanced mutual fund which
seeks to provide conservation of capital, current income and long-term
growth of capital and income by investing in stocks, bonds and other
fixed income securities.
Fidelity Magellan Fund - This fund is a growth mutual fund which seeks
capital appreciation by investing primarily in equity securities of
domestic, foreign and multinational issuers of all sizes that offer
potential for growth.
Gart Sports Company Stock Fund - This fund is invested in shares of the
common stock of Gart Sports Company.
8
<PAGE> 11
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(1) PLAN DESCRIPTION (CONTINUED)
Prior to the acquisition of Sportmart, Inc. by Gart Sports Company,
participants' accounts were invested in the Sportmart Stock Fund. This
fund invested in shares of the voting common stock and the Class A
common stock (non-voting) of Sportmart, Inc. In conjunction with the
acquisition, those shares were exchanged for shares of Gart Sports
Company common stock.
The Stock Cash Account represents contributions which have not yet been
invested in Gart Sports Company or Sportmart Stock Fund as of the Plan
year end.
The Profit Sharing Plan Fund represents contributions receivable from
the Profit Sharing Plan which will be allocated to the participants
based on the proportionate account balances of the participants on the
date of transfer. Participants may self direct their proportionate
share of the Profit Sharing Plan assets to the investment options of
the Plan during 1998 when the Profit Sharing Plan investments are
liquidated and the balances are transferred to the Plan.
PARTICIPANT LOANS
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 at the date of
the loan, 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. Principal
and interest is paid ratably through payroll deductions.
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 with defined limits not to exceed fifteen years.
ADMINISTRATIVE EXPENSES
Plan participants pay the administration fees for the Plan.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis of accounting.
9
<PAGE> 12
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
certain estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the statement of
net assets available for benefits and the reported amounts of increases
and decreases in net assets during the reporting period. Actual results
could differ significantly from those estimates.
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 on an accrual basis.
Purchases and sales of securities are recorded on a trade-date basis.
The Plan presents in the statements 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 as of and for
the year ended January 31, 1997, are amounts representing employee
contributions in excess of allowable contributions as determined by the
Internal Revenue Service (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.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
10
<PAGE> 13
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(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 the custodian of the Gart Sports Company Stock
Fund (formerly the Sportmart Stock Fund) and Nationwide Insurance
Company is custodian of the T-Note Rate Fund, American Balanced Fund
and the Fidelity Magellan Fund.
Investments that represented five percent or more of total assets on
January 31, 1998 and 1997 were:
<TABLE>
<CAPTION>
1997 1996
Fair Value Fair Value
--------- ---------
<S> <C> <C>
Group Annuity Contract - T-Note Rate Fund $ 907,100 851,101
Mutual Funds:
American Balanced Fund 1,599,227 1,235,180
Fidelity Magellan Fund 2,521,136 2,168,035
Equity Securities - Sportmart Stock Fund -- 113,713
</TABLE>
(4) GROUP ANNUITY CONTRACT
The T-Note Rate Fund is a guaranteed investment contract invested in
group annuity contracts with an insurance company.
The average yield on assets as of January 31, 1998 and 1997 was 4.72%
and 4.47%, respectively. The return on assets for the year ended
January 31, 1998 and 1997 was 4.37% and 4.61%, respectively. 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, merger, etc.) are
not eligible for book value disbursements and may cause liquidation of
all or a portion of the fund with a market value adjustment.
11
<PAGE> 14
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(5) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
January 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net assets available for benefits - financial $ 10,156,231 4,540,608
statements
Benefit claims payable (839,700) (182,934)
------------ ------------
Net assets available for benefits - Form 5500 $ 9,316,531 4,357,674
============ ============
</TABLE>
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year ended January 31
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Benefits paid to participants - financial $ 1,046,707 1,136,251
statements
Benefit claims payable - end of year 839,700 182,934
Benefit claims payable - beginning of year (182,934) (158,080)
----------- -----------
Benefits paid to participants - Form 5500 $ 1,703,473 1,319,185
=========== ===========
</TABLE>
Amounts allocated to accounts of individuals who have elected to
withdraw from the Plan but have not yet been paid at January 31 are not
reported as a liability for financial statements prepared in conformity
with generally accepted accounting principles, however, the Department
of Labor requires that this amount be reported as a liability on Form
5500.
(6) 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.
12
<PAGE> 15
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(7) RISKS AND UNCERTAINTIES
The Plan provides for various investment options in any combination of
Gart Sport Company Stock (formerly Sportmart, Inc. 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.
13
<PAGE> 16
SPORTMART, INC.
INCENTIVE SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
JANUARY 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description of investment, including
Identity of issue, maturity date, rate of interest,
borrower, lessor or collateral par
similar party or maturity value Cost Current value
- ------------- ----------------- ---- -------------
<S> <C> <C> <C>
Nationwide Life Insurance Co. Group Annuity Contract with
T-Note an interest rate based on
Rate Fund** the five year Treasury Note
yield $ 907,100 907,100
American Balanced Fund Mutual Fund - 642,796 units 1,599,227 * 1,599,227
Fidelity Magellan Fund Mutual Fund - 1,055,889 units 2,521,136 * 2,521,136
Gart Sports Company** Common stock; $.01 par value 279,690 110,412
8,333 shares
Participant loans ** Loans bearing interest at rates - 98,897
----------- ---------
ranging from 7% to 11%
Total investments $ 5,307,153 5,236,772
=========== =========
</TABLE>
* The custodian is unable to provide the cost of assets.
** Party in interest.
See accompanying independent auditors' report.
14
<PAGE> 17
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
Dated: July 30, 1998 /s/ Larry J. Hochberg
--------------------------------------
Larry J. Hochberg, Trustee of the
Sportmart, Inc. Incentive Savings Plan
15
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBET DESCRIPTION
- ------ -----------
<S> <C>
23 Consent of Independent Auditors
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
GART SPORTS COMPANY:
We consent to incorporation by reference in the registration statement on Form
S-8 of Gart Sports Company of our report dated June 19, 1998, relating to the
statement of net assets available for benefits of the Sportmart, Inc. Incentive
Savings Plan as of January 31, 1998, and the related statement of changes in net
assets available for benefits for the year then ended and related schedule,
which report is included in this annual report on Form 11-K of Gart Sports
Company.
Our report dated June 19, 1998, contains explanatory paragraphs which state that
the schedule of assets held for investment purposes that accompanies the Plan's
financial statements does not disclose the historical cost of certain plan
assets held by the Plan's custodian; and the Plan has not presented a schedule
of reportable transactions. Disclosure of this information is required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
July 29, 1998
