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 October 26, 1997
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 December 5, 1997: 31,503,786
1
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<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
INDEX TO FORM 10-Q
PAGE NUMBER
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<S> <C>
Part I. FINANCIAL INFORMATION
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 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
INDEX TO EXHIBITS 16
</TABLE>
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share data)
<CAPTION>
13 WEEKS ENDED 39 WEEKS ENDED
OCTOBER 26, OCTOBER 27, OCTOBER 26, OCTOBER 27,
------------------------------ ---------------------------
1997 1996 1997 1996
------------- ------------ ------------ ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 340,896 $ 292,920 $ 1,043,992 $ 895,074
Licensee fees and rental income 267 224 951 823
----------- ----------- ------------- -----------
341,163 293,144 1,044,943 895,897
----------- ----------- ------------- -----------
Cost of merchandise sold, includes
buying and occupancy costs 241,800 209,758 747,883 646,710
Selling, general and administrative expenses 90,973 76,522 263,822 219,602
Pre-opening expense 3,875 3,217 5,926 5,720
Goodwill amortization 491 491 1,473 1,473
----------- ----------- ------------- -----------
Operating income 4,024 3,156 25,839 22,392
Interest:
Interest expense 1,968 1,226 5,934 2,698
Interest income (486) (768) (2,139) (1,162)
----------- ----------- ------------- -----------
Interest, net 1,482 458 3,795 1,536
----------- ----------- ------------- -----------
Income before income taxes 2,542 2,698 22,044 20,856
Income tax expense 1,352 1,225 9,306 8,700
Minority interest (821) (503) (1,432) (1,056)
----------- ----------- ------------- -----------
Net income $ 2,011 $ 1,976 $ 14,170 $ 13,212
=========== =========== ============= ===========
Earnings per common share and common
share equivalents $ 0.06 $ 0.06 $ 0.45 $ 0.41
=========== =========== ============= ===========
Weighted average common shares and common
share equivalents 31,888 32,001 31,838 31,797
=========== =========== ============= ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
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<TABLE>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
OCTOBER 26, JANUARY 26,
1997 1997
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,478 $ 109,645
Merchandise inventories 359,773 279,577
Accounts receivable and other current assets 45,053 34,809
Property held for resale - 21,080
----------- ------------
Total current assets 421,304 445,111
Net property owned 292,880 211,651
Other assets and deferred charges 48,143 44,762
Goodwill - net of accumulated amortization of
$15,131 and $13,659 respectively 51,274 52,746
----------- ------------
Total Assets $ 813,601 $ 754,270
=========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable - trade $ 170,614 $ 157,156
Accrued payroll and other liabilities 86,524 89,804
Short-term debt 31,572 5,043
Taxes other than income taxes 14,873 7,407
Income taxes 2,834 9,704
----------- ------------
Total current liabilities 306,417 269,114
Long-term debt 155,730 152,021
Other long-term liabilities 27,391 22,715
----------- ------------
Total liabilities 489,538 443,850
Minority interest (1,328) 103
Stockholders' equity:
Common stock, $.01 par value, 100,000 shares
authorized, 31,542 issued 315 315
Additional paid-in-capital 246,596 245,621
Deferred compensation and receivables from officers (1,659) (2,177)
Retained earnings 81,203 67,033
Treasury stock, 49 shares (495) (381)
Cumulative translation adjustment (569) (94)
----------- ------------
Total stockholders' equity 325,391 310,317
----------- ------------
Total Liabilities and Stockholders' Equity $ 813,601 $ 754,270
=========== ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
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<TABLE>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
39 WEEKS ENDED
------------------------------
OCTOBER 26, OCTOBER 27,
1997 1996
------------ -------------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATIONS
Net income $ 14,170 $ 13,212
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization 27,345 20,526
Cumulative translation adjustment (475) 295
Minority interest in net loss of Joint Venture (1,432) (1,056)
Loss on sale or disposal of property and equipment 52 3
Change in assets and liabilities:
Increase in other assets (5,224) (3,970)
Increase in long-term liabilities 3,676 3,437
Increase in inventories (80,196) (47,364)
Decrease(Increase) in property held for resale 20 (20)
Increase in accounts payable 13,458 14,942
Other - net (12,912) (13,886)
----------- ------------
Net cash used for operations (41,518) (13,881)
----------- ------------
INVESTING
Capital expenditures - owned property (85,062) (74,346)
Proceeds from sale of property and equipment 1,307 372
Other - net 149 (10,226)
----------- ------------
Net cash used for investing (83,606) (84,200)
----------- ------------
FINANCING
Short-term borrowings 26,529 -
Long-term borrowings 3,709 152,146
Proceeds from sale of stock 1,876 1,747
Purchase of treasury stock (114) -
Minority interest in equity of Joint Venture - 1,360
Debt issuance costs (43) (3,453)
----------- ------------
Net cash provided by financing 31,957 151,800
----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (93,167) 53,719
Cash and cash equivalents at beginning of year 109,645 11,785
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,478 $ 65,504
=========== ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
The Company transferred property held for resale of $21,060 to net property
owned in April 1997.
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
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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: ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (FAS 128) - Earnings per Share (EPS).
The statement is effective for financial statements issued for periods ending
after December 15, 1997. FAS 128 supersedes Accounting Principles Board Opinion
No. 15 and replaces primary and fully diluted EPS with basic and diluted EPS.
Basic EPS is computed by dividing net income by the weighted average common
shares outstanding. Diluted EPS includes all dilutive potential common shares.
The Company does not expect the new standard to have a material impact on
its financial position and results of operations for fiscal 1997.
The following illustrate the Company's Earnings per share had FAS 128 been
used in the 13 weeks and 39 weeks ended October 26, 1997:
<TABLE>
<CAPTION>
13 WEEKS ENDED 39 WEEKS ENDED
------------------------------ -----------------------------
OCTOBER 26, OCTOBER 27, OCTOBER 26, OCTOBER 27,
1997 1996 1997 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Earnings per share - Basic $ .06 $ .06 $ .45 $ .42
- Diluted .06 .06 .45 .41
</TABLE>
6
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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 39 WEEKS ENDED
------------------------------ -----------------------------
OCTOBER 26, OCTOBER 27, OCTOBER 26, OCTOBER 27,
1997 1996 1997 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of merchandise sold, includes
buying and occupancy costs 70.9 71.6 71.6 72.3
----------- ----------- ---------- ----------
Gross margin 29.1 28.4 28.4 27.7
Licensee fees and rental income 0.1 0.1 0.1 0.1
Selling, general and administrative expenses 26.7 26.1 25.3 24.5
Pre-opening expense 1.1 1.1 0.6 0.6
Goodwill amortization 0.2 0.2 0.1 0.2
----------- ----------- ---------- ----------
Operating income 1.2 1.1 2.5 2.5
Interest, net 0.4 0.2 0.4 0.2
----------- ----------- ---------- ----------
Income before income taxes 0.8 0.9 2.1 2.3
Income taxes 0.4 0.4 0.9 0.9
Minority interest (0.2) (0.2) (0.2) (0.1)
----------- ----------- ---------- ----------
Net income 0.6% 0.7% 1.4% 1.5%
=========== =========== ========== ==========
The following table sets forth the Company's store openings and closings for the
periods indicated.
13 WEEKS ENDED 39 WEEKS ENDED
------------------------------ -----------------------------
OCTOBER 26, OCTOBER 27, OCTOBER 26, OCTOBER 27,
1997 1996 1997 1996
------------- ------------ ------------ ------------
Beginning number of stores 174 143 168 136
Openings 11 7 17 14
Closings - - - -
----------- ----------- ----------- ----------
Ending number of stores 185 150 185 150
=========== =========== =========== ==========
</TABLE>
7
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THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
13 WEEKS ENDED OCTOBER 26, 1997 AND OCTOBER 27, 1996
Sales for the 13 weeks ended October 26, 1997 were $340.9 million, a $48.0
million, or 16.4%, increase over sales of $292.9 million for the same period in
the prior year. Of the 16.4% increase in sales, 10.1%, or $29.5 million, was
attributable to the inclusion of a full 13 weeks sales for the stores opened in
1996 which had no comparable store sales in the prior year and 8.2%, or $23.9
million, was attributable to the 17 new stores opened in the first 39 weeks of
1997. These increases were partially offset by a 1.9%, or $5.4 million, decrease
in comparable store sales growth. The comparable store sales decrease in the
third quarter of 1997 was due to declining sales in fitness equipment, as the
prior year's demand for abdominal exercisers has not continued in the current
year, athletic wear, in which Olympic merchandise sales in the prior year have
made comparisons in that category difficult, and in-line skates. These decreases
were partially offset by continued growth in the athletic footwear, team sports,
and golf categories. Excluding all or a portion of the third quarter of 1997
sales from 21 stores considered to be cannibalized by new store openings,
comparable store sales were flat in the third quarter of 1997. 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 October 26, 1997 was $241.8 million, or 70.9% of sales, as compared
to $209.8 million, or 71.6% of sales, for the same period in the prior year. As
a percent of sales, gross margin was 29.1% for 1997 and 28.4% for 1996. The
major components of cost of goods sold are merchandise costs and, to a lesser
extent, occupancy costs. For the 1997 period, merchandise costs decreased
primarily due to an increase in the purchase markon as the Company is selling a
larger proportion of higher margin products such as footwear and apparel.
Occupancy costs increased as a percent of sales due to lower initial sales
volumes for non-comparable stores opened subsequent to October 1996 as well as
higher minimum rentals for those stores due to openings in Japan and the New
York metropolitan area.
Selling, general and administrative (SG&A) expenses for the 13 weeks ended
October 26, 1997 were $91.0 million, or 26.7% of sales, as compared to $76.5
million, or 26.1% of sales, for the same period in the prior year. The 0.6% of
sales increase in SG&A expenses was attributable to ongoing expenses related to
opening our first regional distribution center as well as an increase in store
payroll and various store operating expenses as a percent of sales due to lower
sales volumes. In addition, depreciation expense increased as a result of
purchasing more stores and purchasing computer hardware and software for the
corporate office.
8
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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 October 26, 1997 was $3.9
million, or 1.1% of sales, as compared to $3.2 million, or 1.1% of sales, for
the same period in the prior year. Pre-opening expense increased $0.7 million
due primarily to the opening of 11 stores in the 1997 period versus seven stores
in the 1996 period. 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 October 26, 1997 was $4.0 million,
or 1.2% of sales, as compared to operating income of $3.2 million, or 1.1% of
sales, for the same period in the prior year. Operating income before
pre-opening expense and goodwill amortization was $8.4 million, or 2.5% of
sales, for the 13 weeks ended October 26, 1997, as compared to $6.9 million, or
2.3% of sales, for the same period in the prior year.
Interest, net for the 13 weeks ended October 26, 1997 was $1.5 million, or
0.4% of sales, as compared to $0.5 million, or 0.2% of sales, for the same
period in the prior year. The increase of $1.0 million was primarily
attributable to interest incurred under the Company's long-term convertible
debt, which was issued in September 1996.
Income tax expense for the 13 weeks ended October 26, 1997 was $1.4 million
with an effective tax rate of 53.2%, as compared to income tax expense of $1.2
million with an effective tax rate of 45.4% for the same period of 1996. The
increase in the effective tax rate was primarily due to the combined effects of
a higher corporate tax rate and a reduction in net loss in the Company's
Canadian subsidiary.
As a result of the foregoing factors, net income for the 13 weeks ended
October 26, 1997 was $2.0 million, or 0.6% of sales, as compared to net income
of $2.0 million, or 0.7% of sales, for the same period in the prior year.
9
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THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
39 WEEKS ENDED OCTOBER 26, 1997 AND OCTOBER 27, 1996
Sales for the 39 weeks ended October 26, 1997 were $1,044.0 million, a
$148.9 million, or 16.6%, increase over sales of $895.1 million for the same
period in the prior year. Of the 16.6% increase in sales, 14.1%, or $126.8
million, was attributable to the inclusion of a full 39 weeks of sales for the
stores opened in 1996 which had no comparable store sales in the prior year;
4.0%, or $35.5 million, was attributable to the 17 new stores opened in the
first 39 weeks of 1997. These increases were partially offset by a 1.5%, or
$13.4 million, decrease in comparable store sales growth. The comparable store
sales decrease in the first 39 weeks of 1997 was primarily the result of
declining sales in hardlines, specifically the outdoor categories of fishing and
camping, as well as fitness equipment, and athletic wear due to sales of Olympic
merchandise in the prior year. Excluding all or a portion of the first 39 weeks
of 1997 sales from 24 stores considered to be cannibalized by new store
openings, comparable store sales were flat in the first 39 weeks of 1997.
Cost of merchandise sold, including buying and occupancy costs, for the 39
weeks ended October 26, 1997 was $747.9 million, or 71.6% of sales, as compared
to $646.7 million, or 72.3% of sales, for the same period in the prior year. As
a percent of sales, gross margin was 28.4% for 1997 and 27.7% for 1996. The
major components of cost of goods sold are merchandise costs and, to a lesser
extent, occupancy costs. For the 1997 period, merchandise costs decreased
primarily due to an increase in the purchase markon as the Company is selling a
larger proportion of higher margin products such as footwear and apparel.
Occupancy costs increased as a percent of sales due to lower initial sales
volumes for non-comparable stores opened subsequent to July 1996 as well as
higher minimum rentals for those stores due to openings in Japan and the New
York metropolitan area.
SG&A expenses for the 39 weeks ended October 26, 1997 were $263.8 million,
or 25.3% of sales, as compared to $219.6 million, or 24.5% of sales, for the
same period in the prior year. The 0.8% of sales increase in SG&A expenses was
attributable to an increase in store payroll and various store operating
expenses as a percent of sales due to lower sales volumes, expenses related to
the Company's logistics project, and an increase in depreciation expense as a
result of purchasing more stores and purchasing computer hardware and software
for the corporate office.
10
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THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Pre-opening expense for the 39 weeks ended October 26, 1997 was $5.9
million, or 0.6% of sales, as compared to $5.7 million, or 0.6% of sales, for
the same period in the prior year. Pre-opening expense increased only $0.2
million despite opening 17 stores in the 1997 period versus 14 stores in the
1996 period. The decrease in pre-opening expenses on a per store basis is due
primarily to higher pre-opening occupancy expenses in the prior year as a result
of assuming existing lease obligations in three stores.
Operating income for the 39 weeks ended October 26, 1997 was $25.8 million
or 2.5% of sales, as compared to operating income of $22.4 million, or 2.5% of
sales, for the same period in the prior year. Operating income before
pre-opening expense and goodwill amortization was $33.2 million, or 3.2% of
sales, for the 39 weeks ended October 26, 1997, as compared to $29.6 million, or
3.3% of sales, for the same period in the prior year.
Interest, net for the 39 weeks ended October 26, 1997 was $3.8 million, or
0.4% of sales, as compared to $1.5 million, or 0.2% of sales, for the same
period in the prior year. The increase of $2.3 million was primarily
attributable to interest incurred under the Company's long-term convertible
debt. The increase in interest expense is partially offset by an increase in
interest income resulting from short-term investments, a note receivable from a
developer and a participation in a privately placed mortgage note secured by a
store lease.
Income tax expense for the 39 weeks ended October 26, 1997 was $9.3 million
with an effective tax rate of 42.2%, as compared to income tax expense of $8.7
million with an effective tax rate of 41.7% for the same period of 1996. The
increase in the effective tax rate was primarily due to the combined effects of
a higher corporate tax rate and a reduction in net loss in the Company's
Canadian subsidiary.
As a result of the foregoing factors, net income for the 39 weeks ended
October 26, 1997 was $14.2 million, or 1.4% of sales, as compared to net income
of $13.2 million, or 1.5% 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
39 weeks ended October 26, 1997 these capital requirements have generally been
satisfied by cash and cash equivalents at the beginning of the year.
11
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THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Cash flows generated by operating, investing and financing activities as
reported in the Consolidated Statements of Cash Flows for the 39 weeks ended
October 26, 1997 are summarized below. The net decrease in cash and cash
equivalents for the 39 weeks ended October 26, 1997 was $93.2 million as
compared to an increase of $53.7 million for the same period in the prior year.
Net cash used for operations was $41.5 million for the 39 weeks ended
October 26, 1997 as compared to $13.9 million for the same period in the prior
year. Inventory net of accounts payable increased $66.7 million due to a
seasonal increase in inventory levels as well as an increase in the number of
stores. In the other-net category, income taxes payable decreased due to an
estimated 1996 tax payment made in April 1997, as well as estimated 1997 federal
and state tax payments made periodically during the first 39 weeks of the year.
These uses of cash were offset by income before depreciation and amortization of
$41.5 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. Accrued taxes other than
income taxes increased as a result of seasonally high accruals in real estate
and personal property taxes.
Net cash used for investing was $83.6 million for the 39 weeks ended October
26, 1997, as compared to $84.2 million for the same period in the prior year.
Capital expenditures in the first 39 weeks of 1997 included $60.9 million of
expenditures associated with opening stores, of which $31.5 million was used for
the development of the 17 stores opened in the first 39 weeks, and $29.4 million
was used for stores to be opened subsequent to the third quarter. The remaining
$24.2 million includes $9.9 million for capital expenditures related to the
Company's logistics project as well as $14.3 million in expenditures to
refurbish certain existing stores and purchase computer hardware and software
for the corporate office.
Net cash provided by financing for the 39 weeks ended October 26, 1997 was
$32.0 million, as compared to $151.8 million for the same period in the prior
year. The increase for the first 39 weeks of 1997 was comprised principally of
short-term borrowings of the Company's joint venture in Japan and the Company's
borrowings under its Revolving Credit Facility.
The Company's working capital at October 26, 1997 was $114.9 million
compared with $181.9 million at October 27, 1996, a decrease of $67.0 million.
This decrease was primarily due to a decrease in cash of $49.0 million and an
increase in short-term debt of $31.6 million. The prior year cash balance of
$65.5 million was residual cash from the long-term convertible debt issuance in
September 1996. Short-term debt did not have a balance in the prior year as a
portion of the proceeds of the convertible debt were used to pay off the
remaining short-term debt.
12
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THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Pursuant to the Company's rapid expansion program, the Company currently
plans to open 31 stores in 1997. Since the Company has decided to acquire,
develop and own a number of its new stores, and implement a logistics program
involving creation of a network of regional distribution centers, the Company
expects that its capital expenditures will be approximately $110 million in
1997. The Company will continue to finance a certain number of its new stores
with operating leases, assuming availability and appropriate terms. To the
extent stores are not financed with operating leases, capital expenditures will
be higher by approximately $4 million to $8 million per location.
The Company's Revolving Credit Facility, which expires April 27, 1998,
provides for borrowings in a principal amount of $100 million at any one time,
and another credit facility which expires on the same date provides for
borrowings in a principal amount of $10 million at any one time. The Company is
in the process of finalizing amendments to these facilities which would extend
their terms to April 26, 1999 and which would increase the maximum principal
amount of borrowings under the Revolving Credit Facility to $150 million. The
Company anticipates that these amendments will be executed in December 1997. As
of October 26, 1997, the Company had $15.8 million in borrowings under the
Revolving Credit Facility.
Mega Sports, the Company's 51% owned joint venture in Japan, provides its
own financing with a series of term loans with multiple Japanese banks. As of
October 26, 1997, Mega Sports had a balance of $15.8 million in short-term debt
and $6.2 million in long-term debt.
The Company believes that anticipated cash flows from operations, borrowings
under the Revolving Credit Facility (as extended) and by Mega Sports, operating
leases from developers and the remaining proceeds from the $149.5 million of
convertible debt issued in September 1996 will be sufficient to satisfy its
currently anticipated working capital and capital expenditure requirements
through the next 12 months. The Company continues to evaluate various sources of
financing for its expansion, and may seek to raise additional funds through debt
or equity-related offerings, or through an additional commercial bank debt
arrangement.
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 1996, 29.6% of the Company's sales and 55.4%
of its operating income occurred in the fourth quarter. The Company's expansion
program generally is weighted toward store openings in the second half of the
fiscal year. In the future, changes in the number and timing of store openings
and consumer buying habits, particularly in the holiday selling season, may
change seasonality trends. Management does not believe inflation had a material
effect on the financial statements for the periods presented.
13
<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 16
(b) Reports on Form 8-K:
None
14
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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: December 5, 1997 By: /S/ ANTHONY F. CRUDELE
----------------------
Anthony F. Crudele
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.1 Management Stock Purchase Plan, as amended
11.1 Computation of earnings per share
27 Financial Data Schedule
16
EXHIBIT 10.1
THE SPORTS AUTHORITY, INC.
MANAGEMENT STOCK PURCHASE PLAN
(AS AMENDED EFFECTIVE AUGUST 22, 1997)
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 compen sation 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 provi sions 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 the 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.
1
<PAGE>
(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.
(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 corpora tion
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 imme diately prior to the onset of the Disability) or any of its
affiliates by reason of any medi cally 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 Ex change) 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 Restrict ed 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
<PAGE>
(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 sub ject 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
<PAGE>
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 pursu ant
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 accor dance 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 ac count 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
<PAGE>
(a) UP TO $1 MILLION PURCHASE. Except as otherwise determined by the
Committee, in connection with the initial public offering of the Shares, each
Partici pant 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 appli cable 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 per sonal
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 Par ticipant 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 pay ments 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 be tween 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
per centage 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 Re
stricted 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
Com mittee 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.
6
<PAGE>
(c) RESTRICTIONS. Except as may be authorized by the Committee in
connection with any Share Loan, Restricted Shares may not be sold, as signed,
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; provided, however, that the
Restricted Period for Restricted Shares purchased under Section 5 of the Plan in
connection with the initial public offering of the Shares shall terminate on
January 15, 1998. 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 re ceive 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 Re stricted 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 addi tional
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 Commit-
7
<PAGE>
tee) equal to (i) the then-current Fair Market Value of a percentage of his or
her Re stricted Shares, such percentage to be computed by multiplying the number
of Restricted 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-cur rent 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 re strictions 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
8
<PAGE>
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 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 restric tions 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
9
<PAGE>
(ii) the shareholders of the Company approve a
definitive agreement to merge or consolidate the Company with or into
another corporation 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
10
<PAGE>
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distribution of other rights for which the record date is prior to
the date such Share certifi cate 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 "Non-Employee Director"
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 identi cal); 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
11
<PAGE>
written consent. The Committee may delegate to one or more of its members or to
one or 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 pres ent, 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.
12
<PAGE>
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>
THE SPORTS AUTHORITY, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<CAPTION>
13 WEEKS ENDED 39 WEEKS ENDED
------------------------------ -----------------------------
OCTOBER 26, OCTOBER 27, OCTOBER 26, OCTOBER 27,
1997 1996 1997 1996
------------- ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Financial statement computations:
Income before income taxes $ 2,542 $ 2,698 $ 22,044 $ 20,856
Income tax expense 1,352 1,225 9,306 8,700
Minority interest (821) (503) (1,432) (1,056)
----------- ----------- ----------- -----------
Net income $ 2,011 $ 1,976 $ 14,170 $ 13,212
=========== =========== =========== ===========
Earnings per share:
Shares used in primary earnings per share
computation:
Weighted average common shares outstanding 31,559 31,443 31,512 31,372
Net additional shares assuming options
exercised and proceeds used to purchase
treasury shares at average market price 329 558 326 425
----------- ----------- ----------- -----------
Common and common share equivalents 31,888 32,001 31,838 31,797
=========== =========== =========== ===========
Earnings per share assuming primary dilution $ 0.06 $ 0.06 $ 0.45 $ 0.41
=========== =========== =========== ===========
Shares used in fully diluted earnings per share
computation: (1)
Weighted average common shares outstanding 31,559 31,443 31,512 31,372
Net additional shares assuming options
exercised and proceeds used to purchase
treasury shares at higher of average market
price and period-end market price 364 575 376 547
----------- ----------- ----------- -----------
Common and common share equivalents 31,923 32,018 31,888 31,919
=========== =========== =========== ===========
Earnings per share assuming full dilution $ 0.06 $ 0.06 $ 0.44 $ 0.41
=========== =========== =========== ===========
</TABLE>
(1)The calculation of fully diluted earnings per share for the 13 and 39 weeks
ended October 26, 1997 excludes convertible shares under the Company's 5.25%
Convertible Subordinated Notes because they have an antidilutive effect.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-25-1998
<PERIOD-START> JAN-27-1997
<PERIOD-END> OCT-26-1997
<CASH> 16,478
<SECURITIES> 0
<RECEIVABLES> 45,053
<ALLOWANCES> (810)
<INVENTORY> 359,773
<CURRENT-ASSETS> 421,304
<PP&E> 385,314
<DEPRECIATION> (92,434)
<TOTAL-ASSETS> 813,601
<CURRENT-LIABILITIES> 306,417
<BONDS> 0
0
0
<COMMON> 315
<OTHER-SE> 325,076
<TOTAL-LIABILITY-AND-EQUITY> 813,601
<SALES> 1,043,992
<TOTAL-REVENUES> 1,044,943
<CGS> 747,883
<TOTAL-COSTS> 747,883
<OTHER-EXPENSES> 271,221
<LOSS-PROVISION> 0
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<INCOME-TAX> 9,306
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<EPS-PRIMARY> 0.45
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</TABLE>
