SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JULY 28, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission File No. 1-13426
THE SPORTS AUTHORITY, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3511120
- --------------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3383 N. State Road 7, Ft. Lauderdale, Florida 33319
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(954) 735-1701
----------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock outstanding at September 5, 1996: 31,440,066
<PAGE>
THE SPORTS AUTHORITY, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
Part I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of the Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBITS 17
</TABLE>
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share data)
13 WEEKS ENDED 26 WEEKS ENDED
July 28, July 23, July 28, July 23,
1996 1995 1996 1995
------------- ------------ ------------ ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 331,596 $ 268,348 $ 602,154 $ 489,943
Licensee fees and rental income 21 13 599 617
----------- ----------- ----------- -----------
331,617 268,361 602,753 490,560
----------- ----------- ----------- -----------
Cost of merchandise sold, includes
buying and occupancy costs 239,858 195,974 436,952 359,705
Selling, general and administrative expenses 73,869 59,502 143,080 113,682
Pre-opening expense 1,871 289 2,503 940
Goodwill amortization 491 491 982 982
----------- ----------- ----------- -----------
Operating income 15,528 12,105 19,236 15,251
Interest expense 542 57 1,078 276
----------- ----------- ----------- -----------
Income before income taxes 14,986 12,048 18,158 14,975
Income tax expense 6,175 5,144 7,475 6,394
Minority interest (372) - (553) -
----------- ----------- ----------- -----------
Net income $ 9,183 $ 6,904 $ 11,236 $ 8,581
=========== =========== =========== ===========
Earnings per share $ 0.29 $ 0.22 $ 0.36 $ 0.28
=========== =========== =========== ===========
Weighted average shares outstanding 31,375 31,215 31,337 31,195
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
JULY 28, JANUARY 28,
1996 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,169 $ 11,752
Merchandise inventories 273,004 248,307
Accounts receivable and other current assets 40,255 30,442
Property held for resale 21,083 21,063
----------- ------------
Total current assets 352,511 311,564
Net property owned 142,879 134,706
Other assets and deferred charges 32,228 22,950
Goodwill - net of accumulated amortization of
$12,678 and $11,697 respectively 53,727 54,708
----------- ------------
Total Assets $ 581,345 $ 523,928
=========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable - trade $ 155,034 $ 136,344
Accrued payrolls and other liabilities 68,889 73,737
Short-term debt 30,514 -
Taxes other than income taxes 11,486 7,438
Income taxes 3,126 10,507
----------- ------------
Total current liabilities 269,049 228,026
Long-term debt - -
Other long-term liabilities 20,586 18,062
----------- ------------
Total liabilities 289,635 246,088
Minority interest 1,119 312
Stockholder's equity:
Common stock, $.01 par value, 100,000 shares
authorized, 31,479 issued and outstanding 315 209
Additional paid-in-capital 245,089 241,525
Deferred compensation and receivables from officers (2,434) (553)
Retained earnings 48,264 37,028
Treasury stock, 39 shares (381) (381)
Cumulative translation adjustment (262) (300)
----------- ------------
Total stockholder's equity 290,591 277,528
----------- ------------
Total Liabilities and Stockholder's Equity $ 581,345 $ 523,928
=========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
26 WEEKS ENDED
-------------------------------
JULY 28, JULY 23,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATIONS
Net income $ 11,236 $ 8,581
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization 13,245 9,563
Cumulative translation adjustment 38 -
Minority interest in net loss of joint venture (553) -
Loss on disposal of property and equipment 34 -
Increase in long-term liabilities 2,524 1,560
Cash provided by (used for) current assets and liabilities:
(Increase) decrease in inventories (24,697) 1,455
(Increase) decrease in property held for resale (20) 2,961
Increase (decrease) in accounts payable 18,690 (14,395)
Other - net (17,981) 1,151
----------- ----------
Net cash provided by operations 2,516 10,876
----------- ----------
INVESTING
Capital expenditures - owned property (19,710) (24,507)
Other assets and deferred charges (9,802) (5,406)
----------- ----------
Net cash used for investing (29,512) (29,913)
----------- ----------
FINANCING
Net borrowings under Revolving Credit Facility 30,514 5,010
Net proceeds from sale of stock 1,539 1,726
Purchase of treasury stock - (56)
Minority interest in equity of joint venture 1,360 -
----------- ----------
Net cash provided by financing 33,413 6,680
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,417 (12,357)
Cash and cash equivalents at beginning of year 11,752 37,115
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,169 $ 24,758
=========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<PAGE>
THE SPORTS AUTHORITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements do not include
all information and footnotes necessary for the annual presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current year's presentation.
In the opinion of The Sports Authority, Inc. management, all adjustments
necessary for a fair presentation of the results for the interim periods have
been included. All adjustments were of a normal and recurring nature.
NOTE 2: COMMON STOCK SPLIT
In the second quarter, the Company's Board of Directors declared a
three-for-two common stock split. The additional shares of common stock were
distributed on July 16, 1996 to shareholders of record as of July 1, 1996.
Earnings per share and weighted average shares outstanding for periods prior to
the distribution date have been restated to reflect the stock split.
6
<PAGE>
Item 2.
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the Company's income statement data as a percent
of sales for the periods indicated.
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
JULY 28, JULY 23, JULY 28, JULY 23,
1996 1995 1996 1995
------------- ------------ ------------ ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Licensee fees and rental income - - 0.1 0.1
----------- ----------- ---------- ----------
100.0 100.0 100.1 100.1
Cost of merchandise sold, includes
buying and occupancy costs 72.3 73.0 72.6 73.4
----------- ----------- ---------- ----------
Gross margin 27.7 27.0 27.5 26.7
Selling, general and administrative expenses 22.3 22.2 23.8 23.2
Pre-opening expense 0.6 0.1 0.4 0.2
Goodwill amortization 0.1 0.2 0.1 0.2
----------- ----------- ---------- ----------
Operating income 4.7 4.5 3.2 3.1
Interest expense 0.2 - 0.2 -
----------- ----------- ---------- ----------
Income before income taxes 4.5 4.5 3.0 3.1
Income taxes 1.8 1.9 1.2 1.3
Minority interest (0.1) - (0.1) -
----------- ----------- ---------- ----------
Net income 2.8% 2.6% 1.9% 1.8%
=========== =========== ========== ==========
The following table sets forth the Company's store openings for the periods
indicated. No stores were closed during these periods.
13 WEEKS ENDED 26 WEEKS ENDED
July 28, July 23, July 28, July 23,
1996 1995 1996 1995
------------- ------------ ------------ ----------
(Unaudited) (Unaudited)
Beginning number of stores 138 109 136 107
Openings 5 1 7 3
----------- ----------- ----------- ----------
Ending number of stores 143 110 143 110
=========== =========== =========== ==========
</TABLE>
7
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
13 WEEKS ENDED JULY 28, 1996 AND JULY 23, 1995
Sales for the 13 weeks ended July 28, 1996 were $331.6 million, a $63.3
million, or 23.6%, increase over sales of $268.3 million for the same period in
the prior year. Of the 23.6% increase in sales, 14.5%, or $39.0 million, was
attributable to the inclusion of a full 13 weeks sales for the stores opened in
1995 which had no comparable store sales in the prior year; 4.8%, or $13.0
million, was attributable to the seven new stores opened in the first half of
1996; and 4.3%, or $11.3 million, was attributable to comparable store sales
growth. Comparable store sales increased 4.3% and 6.2%, respectively, in the
second quarter of 1996 and 1995. These increases primarily resulted from
apparel, due to strong sales of licensed products, as well as fitness equipment
and footwear. However, comparable store sales increased at a lower rate in 1996
versus 1995 primarily due to sluggish sales in hardlines, particularly outdoor
sports products. Excluding all or a portion of the second quarter of 1996 sales
from seven stores considered to be cannibalized by new store openings,
comparable store sales increased 5.0% in the second quarter of 1996, as compared
to 8.6% in the same period of last year after excluding all or a portion of the
second quarter of 1995 sales from 11 stores considered to be cannibalized. The
Company considers an existing store to be cannibalized for a period of one year
from the date on which a new store overlaps its primary trade area. In
calculating comparable store sales excluding cannibalized stores, sales from a
cannibalized store are excluded from the calculation of total comparable sales
for such months.
Cost of merchandise sold, including buying and occupancy costs, for the 13
weeks ended July 28, 1996 was $239.9 million, or 72.3% of sales, as compared to
$196.0 million, or 73.0% of sales, for the same period in the prior year. As a
percent of sales, gross margin was 27.7% for 1996 and 27.0% for 1995. The major
components of cost of goods sold are merchandise costs and, to a lesser extent,
occupancy costs. For the 1996 period, merchandise costs as a percent of sales
decreased primarily because the Company is selling more higher margin products
such as footwear and apparel. Occupancy costs, which consist principally of
fixed minimum rentals, increased slightly as a percent of sales due to a 3.9%
reduction in average store sales volume per store in the second quarter of 1996
versus the same period in the prior year.
Selling, general and administrative (SG&A) expenses for the 13 weeks ended
July 28, 1996 were $73.9 million, or 22.3% of sales, as compared to $59.5
million, or 22.2% of sales, for the same period in the prior year. The 0.1% of
sales increase in SG&A expenses was attributable to an increase in corporate
general and administrative expenses due to start-up costs in the Company's joint
venture in Japan, and an increase in store payroll expenses partly due to
increased payroll related to the Company's TSA 2000 project which was
implemented in the second half of 1995. These increases are partially offset by
a decrease in advertising due to leveraging of advertising expenses in multiple
store markets.
8
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Pre-opening expense for the 13 weeks ended July 28, 1996 was $1.9 million,
or 0.6% of sales, as compared to $0.3 million, or 0.1% of sales, for the same
period in the prior year. The increase of 0.5% of sales is attributable to
opening five stores in the 1996 period versus one store in the same period in
the prior year. Pre-opening expenses consist principally of store payroll
expense for associate training and store preparation prior to the store opening
as well as grand-opening advertising expenditures.
Operating income for the 13 weeks ended July 28, 1996 was $15.5 million, or
4.7% of sales, as compared to operating income of $12.1 million, or 4.5% of
sales, for the same period in the prior year. Operating income before
pre-opening expense and goodwill amortization was $17.9 million, or 5.4% of
sales, for the 13 weeks ended July 28, 1996, as compared to $12.9 million, or
4.8% of sales, for the same period in the prior year.
Interest expense for the 13 weeks ended July 28, 1996 was $0.5 million, or
0.2% of sales, as compared to interest expense of $0.1 million (less than 0.1%
of sales) for the same period in the prior year. The increase of 0.2% of sales
was attributable to higher average borrowings during the second quarter of 1996
versus the same period in the prior year.
Income tax expense for the 13 weeks ended July 28, 1996 was $6.2 million
with an effective tax rate of 41.2%, as compared to income tax expense of $5.1
million with an effective tax rate of 42.7% for the same period of 1995. The
decrease in the effective tax rate resulted primarily from a decrease in state
taxes, and the declining effect of non-deductible goodwill expense due to the
growth of the Company's pre-tax income from the second quarter of 1995 to the
second quarter of 1996. This was partially offset by a net increase in taxes due
to tax rate differentials in the Company's Canadian subsidiary and its joint
venture in Japan.
As a result of the foregoing factors, net income for the 13 weeks ended July
28, 1996 was $9.2 million, or 2.8% of sales, as compared to net income of $6.9
million, or 2.6% of sales, for the same period in the prior year.
26 WEEKS ENDED JULY 28, 1996 AND JULY 23, 1995
Sales for the 26 weeks ended July 28, 1996 were $602.2 million, a $112.2
million, or 22.9%, increase over sales of $490.0 million for the same period in
the prior year. Of the 22.9% increase in sales, 17.1%, or $84.2 million, was
attributable to the inclusion of a full 26 weeks of sales for the stores opened
in 1995 which had no comparable store sales in the prior year; 3.1%, or $15.0
million, was attributable to the seven new stores opened in the first half of
1996; and 2.7%, or $13.0 million, was attributable to comparable store sales
growth. Comparable store sales increased 2.7% and 3.9%,
9
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
respectively, in the first half of 1996 and 1995. These increases primarily
resulted from apparel, due to strong sales of licensed products, as well as
fitness equipment and footwear. However, comparable store sales increased at a
lower rate in 1996 versus 1995 primarily due to sluggish sales in hardlines,
particularly outdoor sports products. Excluding all or a portion of the first
half of 1996 sales from seven stores considered to be cannibalized by new store
openings, comparable store sales increased 3.3% in the first half of 1996, as
compared to 6.4% in the same period of last year after excluding all or a
portion of the first half of 1995 sales from 11 stores considered to be
cannibalized.
Licensee fees and rental income for the 26 weeks ended July 28, 1996 was
$0.6 million as compared to $0.6 million, for the same period in the prior year,
or 0.1% of sales for both periods. Sales of snow ski merchandise in the first
quarter of 1996 were flat in comparison to the prior year as the sales were more
heavily weighted in the beginning of the ski season, which falls into fiscal
1995. The snow ski merchandise departments in the Company's stores are operated
pursuant to a licensee agreement with a third party under which the Company
receives a fee of approximately 10% of licensee snow ski merchandise sales in
the Company's stores. Snow ski merchandise sales are not included in the
Company's sales.
Cost of merchandise sold, including buying and occupancy costs, for the 26
weeks ended July 28, 1996 was $437.0 million, or 72.6% of sales, as compared to
$359.7 million, or 73.4% of sales, for the same period in the prior year. As a
percent of sales, gross margin was 27.5% for 1996 and 26.7% for 1995. The major
components of cost of goods sold are merchandise costs and, to a lesser extent,
occupancy costs. For the 1996 period, merchandise costs as a percent of sales
decreased primarily because the Company is selling more higher margin products
such as footwear and apparel. Occupancy costs increased slightly as a percent of
sales due to a 4.0% reduction in average store sales volume per store in the
first half of 1996 versus the same period in the prior year.
SG&A expenses for the 26 weeks ended July 28, 1996 were $143.1 million, or
23.8% of sales, as compared to $113.7 million, or 23.2% of sales, for the same
period in the prior year. The 0.6% of sales increase in SG&A expenses was
attributable to an increase in store payroll expenses partly due to increased
payroll related to the Company's TSA 2000 project, which was implemented in the
second half of 1995, and an increase in corporate general and administrative
expenses due to start-up costs in the Company's joint venture in Japan. This is
partially offset by a decrease in advertising due to leveraging of advertising
expenses in multiple store markets.
Pre-opening expense for the 26 weeks ended July 28, 1996 was $2.5 million,
or 0.4% of sales, as compared to $0.9 million, or 0.2% of sales, for the same
period in the prior year. The increase of 0.2% of sales is attributable to
opening seven stores in the 1996 period versus three stores in the same period
in the prior year.
10
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Operating income for the 26 weeks ended July 28, 1996 was $19.2 million or
3.2% of sales, as compared to operating income of $15.3 million, or 3.1% of
sales, for the same period in the prior year. Operating income before
pre-opening expense and goodwill amortization was $22.7 million, or 3.8% of
sales, for the 26 weeks ended July 28, 1996, as compared to $17.2 million, or
3.5% of sales, for the same period in the prior year.
Interest expense for the 26 weeks ended July 28, 1996 was $1.1 million, or
0.2% of sales, as compared to interest expense of $0.3 million (less than 0.1%
of sales) for the same period in the prior year. The increase of 0.2% of sales
was attributable to higher average borrowings during the first half of 1996
versus the same period in the prior year.
Income tax expense for the 26 weeks ended July 28, 1996 was $7.5 million
with an effective tax rate of 41.2%, as compared to income tax expense of $6.4
million with an effective tax rate of 42.7% for the same period of 1995. The
decrease in the effective tax rate resulted primarily from a decrease in state
taxes, and the declining effect of non-deductible goodwill expense due to the
growth of the Company's pre-tax income from the first half of 1995 to the first
half of 1996. This was partially offset by a net increase in taxes due to tax
rate differentials in the Company's Canadian subsidiary and its joint venture in
Japan.
As a result of the foregoing factors, net income for the 26 weeks ended July
28, 1996 was $11.2 million or 1.9% of sales, as compared to net income of $8.6
million, or 1.8% of sales, for the same period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund working capital
needs and to open new stores in connection with its expansion strategy. For the
26 weeks ended July 28, 1996 these capital requirements have generally been
satisfied by borrowings under the Revolving Credit Facility, cash and cash
equivalents at the beginning of the year and by cash flows from operations.
Cash flows generated by operating, investing and financing activities as
reported in the Consolidated Statements of Cash Flows for the 26 weeks ended
July 28, 1996 are summarized below. The net increase in cash and cash
equivalents for the 26 weeks ended July 28, 1996 was $6.4 million as compared to
a decrease of $12.4 million for the same period in the prior year.
Net cash provided by operations was $2.5 million for the 26 weeks ended July
28, 1996 as compared to net cash provided by operations of $10.9 million for the
same period in the prior year. Income
11
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
before depreciation and amortization for the 26 weeks ended July 28, 1996 was
$24.5 million. Depreciation and amortization expense resulted primarily from
leasehold improvements, store fixtures and goodwill. Depreciation expense is
expected to continue to increase in the future due to continued expansion and
new store openings such as those discussed below. In the other-net category,
accrued taxes other than income taxes increased primarily due to a seasonal
increase in accrued real estate taxes. These provisions of cash were offset by a
seasonal increase in inventory net of accounts payable of $6.0 million. In the
other-net category, accounts receivable and other current assets increased due
to build-up of construction allowances for self-developed stores opening in
1996. Income taxes payable decreased due to an estimated 1995 tax payment made
in March, 1996, and estimated 1996 federal and state tax payments made
periodically during the first half of the year.
Net cash used for investing was $29.5 million for the 26 weeks ended July
28, 1996, as compared to $29.9 million for the same period in the prior year.
Capital expenditures in the first 26 weeks of 1996 included $13.4 million of
expenditures associated with opening stores, of which $7.9 million was used for
the development of the seven stores opened in the first half of 1996, and $5.5
million was used for stores to be opened subsequent to the second quarter. The
remaining $6.3 million was used to refurbish certain existing stores and
purchase computer hardware and software for the corporate office. Other assets
and deferred charges increased by $9.8 million due primarily to the purchase of
a participation in a privately placed mortgage note secured by one of the
Company's stores, and the acquisition of leases of two future store locations.
Net cash provided by financing for the 26 weeks ended July 28, 1996 was
$33.4 million, as compared to $6.7 million for the same period in the prior
year. The increase for the first half of 1996 was comprised principally of
borrowings under the Company's Revolving Credit Facility.
Pursuant to the Company's rapid expansion program, the Company currently
plans to open between 25 and 26 stores in the second half of 1996, resulting in
a total of 32 to 33 new stores opened during the year and a year-end total of
168 to 169 stores. The Company currently plans to open at least 30 stores in
1997 and to begin implementation of a logistics program involving creation of a
network of regional distribution centers. Total capital expenditures in 1996 and
1997 are currently projected to be approximately $46 million and $50 million,
respectively, based on the assumption that substantially all of the new stores
opened in these years and the regional distribution centers will be financed
through operating leases. The Company's ability to finance these stores and
distribution centers in this manner will depend on the continued availability of
lease financing on acceptable terms. The Company continues to evaluate various
sources of financing its expansion. If the Company elects to obtain external
financing to enable it to acquire more of these stores and distribution centers,
projected capital expenditures would increase by approximately $4 to $6 million
for each additional store purchased and owned by the Company and by
approximately $15 million in 1997 for the regional distribution centers project.
12
<PAGE>
THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
The Company believes that anticipated cash flows from operations, borrowings
under the Revolving Credit Facility, operating leases from developers and
operating leases under the Operating Lease Facility will be sufficient to
satisfy its currently anticipated working capital and capital expenditure
requirements through the end of 1997. The Company's Revolving Credit Facility
currently provides for borrowings in a principal amount of $110 million at any
one time. As of September 5, 1996, the Company had borrowings of approximately
$42 million under the Revolving Credit Facility. The Operating Lease Facility
provides for funding of up to $50 million of property and improvements at any
one time. As of September 5, 1996, approximately $37 million was available under
the Operating Lease Facility.
The Company's working capital at July 28, 1996 was $83.5 million compared
with $98.7 million at July 23, 1995, a decrease of $15.2 million. This decrease
was primarily due to an increase in net borrowings of $25.5 million, as the
Company held $25.4 million less cash at the beginning of fiscal year 1996 as
compared to the beginning of fiscal year 1995. This was offset by an increase in
inventory net of trade payables of $12.9 million, caused by the Company's
opening of 33 stores since July 23, 1995.
SEASONALITY AND INFLATION
The Company's business is highly seasonal, with its highest sales and
operating profitability occurring in the fourth quarter, which includes the
holiday selling season. In fiscal 1995, 30.8% of the Company's sales and 57.0%
of its operating income occurred in the fourth quarter. The Company's expansion
program generally is weighted with store openings in the second half of the
fiscal year. In the future, changes in the number and timing of store openings
may change seasonality trends.
Management does not believe inflation had a material adverse effect on the
financial statements for the periods presented.
14
<PAGE>
THE SPORTS AUTHORITY, INC.
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of the Security Holders
At the Annual Meeting of Stockholders held on May 30, 1996, the
stockholders of the Company (i) elected Class II Directors (ii)
approved the 1996 Stock Option and Restricted Stock Plan and (iii)
ratified the appointment of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending January 26,
1997. The results of these votes were as follows:
<TABLE>
<CAPTION>
(i)
BROKER
DIRECTOR NOMINEES FOR WITHHELD NON-VOTES
----------------- --- -------- ---------
<S> <C> <C> <C>
Nicholas A. Buoniconti 15,848,797 28,124 0
Steve Dougherty 15,848,582 28,339 0
Harold Toppel 15,847,718 29,203 0
Other Directors whose term of office continued after the meeting
are as follows:
Class I Jack A. Smith
W. Mitt Romney
Class III Richard J. Lynch, Jr.
Carol Farmer
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
(ii) 1996 Stock Option and
Restricted Stock Plan 14,417,770 252,882 15,021 1,191,248
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
(iii) Ratification of Accountants 15,864,077 7,726 3,017 2,101
</TABLE>
14
<PAGE>
THE SPORTS AUTHORITY, INC.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
See Exhibit index on Page 17
(b) Reports on Form 8-K:
None
15
<PAGE>
THE SPORTS AUTHORITY, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SPORTS AUTHORITY, INC.
Date: September 9, 1996 By: /S/ RICHARD J. LYNCH, JR.
-------------------------
Richard J. Lynch, Jr.
President, Chief Operating Officer
and Director
Date: September 9, 1996 By: /S/ ANTHONY F. CRUDELE
----------------------
Anthony F. Crudele
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
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INDEX TO EXHIBITS
EXHIBITS
- --------
10.3 Management Stock Purchase Plan, as amended May 30, 1996
11.1 Computation of earnings per share
EXHIBIT 10.3
THE SPORTS AUTHORITY, INC.
MANAGEMENT STOCK PURCHASE PLAN
(as amended effective May 30, 1996)
1. PURPOSES; CONSTRUCTION.
The purposes of The Sports Authority, Inc. Management Stock
Purchase Plan (the "Plan") are to attract and retain highly-qualified
executives, to align executive and shareholder long-term interests by creating a
direct link between executive compensation and shareholder return and to enable
executives to develop and maintain a substantial stock ownership position in The
Sports Authority, Inc., to provide incentives to such executives to contribute
to the success of the Company's businesses. The provisions of the Plan are
intended to satisfy the requirements of Section 16(b) of the Securities Exchange
Act of 1934, as amended from time to time, and shall be interpreted in a manner
consistent with the requirements thereof, as now or hereafter construed,
interpreted and applied by regulations, rulings and cases.
2. DEFINITIONS.
As used in this Plan, the following words and phrases shall have
the meanings indicated:
(a) "Agreement" shall mean an agreement entered into
between the Company and a Participant in connection with a grant under the Plan.
(b) "Board" shall mean the Board of Directors of th
Company.
(c) "Annual Bonus" shall mean the bonus earned by a
Participant under the Annual Bonus Plan.
(d) "Annual Bonus Plan" shall mean The Sports
Authority, Inc. Annual Incentive Bonus Plan, as amended from time to time.
(e) "Cause" shall mean the Participant's fraud,
embezzlement, defalcation, gross negligence in the performance or nonperformance
of the optionee's duties (other than as a result of Disability) or material
failure or refusal to perform the optionee's duties at any time while in the
employ of the Company or a Subsidiary.
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(f) "Change in Control" shall mean the occurrence of
an event described in Article 7 hereof.
(g) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(h) "Committee" shall mean the Compensation
Committee of the Board.
(i) "Company" shall mean The Sports Authority, Inc.,
a corporation organized under the laws of the State of Delaware, or any
successor corporation.
(j) "Disability" shall mean a Participant's total
and permanent inability to perform his or her duties with the Company (as
defined by the Company immediately prior to the onset of the Disability) or any
of its affiliates by reason of any medically determinable physical or mental
impairment, as determined by a physician selected by the Participant and
acceptable to the Company.
(k) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time, and as now or hereafter
construed, interpreted and applied by regulations, rulings and cases.
(l) "Fair Market Value" per Share or Restricted
Share (or per share of any stock) shall mean the closing price on the NYSE
Composite Transactions Tape (or its equivalent if the Shares or relevant shares
are not traded on the New York Stock Exchange) of such Share, in the case of a
Share or Restricted Share (or for a share of the relevant stock, as the case may
be), for the trading day immediately prior to the relevant valuation date,
except that when a purchase of Restricted Shares is made in connection with the
initial public offering of the Shares, the "Fair Market Value" of a Share shall
be the initial public offering price less underwriting fees and commissions.
(m) "Participant" shall mean a person who is
eligible to receive a grant of Restricted Shares under Article 4 of the Plan and
does receive a grant of Restricted Shares under the Plan; all such grants are
sometimes referred to herein as purchases.
(n) "Plan" shall mean The Sports Authority, Inc.
Management Stock Purchase Plan, as amended from time to time.
2
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(o) "Restricted Period" shall have the meaning given
in Section 6(d) hereof.
(p) "Restricted Share" or "Restricted Shares" shall
mean the Shares purchased hereunder subject to restrictions.
(q) "Restricted Share Unit" or "Restricted Share
Units" shall have the meaning given in Section 6(h) hereof.
(r) "Rule 16b-3" shall mean Rule 16b-3, as in effect
from time to time, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act, including any successor to such Rule.
(s) "Section 16 Person" shall mean a Participant who
is subject to the reporting and short-swing liability provisions of Section 16
of the Exchange Act.
(t) "Shares" shall mean the common shares of the
Company, $.01 par value.
(u) "Stock Option Plan" shall mean The Sports
Authority, Inc. Stock Option Plan, as amended from time to time.
(v) "Subsidiary" shall mean any subsidiary of the
Company (whether or not a subsidiary at the date the Plan is adopted) which is
designated by the Committee or Board to participate in the Plan.
3. SHARES.
The maximum number of Shares which shall be reserved for the
purchase of Restricted Shares under the Plan shall be 314,647 Shares, which
number shall be subject to adjustment as provided in Article 8 hereof. Such
Shares may be either authorized but unissued Shares or Shares that shall have
been or may be reacquired by the Company.
If any outstanding Restricted Shares under the Plan should be
forfeited and reacquired by the Company, the Shares so forfeited shall (unless
the Plan shall have been terminated) again become available for use under the
Plan, to the extent permitted by Rule 16b-3.
4. ELIGIBILITY.
3
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All Company officers and such key employees of the Company and its
Subsidiaries as are designated as participants in the Company's Annual Bonus
Plan shall be Participants in this Plan. Each Participant is required to use at
least 20 percent of his or her Annual Bonus (less applicable payroll deductions,
which shall not include Federal income tax withholding) to purchase Restricted
Shares granted pursuant to, and subject to the terms and conditions of, this
Plan. At the election of any Participant, he or she may use up to 100 percent of
the Annual Bonus (less applicable payroll deductions, which shall not include
Federal income tax withholding) to purchase Restricted Shares granted pursuant
to, and subject to the terms and conditions of, this Plan. The amount of the
Annual Bonus used to purchase such Restricted Shares shall be calculated in
accordance with the Company's Annual Bonus Plan. Since the Restricted Shares are
"purchased" with part or all of the Annual Bonus, all Restricted Share grants
under this Plan are sometimes referred to herein as "purchases." Any election
described in this paragraph shall be made in accordance with rules established
by the Committee; provided, however, that any such election by a Section 16
Person must be made at least six months prior to the day the amount of the
Section 16 Person's Annual Bonus is finally determined under the Annual Bonus
Plan (except, in the Committee's discretion, an election as to the first Annual
Bonus under the Annual Bonus Plan).
Further, in connection with the initial public offering of the
Shares, the Committee may designate a Participant who is a key employee of the
Company or a Subsidiary as eligible to be given the one-time purchase
opportunity described in Article 5 hereof. In determining the individuals who
shall be so designated and size of the purchase opportunity to be given pursuant
to Article 5 hereof, the Committee shall take into account the duties of the
respective individuals, their present and potential contributions to the success
of the Company and/or the relevant Subsidiary, and such other factors as the
Committee shall deem relevant in connection with accomplishing the purposes of
the Plan.
Further, in connection with the initial public offering of the
Shares, each employee of the Company or a Subsidiary who, immediately prior to
the commencement of such initial public offering, holds restricted shares of
Kmart Corporation which have been earned under the Kmart Corporation Performance
Restricted Stock Plan shall become a Participant for the limited purpose of
having such restricted shares of Kmart Corporation replaced by Restricted Shares
pursuant to Section 6(i) hereof. The Restricted Shares so issued shall be
governed by the provisions of the Plan.
5. OPPORTUNITY FOR ONE-TIME PURCHASE OF SHARES.
4
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(a) UP TO $1 MILLION PURCHASE. Except as otherwise determined
by the Committee, in connection with the initial public offering of the Shares,
each Participant who is an officer or a key employee of the Company or a
Subsidiary and who is designated by the Committee shall be given a one-time
opportunity to use up to $1 million to purchase Restricted Shares.
(b) SOURCE OF FUNDS. Subject to any limitations imposed by the
Committee in its discretion, a Participant who is designated pursuant to Section
5(a) hereof may use one or more of the following as sources for funds to
purchase Restricted Shares: (1) up to 100 percent of his or her Annual Bonus
(less applicable payroll deductions, which shall not include Federal income tax
withholding) for the year in which the initial public offering occurs; (2) up to
100 percent of his or her base salary (less applicable payroll deductions, which
shall not include Federal income tax withholding) for the 12-month period
immediately following such initial public offering; (3) his or her own personal
funds; and (4) with respect to up to 50% of the Fair Market Value of the
Restricted Shares on the loan commitment date, any loan which the Committee may
advise such Participant is being made available by a third-party lender and
which the Participant obtains at the time of purchase (a "Share Loan"). If a
Share Loan provides part of the funds used to purchase Restricted Shares, the
Share Loan documents between the third-party lender and the Participant may
effectively alter certain rights of the Participant. For example, a failure to
maintain a certain value-to-loan ratio or a failure by the Participant to make
timely payments required by the Share Loan documents may affect the
Participant's rights to the Restricted Shares or the value thereof or rights
otherwise provided herein.
(c) TIME OF PAYMENT. A Participant shall make an initial
payment at the time of purchase, in cash (from the Participant's personal
funds), of the difference between the aggregate purchase cost of the Restricted
Shares and the sum of the portions of the Annual Bonus and salary which the
Participant has elected to apply to such purchase. Solely for the purpose of
calculating such initial cash payment, the product of multiplying the
Participant's Annual Bonus by the percentage thereof which the Participant has
elected to apply to such purchase shall be deemed to be equal to the product of
multiplying the Participant's targeted Annual Bonus by such percentage. At the
time the actual Annual Bonus for the year is paid, the Participant shall make an
additional payment, in cash, of any balance of the Restricted Share purchase
cost remaining after application of any percentage of the Annual Bonus elected
by the Participant at the time of purchase; any portion of his or her base
salary elected by the Participant at the time of purchase; and/or personal funds
paid at the time of purchase; and/or the proceeds of a Share Loan.
5
<PAGE>
(d) FAILURE TO PAY. Except as otherwise determined by the
Committee, if a Participant fails to make full payment in accordance with
Section 5(c) hereof for a purchase of Restricted Shares hereunder, the
Participant shall forfeit a percentage of such Restricted Shares determined by
dividing the amount payable but not so paid by the Participant on account of
such purchase by the total purchase cost. Fractional Shares shall be
disregarded.
(e) ASSOCIATED OPTION GRANT UNDER STOCK OPTION PLAN. For each
Share purchased pursuant to Section 5(a) hereof, the Participant shall be
granted an option under the Stock Option Plan to acquire a Share at the initial
offering price less underwriting fees and commissions; provided, however, that,
except as determined by the Committee in its discretion in unusual
circumstances, the number of options so granted may not exceed the number of
options for Shares otherwise granted to such Participant under the Stock Option
Plan in connection with the initial public offering of the Shares. An option
granted under the Stock Option Plan pursuant to this Section 5(e) shall become
exercisable no earlier than the date on which full and timely payment for the
related Restricted Share purchase hereunder has been made pursuant to Section
5(c) hereof and to the extent the Participant shall fail to make such full and
timely payment, a proportionate number of Shares underlying such option shall be
immediately forfeited.
6. RESTRICTED SHARES.
Each purchase of Restricted Shares under the Plan shall be
evidenced by a written Agreement between the Company and the Participant, in
such form as the Committee shall from time to time approve, and shall comply
with the following terms and conditions (and with such other terms and
conditions not inconsistent with the terms of this Plan as the Committee, in its
discretion, shall establish):
(a) NUMBER OF SHARES. Each Agreement shall state
the number of Restricted Shares to be purchased. Each Agreement shall also state
whether the Shares subject thereto are an optional purchase under Article 5
hereof, a mandatory purchase under Article 4 hereof, an optional purchase under
Article 4 hereof or a replacement of restricted shares of Kmart Corporation
under Section 6(i) hereof.
(b) PRICE. The price of each Restricted Share
purchased under the Plan (except Restricted Shares resulting from the
replacement of restricted shares of Kmart Corporation) shall be discounted 20
percent from its Fair Market Value.
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(c) RESTRICTIONS. Except as may be authorized by
the Committee in connection with any Share Loan, Restricted Shares may not be
sold, assigned, transferred, pledged, hypothecated or otherwise disposed of
(except by will or the applicable laws of descent and distribution) during the
Restricted Period. The Committee may also impose such other restrictions and
conditions on the Restricted Shares as it deems appropriate. Upon the issuance
of Restricted Shares, either (i) a share certificate or certificates
representing such Restricted Shares shall be registered in the Participant's
name, shall bear an appropriate legend referring to the restrictions applicable
thereto, and shall be held in custody by an escrow agent appointed by the
Committee for the account of the Participant, or (ii) the Company's share
transfer agent or other designee shall credit such Restricted Shares to the
Participant's Restricted Shares account, which Shares shall be subject to the
restrictions applicable thereto under the Plan. Any attempt to dispose of any
such Shares in contravention of such restrictions shall be null and void and
without effect.
(d) RESTRICTED PERIOD. Subject to Sections 6(h)
and 6(i) hereof and subject to such exceptions as may be determined by the
Committee in its discretion, the Restricted Period for Restricted Shares
purchased under the Plan shall be three years from the date of purchase. For
purposes of calculating the Restricted Period, (i) the date of purchase with
respect to the one-time purchase opportunity shall be deemed to be the date a
Participant's decision to purchase becomes irrevocable, and (ii) the date of
purchase with respect to annual purchases shall be deemed to be the date the
Annual Bonus is payable.
(e) TERMINATION OF EMPLOYMENT DURING RESTRICTED
PERIOD. Except as provided in this paragraph or in Section 6(g) hereof, if
during the Restricted Period a Participant's employment is terminated (either
(i) for Cause by the Company or a Subsidiary or (ii) for any reason by the
Participant), the Participant shall receive unrestricted Shares, having a Fair
Market Value (or cash, in the discretion of the Committee) equal to the lesser
in value of (i) the then-current Fair Market Value of all Restricted Shares
purchased under the Plan and held by the Participant or (ii) the aggregate
purchase cost to the Participant of all Restricted Shares held by the
Participant. Any additional value shall be forfeited.
If, during a Restricted Period, a Participant's
employment is terminated by the Company or a Subsidiary without Cause, the
Participant shall receive unrestricted Shares having a Fair Market Value (or
cash, in the discretion of the Committee) equal to (i) the then-current Fair
Market Value of a percentage of his or her Restricted Shares, such percentage to
be computed by multiplying the number of Restricted
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Shares purchased under the Plan by the Participant to which such Restricted
Period applies by a fraction, the numerator of which is the number of months of
employment completed during the applicable Restricted Period and the denominator
of which is thirty-six (36), plus (ii) as to the balance of such Restricted
Shares, the lesser of (x) the then-current Fair Market Value of such remaining
Restricted Shares or (y) the aggregate purchase cost to the Participant of such
remaining Restricted Shares. Any additional value shall be forfeited.
If the employment of a Participant holding Restricted Share Units
terminates during the Restricted Period relating to such Restricted Share Units,
they shall be treated in a manner substantially equivalent to the treatment of
Restricted Shares set forth above.
(f) OWNERSHIP. During the Restricted Period the
Participant shall possess all incidents of ownership of such Restricted Shares,
including the right to vote and to receive dividends with respect to such
Shares, subject to the restrictions and limitations described in this Article.
(g) ACCELERATED LAPSE OF RESTRICTIONS. Upon the
termination of a Participant's employment which either (i) occurs after the
Participant has attained the age of 65 years with at least ten years of
full-time service or (ii) results from the Participant's death or Disability, or
upon the occurrence of a Change in Control, all restrictions then outstanding
with respect to Restricted Shares purchased hereunder (or any related Restricted
Share Units) shall automatically expire and be of no further force and effect.
Additionally, the Committee shall have the authority (and the Agreement may so
provide) to cancel all or any portion of any outstanding restrictions prior to
the expiration of the Restricted Period with respect to any or all of the
Restricted Shares (or Restricted Share Units) on such terms and conditions as
the Committee shall deem appropriate.
(h) RESTRICTED SHARE UNITS. If, during the
Restricted Period relating to a Participant's Restricted Shares, the Committee
determines that the Company may lose its federal income tax deduction in
connection with the future lapsing of the restrictions on such Restricted Shares
because of the deductibility cap of Section 162(m) of the Code, the Committee,
in its discretion, may convert some or all of such Restricted Shares into an
equal number of Restricted Share Units, as to which payment will be postponed
until such time as the payment will not cause the Company to lose its federal
income tax deduction for such payment under Section 162(m). Until payment of the
Restricted Share Units is made, the Participant will be credited with dividend
equivalents on the Restricted Share Units, which dividend equivalents will be
converted
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into additional Restricted Share Units. When payment of any Restricted Share
Units is made, it will be made in unrestricted Shares, except as provided in
Section 6(e) hereof.
(1) REPLACEMENT OF KMART RESTRICTED SHARES. If an
employee of the Company or any Subsidiary holds restricted shares of Kmart
Corporation immediately prior to the date of the commencement of the initial
public offering of the Shares which have been earned under the Kmart Corporation
Performance Restricted Stock Plan, such restricted shares of Kmart Corporation
shall be replaced by Restricted Shares hereunder on such date, subject to
completion of such initial public offering. The number of replacement Restricted
Shares to be issued shall equal the quotient obtained by dividing the aggregate
Fair Market Value of such shares of Kmart Corporation on such date (without
regard to their restrictions) by the initial public offering price of a Share
(less underwriting fees and commissions), with any fractional Share being
disregarded. Such replacement grants shall be deemed a purchase of Restricted
Shares hereunder. The restrictions on the replacement Restricted Shares shall
lapse on the same date the restrictions were to lapse on the restricted shares
of Kmart Corporation. Except as otherwise specifically provided in this Section
6(i), the terms and conditions of the Restricted Shares shall be governed by the
provisions of this Plan.
7. CHANGE IN CONTROL OF THE COMPANY.
The first to occur of any of the following events shall be deemed
a Change in Control of the Company; provided, however, that in no event shall
the initial public offering of the Shares be deemed a Change in Control of the
Company for purposes of this Plan:
(i) the "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act) of securities representing more than 20%
of the combined voting power of the Company is acquired by any
"person," as defined in sections 13(d) and 14(d) of the Exchange Act
(other than Kmart Corporation, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as
their ownership of Shares of the Company, or any "person" acquiring
such securities in a sale or transfer by Kmart Corporation in a
transaction not involving a public offering), or
(ii) the shareholders of the Company approve a
definitive agreement to merge or consolidate the Company with or into
another corporation
9
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or to sell or otherwise dispose of all or substantially all of its
assets, or adopt a plan of liquidation, or
(iii) during any period of three consecutive years
beginning after the completion of the initial public offering of the
Shares, individuals who at the beginning of such period were members of
the Board cease for any reason to constitute at least a majority
thereof (unless the election, or the nomination for election by the
Company's shareholders, of each new director was approved by a vote of
at least a majority of the directors then still in office who were
directors at the beginning of such period or whose election or
nomination was previously so approved).
8. EFFECT OF CERTAIN CHANGES.
In the event of any extraordinary dividend, share dividend,
recapitalization, merger, consolidation, share split, warrant or rights
issuance, or combination or exchange of such shares, or other similar
transactions, the number of Shares available for purchase and the number of
outstanding Restricted Shares shall be equitably adjusted by the Committee to
reflect such event and preserve the value of such purchases and the Committee
may make such other adjustments to the terms of outstanding Restricted Shares as
it may deem equitable under the circumstances; provided, however, that any
fractional Shares resulting from such adjustment shall be eliminated.
9. PAYMENT OF WITHHOLDING TAXES.
The Committee shall have discretion to permit or require a
Participant, on such terms and conditions as it determines, to pay all or a
portion of any taxes arising in connection with a purchase of Restricted Shares
hereunder or the lapse of restrictions with respect thereto by having the
applicable employer withhold Shares or by the Participant's delivering other
Shares having a then-current Fair Market Value equal to the amount of taxes to
be withheld.
10. RIGHTS AS A SHAREHOLDER.
Except as provided in Section 6(f) hereof, a Participant shall
have no rights as a shareholder with respect to any Restricted Shares until the
date of the issuance of an unrestricted Share certificate to him or her for such
Shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or
10
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distribution of other rights for which the record date is prior to the date such
Share certificate is issued, except as provided in Article 8 hereof.
11. NO RIGHTS TO EMPLOYMENT.
Nothing in the Plan or in any grant or purchase made or Agreement
entered into pursuant hereto shall confer upon any Participant the right to
continue in the employ of the Company or any Subsidiary or to be entitled to any
remuneration or benefits not set forth in the Plan or such Agreement or to
interfere with, or limit in any way, the right of the Company or any Subsidiary
to terminate such Participant's employment. Purchases made under the Plan shall
not be affected by any change in duties or position of a Participant as long as
such Participant continues to be employed by the Company or any Subsidiary.
12. ADMINISTRATION.
Prior to completion of the initial public offering of the Shares,
the Plan shall be administered by the Board (which, during such period, shall
have all the powers given herein to the Committee). From and after the
completion of such offering, the Plan shall be administered by the Committee.
The Committee shall consist of two or more persons each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act.
The Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and
to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, to interpret the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of the Agreements (which need not be identical); and to make all
other determinations deemed necessary or advisable for the administration of the
Plan.
The Board shall fill all vacancies, however caused, in the
Committee. The Board may from time to time appoint additional members to the
Committee, and may at any time remove one or more Committee members and
substitute others. The Committee may appoint a chairperson and a secretary and
make such rules and regulations for the conduct of its business as it shall deem
advisable, and shall keep minutes of its meetings. The Committee shall hold its
meetings at such times and places as it shall deem advisable. All determinations
of the Committee shall be made by a majority of its members either present in
person or participating by conference telephone at a meeting or by unanimous
written consent. The Committee may delegate to one or more of its members or to
one or
11
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more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan. All decisions, determinations
and interpretations of the Committee shall be final and binding on all persons,
including the Company, the Participant (or any person claiming any rights under
the Plan from or through any Participant) and any shareholder.
No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any grant
hereunder.
13. AMENDMENT AND TERMINATION OF THE PLAN.
The Board at any time and from time to time may suspend,
terminate, modify or amend the Plan; provided, however, that an amendment which
requires shareholder approval in order for the Plan to continue to comply with
Rule 16b-3 or any other law, regulation or stock exchange requirement shall not
be effective unless approved by the requisite vote of shareholders. Except as
provided in Article 8 hereof, no suspension, termination, modification or
amendment of the Plan may adversely affect any purchase previously made, unless
the written consent of the Participant is obtained.
14. GOVERNING LAW.
The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Delaware
without giving effect to the choice of law principles thereof, except to the
extent that such law is preempted by federal law.
15. APPROVAL OF SHAREHOLDERS.
The Plan shall take effect upon its adoption by the Board but the
Plan (and any purchases made prior to the shareholder approval described in this
Article 15) shall be subject to the approval of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting of shareholders held in accordance with applicable law, which approval
must occur within twelve months of the date the Plan is adopted by the Board.
16. PERIOD DURING WHICH PURCHASES MAY BE MADE.
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Purchases may be made pursuant to the Plan from time to time until
December 31, 2004. No purchases shall be made thereafter. However, the
Restricted Period of Restricted Shares purchased hereunder prior to such date
(or related Restricted Share Units) may extend beyond such date, and the
provisions of the Plan shall continue to apply to such Restricted Shares (or
related Restricted Share Units).
17. CURTAILMENT OF FUTURE PARTICIPATION IN THE PLAN.
Notwithstanding anything else contained in the Plan, no additional
purchases of Restricted Shares shall be made under the Plan after May 30, 1996.
13
Exhibit 11.1
<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
13 WEEKS ENDED 26 WEEKS ENDED
JULY 28, JULY 23, JULY 28, JULY 23,
1996 1995 1996 1995
------------- ------------ ------------ ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Financial statement computations:
Income before income taxes $ 14,986 $ 12,048 $ 18,158 $ 14,975
Income tax expense 6,175 5,144 7,475 6,394
Minority interest (372) - (553) -
----------- ----------- ----------- -----------
Net income $ 9,183 $ 6,904 $ 11,236 $ 8,581
=========== =========== =========== ===========
Earnings per share:
Shares used in primary earnings per share computation:
Weighted average common shares outstanding 31,375 31,215 31,337 31,195
Net additional shares assuming options
exercised and proceeds used to purchase
treasury shares at average market price 794 152 572 99
----------- ----------- ----------- -----------
Common and common equivalent shares 32,169 31,367 31,909 31,294
=========== =========== =========== ===========
Earnings per share assuming primary dilution $ 0.29 $ 0.22 $ 0.35 $ 0.27
=========== =========== =========== ===========
Shares used in fully diluted earnings per share
computation:
Weighted average common shares outstanding 31,375 31,215 31,337 31,195
Net additional shares assuming options
exercised and proceeds used to purchase
treasury shares at higher of average market
price and period-end market price 818 373 762 373
----------- ----------- ----------- -----------
Common and common equivalent shares 32,193 31,588 32,099 31,568
=========== =========== =========== ===========
Earnings per share assuming full dilution $ 0.29 $ 0.22 $ 0.35 $ 0.27
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-26-1997
<PERIOD-START> JAN-29-1996
<PERIOD-END> JUL-28-1996
<CASH> 18,169
<SECURITIES> 0
<RECEIVABLES> 23,815
<ALLOWANCES> (1,392)
<INVENTORY> 273,004
<CURRENT-ASSETS> 352,511
<PP&E> 199,233
<DEPRECIATION> (56,354)
<TOTAL-ASSETS> 581,345
<CURRENT-LIABILITIES> 269,049
<BONDS> 0
0
0
<COMMON> 315
<OTHER-SE> 290,276
<TOTAL-LIABILITY-AND-EQUITY> 581,345
<SALES> 602,154
<TOTAL-REVENUES> 602,753
<CGS> 436,952
<TOTAL-COSTS> 436,952
<OTHER-EXPENSES> 146,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,078
<INCOME-PRETAX> 18,158
<INCOME-TAX> 7,475
<INCOME-CONTINUING> 19,236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,236
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
