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 27, 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 September 5, 1997: 31,556,839
1
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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 4. Submission of Matters to a Vote of the Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
INDEX TO EXHIBITS 17
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2
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<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share data)
13 WEEKS ENDED 26 WEEKS ENDED
------------------------------ ----------------------------
JULY 27, JULY 28, JULY 27, JULY 28,
1997 1996 1997 1996
-------------- ----------- ------------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 383,294 $ 331,596 $ 703,096 $ 602,154
Licensee fees and rental income 19 21 684 599
-------------- ----------- ------------- -----------
383,313 331,617 703,780 602,753
-------------- ----------- ------------- -----------
Cost of merchandise sold, includes
buying and occupancy costs 274,734 239,858 506,083 436,952
Selling, general and administrative expenses 90,022 73,869 172,849 143,080
Pre-opening expense 1,165 1,871 2,051 2,503
Goodwill amortization 491 491 982 982
-------------- ----------- ------------- -----------
Operating income 16,901 15,528 21,815 19,236
Interest:
Interest expense 1,787 786 3,966 1,472
Interest income (646) (244) (1,653) (394)
-------------- ----------- ------------- -----------
Interest, net 1,141 542 2,313 1,078
-------------- ----------- ------------- -----------
Income before income taxes 15,760 14,986 19,502 18,158
Income tax expense 6,446 6,175 7,954 7,475
Minority interest (241) (372) (611) (553)
-------------- ----------- ------------- -----------
Net income $ 9,555 $ 9,183 $ 12,159 $ 11,236
============== =========== ============= ===========
Earnings per common share and common
share equivalents $ 0.30 $ 0.29 $ 0.38 $ 0.35
============== =========== ============= ===========
Weighted average common shares and common
share equivalents 31,816 31,851 31,814 31,680
============== =========== ============= ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
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<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
JULY 27, JANUARY 26,
1997 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 49,993 $ 109,645
Merchandise inventories 333,481 279,577
Accounts receivable and other current assets 32,779 34,809
Property held for resale - 21,080
------------ ------------
Total current assets 416,253 445,111
Net property owned 276,035 211,651
Other assets and deferred charges 47,653 44,762
Goodwill - net of accumulated amortization of
$14,641 and $13,659 respectively 51,764 52,746
------------ ------------
Total Assets $ 791,705 $ 754,270
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable - trade $ 178,782 $ 157,156
Accrued payroll and other liabilities 79,189 89,804
Short-term debt 14,673 5,043
Taxes other than income taxes 14,051 7,407
Income taxes 4,164 9,704
------------ ------------
Total current liabilities 290,859 269,114
Long-term debt 152,773 152,021
Other long-term liabilities 25,124 22,715
------------ ------------
Total liabilities 468,756 443,850
Minority interest (507) 103
Stockholders' equity:
Common stock, $.01 par value, 100,000 shares
authorized, 31,581 issued 316 315
Additional paid-in-capital 246,770 245,621
Deferred compensation and receivables from officers (1,881) (2,177)
Retained earnings 79,192 67,033
Treasury stock, 39 shares (381) (381)
Cumulative translation adjustment (560) (94)
------------ ------------
Total stockholders' equity 324,456 310,317
------------ ------------
Total Liabilities and Stockholders' Equity $ 791,705 $ 754,270
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
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<CAPTION>
THE SPORTS AUTHORITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
26 WEEKS ENDED
---------------------------
JULY 27, JULY 28,
1997 1996
----------- ----------
(Unaudited)
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATIONS
Net income $ 12,159 $ 11,236
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization 17,816 13,245
Cumulative translation adjustment (466) 38
Minority interest in net loss of Joint Venture (610) (553)
Loss on sale or disposal of property and equipment 44 34
Increase in other assets (4,287) (64)
Increase in long-term liabilities 2,409 2,524
Cash provided by (used for) current assets and liabilities:
Increase in inventories (53,904) (24,697)
(Increase) decrease in property held for resale 20 (20)
Increase in accounts payable 21,627 18,690
Other - net (7,470) (17,930)
----------- ----------
Net cash provided by (used for) operations (12,662) 2,503
----------- ----------
INVESTING
Capital expenditures - owned property (58,626) (19,710)
Proceeds from sale of property and equipment 10 -
Other - net 254 (9,738)
----------- ----------
Net cash used for investing (58,362) (29,448)
----------- ----------
FINANCING
Short-term borrowings 9,630 30,371
Long-term borrowings 752 -
Proceeds from sale of stock 1,033 1,539
Minority interest in equity of Joint Venture - 1,360
Debt issuance costs (43) -
----------- ----------
Net cash provided by financing 11,372 33,270
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (59,652) 6,325
Cash and cash equivalents at beginning of year 109,645 11,785
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 49,993 $ 18,110
=========== ==========
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 26 weeks ended July 27, 1997:
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
------------------------------ ------------------------------
JULY 27, JULY 28, JULY 27, JULY 28,
1997 1996 1997 1996
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Earnings per share - Basic $ .30 $ .29 $ .39 $ .36
- Diluted .30 .29 .38 .35
</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 26 WEEKS ENDED
------------------------------ -----------------------------
JULY 27, JULY 28, JULY 27, JULY 28,
1997 1996 1997 1996
------------ ------------ ----------- -----------
<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 71.7 72.3 72.0 72.6
----------- ----------- ---------- ----------
Gross margin 28.3 27.7 28.1 27.5
Selling, general and administrative expenses 23.5 22.3 24.6 23.8
Pre-opening expense 0.3 0.6 0.3 0.4
Goodwill amortization 0.1 0.1 0.1 0.1
----------- ----------- ---------- ----------
Operating income 4.4 4.7 3.1 3.2
Interest, net 0.3 0.2 0.3 0.2
----------- ----------- ---------- ----------
Income before income taxes 4.1 4.5 2.8 3.0
Income taxes 1.7 1.8 1.2 1.2
Minority interest (0.1) (0.1) (0.1) (0.1)
----------- ----------- ---------- ----------
Net income 2.5% 2.8% 1.7% 1.9%
=========== =========== ========== ==========
</TABLE>
The following table sets forth the Company's store openings and closings for the
periods indicated.
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
------------------------------ -----------------------------
JULY 27, JULY 28, JULY 27, JULY 28,
1997 1996 1997 1996
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Beginning number of stores 171 138 168 136
Openings 3 5 6 7
Closings - - - -
----------- ----------- ----------- ----------
Ending number of stores 174 143 174 143
=========== =========== =========== ==========
</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 JULY 27, 1997 AND JULY 28, 1996
Sales for the 13 weeks ended July 27, 1997 were $383.3 million, a $51.7
million, or 15.6%, increase over sales of $331.6 million for the same period in
the prior year. Of the 15.6% increase in sales, 14.4%, or $47.5 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 3.0%, or $10.1
million, was attributable to the six new stores opened in the first half of
1997. These increases were partially offset by a 1.8%, or $5.9 million, decrease
in comparable store sales growth. The comparable store sales decrease in the
second 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, and athletic wear, in which Olympic merchandise sales in the prior year
have made comparisons in that category difficult. In addition, comparable sales
in the footwear category decreased due to declining sales in the in-line skate
category. These decreases were partially offset by continued growth in the
athletic footwear, team sports, and golf categories. Excluding all or a portion
of the second quarter of 1997 sales from 16 stores considered to be cannibalized
by new store openings, comparable store sales were flat in the second 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 July 27, 1997 was $274.7 million, or 71.7% of sales, as compared to
$239.9 million, or 72.3% of sales, for the same period in the prior year. As a
percent of sales, gross margin was 28.3% 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.
Selling, general and administrative (SG&A) expenses for the 13 weeks ended
July 27, 1997 were $90.0 million, or 23.5% of sales, as compared to $73.9
million, or 22.3% of sales, for the same period in the prior year. The 1.2% 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 as well as an increase in depreciation expense 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 July 27, 1997 was $1.2 million,
or 0.3% of sales, as compared to $1.9 million, or 0.6% of sales, for the same
period in the prior year. Pre-opening expense decreased $0.7 million due to the
opening of three stores in the 1997 period versus five 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 July 27, 1997 was $16.9 million, or
4.4% of sales, as compared to operating income of $15.5 million, or 4.7% of
sales, for the same period in the prior year. Operating income before
pre-opening expense and goodwill amortization was $18.6 million, or 4.8% of
sales, for the 13 weeks ended July 27, 1997, as compared to $17.9 million, or
5.4% of sales, for the same period in the prior year.
Interest, net for the 13 weeks ended July 27, 1997 was $1.1 million, or 0.3%
of sales, as compared to $0.5 million, or 0.2% of sales, for the same period in
the prior year. The increase of $0.6 million was primarily attributable to
interest incurred under the Company's long-term convertible debt issuance in
September 1996. The interest expense is partially offset by interest income 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 13 weeks ended July 27, 1997 was $6.4 million
with an effective tax rate of 40.9%, as compared to income tax expense of $6.2
million with an effective tax rate of 41.2% for the same period of 1996. The
decrease in the effective tax rate was primarily due to a decrease in the
valuation allowance related to the Company's joint venture in Japan.
As a result of the foregoing factors, net income for the 13 weeks ended July
27, 1997 was $9.6 million, or 2.5% of sales, as compared to net income of $9.2
million, or 2.8% 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
26 WEEKS ENDED JULY 27, 1997 AND JULY 28, 1996
Sales for the 26 weeks ended July 27, 1997 were $703.1 million, a $100.9
million, or 16.8%, increase over sales of $602.2 million for the same period in
the prior year. Of the 16.8% increase in sales, 16.2%, or $97.3 million, was
attributable to the inclusion of a full 26 weeks of sales for the stores opened
in 1996 which had no comparable store sales in the prior year; 1.9%, or $11.6
million, was attributable to the six new stores opened in the first half of
1997. These increases were partially offset by a 1.3%, or $8.0 million, decrease
in comparable store sales growth. The comparable store sales decrease in the
first half of 1997 was primarily the result of declining sales in hardlines,
specifically the outdoor categories of fishing and marine, 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 half of 1997 sales from 16 stores
considered to be cannibalized by new store openings, comparable store sales
increased 0.5% in the first half 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 26
weeks ended July 27, 1997 was $506.1 million, or 72.0% of sales, as compared to
$437.0 million, or 72.6% of sales, for the same period in the prior year. As a
percent of sales, gross margin was 28.1% for 1997 and 27.5% 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 26 weeks ended July 27, 1997 were $172.8 million, or
24.6% of sales, as compared to $143.1 million, or 23.8% 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. This was partially offset by a decrease in advertising
expense as a percent of sales due to leveraging of advertising expenses as the
Company continues to backfill in existing multiple store markets.
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 26 weeks ended July 27, 1997 was $2.1 million,
or 0.3% of sales, as compared to $2.5 million, or 0.4% of sales, for the same
period in the prior year. Pre-opening expense decreased $0.4 million due to the
openings of six stores in the 1997 period versus seven stores in the 1996
period. Pre-openings expenses consist principally of store payroll expense for
associate training and store preparation prior to a store opening, as well as
grand-opening advertising expenditures.
Operating income for the 26 weeks ended July 27, 1997 was $21.8 million or
3.1% of sales, as compared to operating income of $19.2 million, or 3.2% of
sales, for the same period in the prior year. Operating income before
pre-opening expense and goodwill amortization was $24.8 million, or 3.5% of
sales, for the 26 weeks ended July 27, 1997, as compared to $22.7 million, or
3.8% of sales, for the same period in the prior year.
Interest, net for the 26 weeks ended July 27, 1997 was $2.3 million, or 0.3%
of sales, as compared to $1.1 million, or 0.2% of sales, for the same period in
the prior year. The increase of $1.2 million was primarily attributable to
interest incurred under the Company's long-term convertible debt issuance in
September 1996. The interest expense is partially offset by interest income 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 26 weeks ended July 27, 1997 was $8.0 million
with an effective tax rate of 40.8%, as compared to income tax expense of $7.5
million with an effective tax rate of 41.2% for the same period of 1996. The
decrease in the effective tax rate was primarily due to 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 1996 to the first
half of 1997. This was partially offset by the tax rate differential related to
the Company's Canadian subsidiary.
As a result of the foregoing factors, net income for the 26 weeks ended July
27, 1997 was $12.2 million, or 1.7% of sales, as compared to net income of $11.2
million, or 1.9% 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 27, 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 26 weeks ended
July 27, 1997 are summarized below. The net decrease in cash and cash
equivalents for the 26 weeks ended July 27, 1997 was $59.7 million as compared
to an increase of $6.3 million for the same period in the prior year.
Net cash used for operations was $12.2 million for the 26 weeks ended July
27, 1997 as compared to net cash provided by operations of $2.5 million for the
same period in the prior year. Inventory net of accounts payable increased $32.3
million due to a seasonal increase in inventory levels. In the other-net
category, accrued payroll and other liabilities decreased, resulting from a
reduction in seasonally high year-end accruals, and income taxes payable
decreased due to an estimated 1996 tax payment made in April 1997, and estimated
1996 federal and state tax payments made periodically during the first half of
the year. These uses of cash were offset by income before depreciation and
amortization of $30.0 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.
Net cash used for investing was $58.4 million for the 26 weeks ended July
27, 1997, as compared to $29.4 million for the same period in the prior year.
Capital expenditures in the first 26 weeks of 1997 included $43.8 million of
expenditures associated with opening stores, of which $8.8 million was used for
the development of the six stores opened in the first half, and $35.0 million
was used for stores to be opened subsequent to the second quarter. The remaining
$14.8 million was used for capital expenditures related to the Company's
logistics project, to refurbish certain existing stores, and purchase computer
hardware and software for the corporate office.
Net cash provided by financing for the 26 weeks ended July 27, 1997 was
$11.4 million, as compared to $33.3 million for the same period in the prior
year. The increase for the first half of 1997 was comprised principally of
short-term borrowings of the Company's joint venture in Japan.
The Company's working capital at July 27, 1997 was $125.4 million compared
with $81.8 million at July 28, 1996, an increase of $43.6 million. This increase
was primarily due to an increase in cash of $31.9 million and a decrease in
short-term debt of $15.7 million, both variances the result of the Company's
convertible debt issuance in September 1996.
Pursuant to the Company's rapid expansion program, the Company currently
plans to open 31-34 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 $120 million in
1997. The Company will continue to finance a certain number of its new stores
with operating leases,
12
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THE SPORTS AUTHORITY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
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 believes that anticipated cash flows from operations, borrowings
under the Revolving Credit Facility, operating leases from developers and the
remaining proceeds from the convertible debt issuance 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. The Company's Revolving Credit Facility, which
expires April 26, 1998, currently provides for borrowings in a principal amount
of $110 million at any one time. As of September 5, 1997, the Company had no
borrowings under the Revolving Credit Facility.
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 4. Submission of Matters to a Vote of the Security Holders
At the Annual Meeting of Stockholders held on May 29, 1997, the
stockholders of the Company (I) elected three Class III Directors
and one Class I Director, (ii) approved the Amended and Restated
Director Stock Plan and (iii) ratified the appointment of Price
Waterhouse LLP as independent accountants for the Company for the
fiscal year ending January 25, 1998. The results of these votes
were as follows:
(i)
<TABLE>
<CAPTION>
BROKER
DIRECTOR NOMINEES FOR WITHHELD NON-VOTES
----------------- --- -------- ---------
<S> <C> <C> <C>
CLASS I
-------
Julius W. Erving 22,559,230 2,268,580 0
CLASS III
---------
Carol Farmer 18,161,509 6,666,301 0
Jack F. Kemp 22,553,289 2,274,441 0
Richard J. Lynch, Jr. 22,561,883 2,265,847 0
</TABLE>
Other Directors whose term of office continued after the meeting
are as follows:
Class I Jack A. Smith
W. Mitt Romney
Class II Nicholas A. Buoniconti
Steve Dougherty
Harold Toppel
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
<S> <C> <C> <C> <C>
(ii) Amended and Restated Director
Director Stock Plan 24,566,039 95,921 24,740 141,110
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
<S> <C> <C> <C> <C>
(iii) Ratification of Accountants 24,795,725 25,673 6,412 0
</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 19
(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 5, 1997 By: /S/ ANTHONY F. CRUDELE
----------------------
Anthony F. Crudele
Senior Vice President and
Chief Financial Officer
(Duly authorized signor and
Principal Financial and
Accounting Officer)
16
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Amended and Restated Bylaws of the Company, as amended.
10.1 Form of Change of Control Agreement between the Company and
Anthony F. Crudele dated May 30, 1997.
10.2 1996 Stock Option and Restricted Stock Plan, as amended.
10.3 Supplemental Executive Retirement Plan, as amended.
11.1 Computation of earnings per share
27 Financial Data Schedule
17
EXHIBIT 3.1
RESOLVED, that this Board of Directors hereby amends the Company's
Bylaws by adding the following as a new Section 5 of Article V:
"SECTION 5. GOVERNANCE COMMITTEE. The Board of Directors
may, by resolution passed by a majority of the entire Board of
Directors, designate a Governance Committee of the Board of Directors.
The Governance Committee shall consist of one or more members of the
Board, none of whom shall be an officer of the Corporation or any of its
subsidiaries. One member shall be designated as chairman by the Board.
The Committee shall perform such duties as the Board may prescribe."
Mr. Bubb also recommended that the Board amend Section 3 of Article V
of the Bylaws, which authorizes the Compensation Committee, to reflect the
recent amendments to SEC Rule 16b-3 discussed above. Upon motion duly made and
seconded, the Board unanimously adopted the following resolution:
RESOLVED, that this Board of Directors hereby amends Section 3 of
Article V of the Company's Bylaws by replacing the second and third
sentences thereof with the following: "The Compensation Committee shall
consist of one or more members of the Board, all of whom shall be
"Non-Employee Directors," as defined in Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended."
EXHIBIT 10.1
CHANGE IN CONTROL AGREEMENT
SENIOR VICE PRESIDENTS
May 30, 1997
Dear Mr. Crudele:
This letter will confirm our understanding concerning your employment
with The Sports Authority, Inc. (the "Company").
1. If there is a Change in Control of the Company while you are
employed by the Company and if your employment with the Company is terminated by
the Company other than for Cause or if you terminate your employment with the
Company for Good Reason, in either case within a two-year period following such
a Change in Control, the Company will pay to you an amount equal to two times
the sum of (i) your annual rate of base salary at the time of termination or
immediately prior to the Change in Control, whichever base salary amount is
greater, and (ii) the "on plan" bonus amount targeted for you for the fiscal
year in which termination occurs or the fiscal year immediately prior to the
Change in Control, whichever bonus amount is greater; provided, however, that
the amount of such payment may be reduced as provided in paragraph 3. Such
payment shall be made within fifteen days after your termination, or as promptly
thereafter as possible if the procedures set forth in paragraph 3 cannot be
completed within fifteen days.
2. (a) Termination by the Company for "Cause" means termination based
on (i) conduct which is a material violation of Company policy, as in effect
immediately before any Change in Control, or which is fraudulent or unlawful or
which materially interferes with your ability to perform your duties, (ii)
misconduct which damages or injures the Company or substantially damages the
Company's reputation, or (iii) gross negligence in the performance of, or
willful failure to perform, your duties and responsibilities.
(b) Termination by you for "Good Reason" means termination based on
the occurrence without your express written consent of any of the following:
(i) a significant diminution by the Company of your role with the Company or a
significant detrimental change in the nature and/or scope of your status with
the Company, other than for Cause, (ii) a reduction in your base salary, other
than for Cause and other than as part of an across-the-board reduction in
salaries of management personnel (including all Vice Presidents and above) of
less than 20%, (iii) a material diminution by the Company of benefits (taken as
a whole) provided to you immediately prior to the Change in Control, or (iv) the
relocation of the Company's principal executive offices to a location outside of
Broward County, Palm Beach County or Dade County, Florida or any requirement
that you be based anywhere other than the Company's principal executive offices.
<PAGE>
(c) A "Change in Control" shall be deemed to have occurred if:
(i) the "beneficial ownership" (as defined in Rule
l3d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of securities representing more than 50% 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 the Company or any trustee or other fiduciary
holding securities under an employee benefit plan of the Company), or
(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
(iii) during any period of three consecutive years,
individuals who at the beginning of such period were members of the Board of
Directors of the Company 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).
3. If it is determined that any payment or distribution by the Company
to you or for your benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this agreement or otherwise (a
"Payment"), would constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
aggregate present value of amounts payable or distributable to you or for your
benefit pursuant to this agreement (such payments or distributions pursuant to
this agreement are hereinafter referred to as "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall
be an amount expressed in present value which maximizes the aggregate present
value of Agreement Payments without causing any Payment to be subject to
taxation under Section 4999 of the Code. For this purpose, present value shall
be determined in accordance with Section 280G(d)(4) of the Code.
All determinations to be made under this paragraph 3 shall be made by
the Company's independent public accountant immediately prior to the Change in
Control (the "Accounting Firm")), which firm shall provide its determinations
and any supporting calculations both to the Company and to you within ten days
of your termination. Any such determination by the Accounting Firm shall be
binding on both the Company and you. You shall, in your sole discretion,
determine which and how much of any Payment will be eliminated or reduced
consistent with the requirements of this paragraph 3. Within five days after
this determination, the Company shall pay (or cause to be paid) or distribute
(or cause to be distributed) to or for your benefit such amounts as are then due
to you under this agreement.
<PAGE>
As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Agreement Payments will have been made by the
Company which should not have been made ("Overpayment") or that additional
Agreement Payments which have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. Within two years after the termination of your employment, the
Accounting Firm shall review the determination made by it pursuant to the
preceding paragraph. If the Accounting Firm determines that an Overpayment has
been made, any such Overpayment shall be treated for all purposes as a loan to
you which you shall repay to the Company together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code (the
"Federal Rate"); PROVIDED, HOWEVER, that no amount shall be payable by you to
the Company if and to the extent such payment would not reduce the amount which
is subject to taxation under Section 4999 of the Code. If the Accounting Firm
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to you or for your benefit, together with interest
at the Federal Rate.
All of the fees and expenses of the Accounting Firm in performing the
determinations referred to above shall be borne solely by the Company. The
Company agrees to indemnify and hold harmless the Accounting Firm against any
and all claims, damages and expenses resulting from or relating to such
determinations, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
4. The payments provided hereunder shall constitute the exclusive
payments due you from, and the exclusive obligation of, the Company in the event
of any termination of your employment, except for any benefits which may be due
you in normal course under any employee or executive benefit plan of the Company
which provides benefits after termination of employment, other than a severance
pay plan. You shall not be required to mitigate the amount of any payment or
benefit provided for in this agreement by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for herein be reduced by
any compensation earned by other employment or otherwise. The payments hereunder
may not be transferred, assigned or encumbered in any manner, either voluntarily
or involuntarily. In the event of your death, any payments then or thereafter
due hereunder will be made to your estate.
5. It is the intent of the parties that you not be required to incur
any expenses associated with the enforcement of your right to receive payments
due under this agreement by arbitration, litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to you. Accordingly, the Company shall pay you
on demand the amount necessary to reimburse you in full for all reasonable
expenses (including all attorneys' fees and legal expenses) incurred by you in
enforcing the obligations of the Company to make the payments due under this
agreement.
<PAGE>
6. This agreement shall terminate on July 31, 1999 and shall be
automatically renewed for successive one-year periods unless the Company
notifies you or you notify the Company in writing that this agreement will not
be renewed at least sixty days prior to the end of the current term, provided,
however, that (i) after a Change in Control during the term of this agreement,
this agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied, and (ii) this agreement shall terminate if,
prior to a Change in Control, your employment with the Company or any of its
Subsidiaries shall terminate for any reason other than as provided herein.
7. The Company shall require any successor or successors (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to acknowledge expressly that this
agreement is binding upon and enforceable against the Company in accordance with
the terms hereof, and in the same manner and to the same extent that the Company
would be required to perform if no such succession or successions had taken
place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this agreement. As
used in this agreement, the Company shall mean the Company as hereinbefore
defined and any such successor or successors to its business and/or assets,
jointly and severally.
8. All payments hereunder shall be subject to applicable tax
withholding and deductions.
9. Nothing in this agreement shall be construed as giving you any
right to be retained in the employ of the Company.
10. This agreement shall be governed by and interpreted under the laws
of the State of Delaware without giving effect to any conflict of laws
provisions.
11. This agreement sets forth the entire understanding with respect to
the subject matter hereof and supersedes all prior agreements, written or oral
or express or implied, between you and the Company as to such subject matter.
This agreement may not be amended, nor may any provision hereof be modified or
waived, except by an instrument in writing duly signed by you and the Company.
12. If any provision of this agreement, or any application thereof to
any circumstances, is invalid, in whole or in part, such provision or
application shall to that extent be severable and shall not affect other
provisions or applications of this agreement.
<PAGE>
Please indicate your agreement by signing below and retain one copy for
you records.
Sincerely,
THE SPORTS AUTHORITY, INC.
By:________________________
Agreed:
_____________________________
Date: May 30, 1997
EXHIBIT 10.2
THE SPORTS AUTHORITY, INC.
1996 STOCK OPTION AND RESTRICTED STOCK PLAN
(AS AMENDED MAY 29, 1997)
1. PURPOSE. The Sports Authority, Inc. 1996 Stock Option and
Restricted Stock Plan (the "Plan") is intended (i) to attract and retain
officers and other key employees of The Sports Authority, Inc. (the "Company")
and its "Subsidiaries" (business entities which have a majority of their equity
interests owned directly or indirectly by the Company); (ii) to increase the
proprietary interest in the Company of such persons by providing further
opportunity for ownership of the Company's common shares, $.01 par value (the
"Shares"); and (iii) to increase the incentives to such persons to contribute to
the success of the Company's business.
2. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee of the Company's Board of Directors (the "Board")
consisting of not less than two directors of the Company appointed by the Board
(the "Committee"). Members of the Committee shall be appointed by and serve at
the pleasure of the Board. No person may be a member of the Committee if he or
she would fail to be (i) a "Non-Employee Director " under Rule 16b-3, as amended
from time to time ("Rule 16b-3"), under the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act") or (ii) an "outside director"
under Section 162(m) of the Internal Revenue Code of 1986, as amended from time
to time (the "Code"), and the regulations promulgated thereunder.
The Committee shall have sole discretion and authority to
construe and interpret the Plan, to make factual determinations and to establish
and amend rules for the administration of the Plan. The Committee shall have no
obligation to treat persons uniformly, except to the extent otherwise
specifically provided in the Plan. All actions by the Committee may be taken in
its sole discretion and shall be conclusive and binding on all parties.
3. SHARES. The number of Shares reserved for the grants under
the Plan shall be 1,500,000, of which 1,300,000 Shares shall be reserved for
grants of options and of which 200,000 Shares shall be reserved for the grant of
restricted Shares under the Plan. The number of Shares on which options may be
granted to any one person under the Plan shall not exceed 200,000 and the number
of restricted Shares which may be granted to any one person under the Plan shall
not exceed 80,000. Shares to be issued under the Plan may be either authorized
and unissued shares or issued shares which shall have been reacquired by the
Company. In the event that any outstanding option or grant of restricted Shares,
or portion thereof, expires or is
1
<PAGE>
cancelled, surrendered or terminated for any reason, the Shares allocable to the
unexercised portion of such option or the unvested portion of such grant of
restricted Shares may again be subjected to a grant or be issued under the Plan.
4. GRANT OF OPTIONS.
(a) GENERAL POWERS OF COMMITTEE. The Committee may grant
options to purchase Shares to officers and other key employees of the Company or
its Subsidiaries, including directors who are full-time employees, if any. The
Committee shall have sole discretion, in accordance with the provisions of the
Plan, to determine to whom an option is granted, the number of Shares optioned
and the terms and conditions of the option, and shall have the authority to
accelerate the vesting or exercisability of any option. In making such
determinations, the Committee may consider the position and responsibilities of
the employee, the nature and value to the Company of his or her services and
accomplishments, his or her present and potential contribution to the success of
the Company, and such other factors as the Committee may deem relevant, but
shall not be required to treat employees uniformly.
(b) TYPES OF OPTIONS. Each option granted under the Plan shall
be a non-qualified stock option (a "Non-Qualified" option) unless it is
specifically designated by the Committee at the time of grant as an incentive
stock option (an "Incentive" option). An Incentive option is intended to meet
the requirements of Section 422 of the Code. The aggregate Fair Market Value
(determined at the time the option is granted) of the Shares as to which
Incentive options are exercisable for the first time by the optionee during any
calendar year under the Plan and any other stock option plan of the Company year
shall not exceed $100,000 (as determined in accordance with the rules set forth
in Section 422 of the Code).
(c) OPTIONS GRANTED IN LIEU OF BONUSES. Pursuant to its powers
under Section 4(a), the Committee may grant Non-Qualified options to those
employees otherwise eligible to receive them wholly or partially in lieu of
bonuses under any annual bonus plan of the Company to which such employees might
otherwise be entitled. The Committee shall have sole discretion to determine the
method of valuing options and bonuses for this purpose, and shall be entitled to
grant options of equal, greater or lesser value, as so determined, than the
bonuses such options would replace. The Committee shall have sole discretion to
vary such valuation methods among individual optionees and from one grant to the
next.
(d) GENERAL PROVISIONS. Options granted under the Plan shall
be subject to and governed by the provisions of the Plan, including the terms
and conditions set forth in this Section 4 and Section 5 hereof and by such
other terms and conditions, not inconsistent with the Plan, as shall be
determined by the Committee. The date on which an option shall be granted shall
be the date that the optionee, the number of Shares optioned and the terms and
conditions of the option
2
<PAGE>
are determined by the Committee, or as otherwise specified by the Committee.
Each option shall be evidenced by a Share Option Agreement in such form as the
Committee may from time to time approve.
5. TERMS AND CONDITIONS OF OPTIONS.
(a) OPTION PRICE. The option price of each option granted
under the Plan shall not be less than the Fair Market Value of a Share on the
date of grant of such option, except that options granted under Section 4(c) in
lieu of a bonus may be granted at a price not less than 80% of the Fair Market
Value of a Share on the date of grant of such option. Fair Market Value of a
Share for purposes of the Plan shall be deemed to be the closing price on the
New York Stock Exchange Composite Transactions Tape (or its equivalent if the
Shares are not traded on the New York Stock Exchange) of a Share for the trading
day immediately prior to the relevant valuation date.
(b) PERIOD OF OPTION, VESTING AND WHEN EXERCISABLE.
(i) An option granted under the Plan may not be exercised
after the earlier of (A) the date specified by the Committee, which shall be a
maximum of ten years from date of grant, or (B) the applicable time limit
specified in paragraph (iii) of this Section 5(b). Any option not exercised
within the aforementioned time period shall automatically terminate at the
expiration of such period.
(ii) The time or times during which options may become
nonforfeitable ("vest") or become exercisable and any conditions pertaining to
the vesting or exercisability thereof, shall be determined by the Committee at
the time of grant; provided that, except as set forth below, no option shall be
exercisable, and no option which is not granted in lieu of a bonus shall vest,
until the optionee shall have completed one year as an employee of the Company
or its Subsidiaries after the date of grant. Notwithstanding this limitation,
vesting and exercisability shall be accelerated if termination of employment of
the optionee results from death or total and permanent disability, or if
termination of employment of the optionee occurs at or after age 65 and the
optionee has ten or more years of full-time service with the Company or a
Subsidiary, or in the event of a Change in Control of the Company, or if and to
the extent the Committee may so determine in its sole discretion. A Change in
Control shall be deemed to have occurred if:
(a) the "beneficial ownership" (as defined
in Rule l3d-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 section 13(d) or section 14(d) of the
Exchange Act (other than the Company or any trustee or other fiduciary
holding securities under an employee benefit plan of the Company), or
3
<PAGE>
(b) the stockholders 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
(c) during any period of three consecutive
years, 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 stockholders, 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).
(iii) An option may be exercised by an optionee only while
such optionee is in the employ of the Company or a Subsidiary or within three
months thereafter, or such longer period as the Committee may determine in its
sole discretion, and only if any limitation upon the vesting of and the right to
exercise such option under Section 5(b)(ii) has been removed or has expired
prior to termination of employment and exercise is not otherwise precluded
hereunder; provided that, (i) if at the date of termination of employment, the
optionee has ten or more years of full-time service with the Company or a
Subsidiary or if termination of employment results from death or total and
permanent disability, such three month period shall be extended to three years,
and (ii) for then-vested options granted in lieu of bonuses, such three month
period shall be extended to three months after the date such options were
scheduled to first become exercisable. Employment with a Subsidiary shall be
deemed terminated on the date a former Subsidiary ceases to be a Subsidiary of
the Company.
(iv) In the event of the disability of an optionee, an option
which is otherwise exercisable may be exercised by the optionee's legal
representative or guardian. In the event of the death of an optionee, either
before or after termination of employment, an option which is otherwise
exercisable may be exercised by the person or persons whom the optionee shall
have designated in writing on forms prescribed by and filed with the Committee
("Beneficiaries"), or, if no such designation has been made, by the person or
persons to whom the optionee's rights shall have passed by will or the laws of
descent and distribution ("Successor(s)"). The Committee may require an
indemnity and/or such evidence or other assurances as it may deem necessary in
connection with an exercise by a legal representative, guardian, Beneficiary or
Successor.
(c) EXERCISE AND PAYMENT.
(i) Subject to the provisions of Section 5(b), an option may
be exercised by notice (in the form prescribed by the Committee) to the Company
specifying the number of Shares to be purchased. Payment for the number of
Shares purchased upon the exercise of an option shall be made in full at the
price provided for in the applicable Share Option Agreement. Such purchase
4
<PAGE>
price shall be paid by the delivery to the Company of cash (including check or
similar draft) in United States dollars or whole Shares (subject to any
restrictions the Committee may impose), or a combination thereof. Shares used in
payment of the purchase price shall be valued at their Fair Market Value as of
the date notice of exercise is received by the Company. Any Shares delivered to
the Company shall be in such form as is acceptable to the Company.
(ii) The Company may defer making delivery of Shares under the
Plan until satisfactory arrangements have been made for the payment of any tax
attributable to exercise of the option. The Committee may, in its sole
discretion, permit an optionee to elect, in such form and at such time as the
Committee may prescribe, to pay all or a portion of all taxes arising in
connection with the exercise of an option by electing to (a) have the Company
withhold whole Shares, or (b) deliver other whole Shares previously owned by the
optionee having a Fair Market Value not greater than the amount to be withheld;
provided that the amount to be withheld shall not exceed the total Federal,
State and local tax withholding obligations associated with the transaction.
(d) TERMINATION OF OPTION BY OPTIONEE. An optionee may at any
time elect, in a written notice filed with the Committee, to terminate a
Non-Qualified option with respect to any number of shares as to which such
option shall not have been exercised.
(e) NONTRANSFERABILITY. No option or any rights with respect
thereto shall be subject to any debts or liabilities of an optionee, nor be
assignable or transferable except by will or the laws of descent and
distribution; provided that Non-qualified options and related rights may be
transferred to one or more transferees during the optionee's lifetime, and such
transferees may exercise rights thereunder in accordance with the terms hereof,
but only if and to the extent then permissible without the loss of the exemption
under Rule 16b-3 and otherwise permitted by the Committee.
(f) RIGHTS AS A STOCKHOLDER. An optionee shall have no rights
as a record holder with respect to Shares covered by his or her option until the
date of issuance to him or her of a certificate evidencing such Shares after the
exercise of such option and payment in full of the purchase price. No adjustment
will be made for cash dividends for which the record date is prior to the date
such certificate is issued.
6. GRANT OF RESTRICTED SHARES
(a) GENERAL POWERS OF COMMITTEE. The Committee may grant
restricted Shares to officers and other key employees of the Company or its
Subsidiaries, including directors who are full-time employees, if any. The
Committee shall have sole discretion, in accordance with the provisions of the
Plan, to determine to whom restricted Shares are granted, the number of
5
<PAGE>
restricted Shares, the nature and duration of restrictions, and the terms and
conditions of each grant. In making such determinations, the Committee may
consider the position and responsibilities of the employee, the nature and value
to the Company of his or her services and accomplishments, his or her present
and potential contribution to the success of the Company, and such other factors
as the Committee may deem relevant, but shall not be required to treat employees
uniformly.
(b) GENERAL PROVISIONS. Restricted Shares granted under the
Plan shall be subject to and governed by the provisions of the Plan and by the
terms and conditions set forth in this Section 6 and by such other terms and
conditions, not inconsistent with the Plan, as shall be determined by the
Committee. The date on which restricted Shares shall be granted shall be the
date that the grantee, the number of Shares granted and the terms and conditions
of the grant are determined by the Committee, or as otherwise specified by the
Committee. Each grant of restricted Shares shall be evidenced by a Restricted
Share Agreement in such form as the Committee may from time to time approve.
(c) RESTRICTIONS; RESTRICTED PERIOD.
(i) The Committee shall determine for each grant of restricted
Shares the period during which transferability shall be restricted and any
conditions which must be met during or at the expiration of such period for the
grant to become vested (the "Restricted Period"). In no event shall the
Restricted Period be less than six months after the date of grant. If any
condition contained in a grant of restricted Shares is not met within the period
of time it is required to be met, the grant shall be forfeited.
(ii) The conditions which must be met for a grant of
restricted Shares to become vested may include performance goals of whatever
type or nature as the Committee may determine, to be met by the grantee, the
Company, or any portion of the Company. Any such performance goal may be waived
in whole or in part at any time by the Committee, in its sole discretion.
(iii) The conditions which must be met for a grant of
restricted Shares to become vested shall include the grantee's continued
employment by the Company or its Subsidiaries during the Restricted Period. This
condition shall be deemed satisfied and the Restricted Period shall be deemed
completed (subject to the satisfaction or waiver by the Committee of any
performance goals described in subsection (ii) above) if termination of
employment of the grantee results from death or total and permanent disability,
or if termination of employment of the grantee occurs at or after age 65 and the
grantee has ten or more years of full-time service with the Company or a
Subsidiary, or in the event of a Change in Control of the Company, or if and to
the extent the Committee may so determine in its sole discretion.
6
<PAGE>
(d) MANNER OF HOLDING AND DELIVERING CERTIFICATES FOR
RESTRICTED SHARES. Each certificate issued for restricted Shares shall be
registered in the name of the grantee and deposited with the Company or its
designee in an escrow account, accompanied by a stock power executed in blank by
the grantee covering the restricted Shares. At the end of the Restricted Period,
certificates representing the number of Shares to which the grantee is then
entitled shall be released from escrow and delivered to the grantee free and
clear of all restrictions. The Company may defer delivering such Shares until
satisfactory arrangements have been made for the payment of any tax attributable
to the vesting of such Shares. The Committee may, in its sole discretion, permit
a grantee to elect, in such form and at such time as the Committee may
prescribe, to pay all or a portion of all taxes arising from the vesting of such
Shares by electing to have the Company withhold whole Shares; provided that the
amount to be withheld shall not exceed the total Federal, State and local tax
withholding obligations associated with the transaction.
(e) NONTRANSFERABILITY. No restricted Share granted or held
under the Plan shall be subject to any debts or liabilities of a grantee, nor be
assignable or transferable except by will or the laws of descent and
distribution.
(f) RIGHTS AS A STOCKHOLDER. Except for the restrictions and
limitations described in the Plan, a grantee holding restricted Shares shall
have all of the rights of a record holder of the Shares, including the right to
receive dividends paid on those Shares and the right to vote them at meetings of
stockholders of the Company.
7. LIMITATIONS ON RIGHTS OF OPTIONEES AND GRANTEES.
(a) EMPLOYMENT. No provision of the Plan, nor any term or
condition of any grant of an option or restricted Shares, nor any action taken
by the Committee, the Company or a Subsidiary pursuant to the Plan, shall give
or be construed as giving an optionee or grantee any right to be retained in the
employ of the Company or of any Subsidiary, or affect or limit in any way the
right of the Company or any Subsidiary to terminate the employment of any
optionee or grantee.
(b) CONDITIONS. Notwithstanding anything contained herein to
the contrary, all rights with respect to all options or restricted Shares are
subject to the conditions that the optionee or grantee not engage or have
engaged in fraud, embezzlement, defalcation, gross negligence in the performance
or nonperformance of the optionee's or grantee's duties (other than as a result
of total and permanent disability) or material failure or refusal to perform the
optionee's or grantee's duties at any time while in the employ of the Company or
a Subsidiary, and all rights with respect to all options are subject to the
conditions that the optionee not engage or have engaged in activity directly or
indirectly in competition with any business of the Company or a Subsidiary, or
in other
7
<PAGE>
conduct inimical to the best interests of the Company or a Subsidiary,
following the optionee's termination of employment. If it is determined by the
Committee that there has been a failure of any such condition, all options and
all rights with respect to all options granted to such optionee and all rights
with respect to restricted Shares which shall not have then vested shall
immediately terminate and be null and void.
8. ADJUSTMENTS. If there is any change in the number or class
of Shares through the declaration of Share dividends, or recapitalization, or
combinations or exchanges of such Shares or similar corporate transactions, or
if the Committee otherwise determines that, as a result of a corporate
transaction involving a change in the Company's capitalization, it is
appropriate to effect the adjustments described in this section, the aggregate
number or class of Shares on which options or restricted Shares may be granted
or which may be issued under the Plan, the per-person limits on grants, the
number or class of Shares covered by each outstanding option and restricted
Share grant, and the price per Share in each option, shall all be appropriately
adjusted by the Committee; provided that any fractional Shares resulting from
such adjustment shall be eliminated. If a new option is substituted for the
option granted hereunder, or an assumption of the option granted hereunder is
made, by reason of a corporate merger, consolidation, acquisition of property or
stock, split-up, reorganization or liquidation (and each option outstanding
under the Plan shall be substituted for or assumed by the surviving corporation
in any such transaction, if the Company is not the surviving corporation), the
option granted hereunder shall pertain to and apply to the securities to which a
holder of the number of Shares subject to the option would have been entitled.
9. APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of Shares pursuant to options granted under the Plan will be used
for general corporate purposes.
10. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become
effective on March 28, 1996, subject to approval by the affirmative vote of the
holders of a majority of the Shares present or represented and entitled to vote
at the 1996 annual meeting of stockholders of the Company, and any grants made
prior to stockholder approval of the Plan shall be subject to such approval. The
term during which options and restricted Shares may be granted under the Plan
shall expire on March 28, 2006. The term of options granted and grants of
restricted Shares made prior thereto, however, may extend beyond such date and
the provisions of the Plan shall continue to apply thereto.
11. AMENDMENTS. The Board may from time to time alter, amend,
suspend or discontinue the Plan; provided that no amendment which requires
stockholder approval in order for the exemptions available under Rule l6b-3 or
Section 162(m) of the Code to be applicable to
8
<PAGE>
the Plan shall be effective unless the same shall be approved by the
stockholders of the Company entitled to vote thereon.
The Plan, each option under the Plan and the grant and
exercise thereof, each grant of restricted Shares under the Plan, and the
obligation of the Company to sell and issue shares under the Plan shall be
subject to all applicable laws, rules, regulations and governmental, stock
exchange and stockholder approvals, and the Committee may make such amendment or
modification thereto as it shall deem necessary to comply with any such laws,
rules and regulations or to obtain any such approvals.
12. SEVERABILITY. If any provision of the Plan, any term or
condition of any option or restricted Share granted or Shares Option Agreement
or Restricted Share Agreement or form executed or to be executed thereunder or
any application thereof to any person or circumstance is invalid or would result
in an Incentive option failing to meet the requirements of Section 422 of the
Code, such provision, term, condition or application shall to that extent be
void (or, in the sole discretion of the Committee, such provision, term or
condition may be amended so as to avoid such invalidity or failure), and shall
not affect other provisions, terms or conditions or applications thereof, and to
this extent such provision, term or condition is severable.
13. GOVERNING LAW. The Plan shall be applied and construed in
accordance with and governed by the laws of the State of Delaware without regard
to the conflict of laws principles thereof and applicable Federal law.
9
EXHIBIT 10.3
THE SPORTS AUTHORITY, INC.
TARGET SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
<PAGE>
THE SPORTS AUTHORITY, INC.
TARGET SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, it is in the best interest of The Sports Authority, Inc. and its
Affiliates (the "Corporation") to retain a select group of competent and loyal
management personnel; and
WHEREAS, Congress has from time to time limited the amounts of retirement
benefits available to the more highly compensated employees in relationship to
their pay; and
WHEREAS, the Corporation finds that it is in its best interest to supplement the
retirement pay of a select group of management personnel who might otherwise
receive less retirement pay than their counterparts, and to retain equity among
the Corporation's management personnel;
NOW THEREFORE, the Corporation hereby establishes the following Target
Supplemental Executive Retirement Plan effective January 1, 1996 ("Effective
Date"):
<PAGE>
ARTICLE I
DEFINITIONS
1.1 AFFILIATE. "Affiliate" means an entity that is a wholly-owned
subsidiary of The Sports Authority, Inc.
1.2 AVERAGE COMPENSATION. "Average Compensation" means the result obtained
by dividing the total Compensation of a Participant during the
considered period by three (3). The considered period shall be the
three (3) complete calendar years out of the last five (5) complete
calendar years of the Participant's Service in which the Participant
received the highest amount of Compensation from the Corporation.
1.3 BENEFICIARY. "Beneficiary" means a person or entity designated by the
Participant under the terms of the Plan to receive any amounts
distributable under the Plan upon the death of the Participant.
1.4 BOARD OF DIRECTORS. "Board of Directors" means the Board of Directors
of The Sports Authority, Inc.
1.5 CHANGE IN CONTROL. "Change in Control" means the first to occur of any
of the following events:
(a) the "beneficial ownership" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of securities representing
more than 20% of the combined voting power of the Corporation
is acquired by any "person," as defined in sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (other than the
Corporation, any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation), or
(b) the shareholders of the Corporation approve a definitive
agreement to merge or consolidate the Corporation 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
(c) during any period of three consecutive years, individuals who
at the beginning of such period were members of the Board of
Directors cease for any reason to constitute at least a
majority thereof (unless the election, or the nomination for
election by the Corporation'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).
1.6 CODE. "Code" means the Internal Revenue Code of 1986, as amended.
1
<PAGE>
1.7 COMPENSATION. "Compensation" means a Participant's gross base salary
and bonus (without reduction for any bonus foregone pursuant to Section
6(d) of the Annual Incentive Bonus Plan) during a complete calendar
year.
1.8 COMPENSATION COMMITTEE. "Compensation Committee" means the persons who
are from time to time serving as members of the Compensation Committee
of the Corporation's Board of Directors.
1.9 CORPORATION. "Corporation" means The Sports Authority, Inc. and any of
its Affiliates (a) whose participation in the Plan has been approved by
the Board of Directors, and (b) which by action of its own board of
directors shall have adopted the Plan.
1.10 DISABILITY. "Disability" means a physical or mental impairment which
prevents the Participant from continuing to perform the functions of an
Officer for the Corporation.
1.11 EARLY RETIREMENT. "Early Retirement" means the Participant's
termination of any employment relationship with the Corporation or any
legal successor before age sixty-five (65), but after completing seven
(7) or more Years of Vesting Service.
1.12 EARLY RETIREMENT DATE. "Early Retirement Date" means the first day of
the calendar month coincident with or following the Early Retirement of
the Participant.
1.13 EFFECTIVE DATE. "Effective Date" means the date as of which the Plan
is effective, which is January 1, 1996.
1.14 ELIGIBLE SPOUSE. "Eligible Spouse" means the person to whom the
Participant is legally married at the time of the Participant's death.
1.15 LATE RETIREMENT. "Late Retirement" means the Participant's termination
of any employment relationship with the Corporation or any legal
successor after Normal Retirement.
1.16 LATE RETIREMENT DATE. "Late Retirement Date" means the first day of
the calendar month coincident with or following the Participant's Late
Retirement.
1.17 NORMAL RETIREMENT. "Normal Retirement" means the Participant's
termination of any employment relationship with the Corporation or any
legal successor at age sixty-five (65).
1.18 NORMAL RETIREMENT DATE. "Normal Retirement Date" means the first day
of the calendar month coincident with or immediately following the
Normal Retirement of the Participant.
2
<PAGE>
1.19 OFFICER. "Officer" means an officer of the Corporation at the level
of Vice President or above.
1.20 PARTICIPANT. "Participant" means any Officer of The Sports Authority,
Inc. Participant shall also include any Officer of an Affiliate
designated by the Compensation Committee of the Board of Directors to
participate in the Plan. Jack A. Smith and Arnold Sedel will be
excluded from active participation in the Plan, and will only be
entitled to benefits payable under Section 4.9.
1.21 PLAN. "Plan" means The Sports Authority, Inc. Target Supplemental
Executive Retirement Plan set forth in this document, as amended from
time to time.
1.22 PLAN YEAR. "Plan Year" means calendar year.
1.23 PRESENT VALUE EQUIVALENCY. "Present Value Equivalency" means the
conversion of the benefit to a certain annuity, where the certain
period equals twenty (20) years plus the period of time the benefit
starts before Normal Retirement Date. The basis for discounting future
payments and converting the payment duration will be the average
interest rate on 20-year Treasury Constant Maturities for the three (3)
calendar months prior to the month of benefit commencement.
1.24 PRESENT VALUE EQUIVALENT. "Present Value Equivalent" means a lump sum
amount equal to the present value of a certain annuity.. The basis for
discounting future payments will be the average interest on a 20-year
Treasury Constant Maturities for the three (3) calendar months prior to
the month of benefit payment
1.25 SERVICE. "Service" means employment with the Corporation while an
employee is an Officer.
1.26 TRUST. "Trust" means the "rabbi trust," which may be entered into in
conjunction with the Plan.
1.27 YEAR OF BENEFIT SERVICE. "Year of Benefit Service" means any calendar
year in which an Officer earns one thousand (1,000) or more hours of
Service; provided, however, that Years of Benefit Service shall not
include any period of Service prior to June 1, 1990, and will be
limited to a maximum of twenty (20) years.
1.28 YEAR OF VESTING SERVICE. "Year of Vesting Service" means any calendar
year in which an Officer earns one thousand (1,000) or more hours of
Service.
3
<PAGE>
ARTICLE II
ELIGIBILITY
Officers of The Sports Authority, Inc. who are among a select group of
management and highly compensated employees shall, unless otherwise
provided herein participate in the Plan. Officers of any Affiliate who
are among a select group of management and highly compensated
employees, and who are selected at the discretion of the Board of
Directors, may participate in the Plan. An Officer who becomes a
Participant shall remain a Participant unless and until the Board of
Directors or the Compensation Committee determines that the Officer is
no longer designated to participate in the Plan. Such action shall be
effective as of the later of: (i) the date such action is taken; or
(ii) its effective date. An Officer whose status as a Participant is
revoked shall be entitled only to any benefits to which he or she is
entitled under Article IV.
4
<PAGE>
ARTICLE III
VESTING
A Participant shall vest in his or her benefit on the earlier of the
Participant's:
(a) attainment of age sixty-five (65);
(b) completion of seven (7) Years of Vesting Service; or
(c) death or Disability.
In the case of a Change in Control, each Participant shall become immediately
fully vested in his or her benefit under the Plan.
5
<PAGE>
ARTICLE IV
RETIREMENT BENEFIT
4.1 CALCULATION OF RETIREMENT BENEFIT. Upon Normal Retirement or Late
Retirement from the Corporation, a Participant shall be entitled to
receive an annual benefit under the Plan beginning on the Participant's
Normal Retirement Date, or Late Retirement Date if applicable, and
ending after two hundred and forty (240) monthly payments. The amount
of the benefit under this Section 4.1 shall be equal to one and
three-quarters percent (1 3/4%) of a Participant's Average
Compensation, multiplied by Years of Benefit Service up to twenty (20)
years.
4.2 EARLY RETIREMENT. Upon Early Retirement from the Corporation, a
Participant shall be entitled to receive the same benefit calculated
under Section 4.1 payable at the Participant's Normal Retirement Date
(or at an earlier date at the request of the Participant and granted
solely in the discretion of the Compensation Committee) in a reduced
amount using the Present Value Equivalency, payable until the
Participant attains age eighty-five (85)).
4.3 DISABILITY BENEFIT. Upon the Disability of the Participant, the
Participant shall be entitled to a benefit calculated in accordance
with Section 4.1 payable at the Participant's Normal Retirement Date
(or at an earlier date at the request of the Participant made at any
time before Normal Retirement Date in a reduced amount using the
Present Value Equivalency). If a Participant does not receive his or
her benefit commencing immediately under this Section 4.3, continued
Years of Benefit Service will continue to be recognized, up to the
earlier of the Participant's Normal Retirement Date, or the date the
Participant's benefit commences in determining the Participant's
benefit under Section 4.1.
4.4 DEATH BENEFIT.
(a) If death occurs prior to the Participant's benefit
commencement date, the Corporation shall pay to the
Participant's designated Beneficiary a benefit calculated in
accordance with Section 4.1 payable commencing on the
Participant's Normal Retirement Date (or at an earlier date at
the request of the designated Beneficiary made at any time
before Normal Retirement Date in a reduced amount using the
Present Value Equivalency).
(b) If death occurs while the Participant is receiving his benefit
under the Plan, his Beneficiary shall continue to receive his
monthly benefits for the period of time that the Participant
would have received his or her benefit if he or she were still
alive.
6
<PAGE>
4.5 TIMING AND FORM OF PAYMENT.
(a) A Participant shall receive his or her benefit under the Plan
in monthly payments.
(b) A Beneficiary receiving a death benefit under Section 4.4 may
request a Present Value Equivalent in lieu of monthly
payments.
(c) At any time and without consent of the Participant or
Beneficiary, the Participant's benefit may be paid in the form
of a Present Value Equivalent in lieu of monthly payments at
the discretion of the Board of Directors; provided, however,
no Board member may vote on his or her own payout form.
4.6 UNUSUAL PAYOUTS. In the event any circumstance should occur which
results in taxation to a Participant on his or her benefit prior to
commencement of benefit payments, a distribution of part of the benefit
will be allowed that is sufficient to provide for the required taxes.
4.7 DESIGNATION OF BENEFICIARY.
(a) The Participant shall file with the Compensation Committee a
designation of one or more Beneficiaries to whom the benefit
under the Plan will be payable in the event of the
Participant's death prior to receipt of his or her entire
benefit. The designation will be effective upon receipt by the
Compensation Committee of a properly executed form which the
Compensation Committee has approved for that purpose.
(b) From time to time, a Participant may change his or her
Beneficiary by written notice to the Compensation Committee,
and upon such change, the rights of all previously designated
Beneficiaries to receive any benefits under the Plan shall
cease.
(c) If there is no valid designation of a Beneficiary on file with
the Compensation Committee at the time of the Participant's
death, or if all of the Beneficiaries designated in the
Beneficiary designation have predeceased the Participant, the
Beneficiary will be the Participant's Eligible Spouse if the
Eligible Spouse survives the Participant, or otherwise the
Participant's estate.
7
<PAGE>
4.8 Benefit due to Service with Prior Parent Company. Certain Officers
earned supplemental retirement benefits while the Corporation was a
wholly owned subsidiary of Kmart Corporation. The liability for these
benefits has become an obligation of the Corporation.
In addition to any amount payable under the preceding provisions of
this Plan, any Officer listed on Exhibit A of this Plan shall be
entitled to the benefit so listed.
8
<PAGE>
ARTICLE V
EVENTS CAUSING FORFEITURE
5.1 TERMINATION OF EMPLOYMENT. Termination of employment for any reason
prior to the Participant's vesting under Article III will cause the
Participant and all Beneficiaries under the Plan to forfeit any
unvested interest in the Plan.
5.2 FORFEITURE FOR CAUSE. If the Compensation Committee finds, after full
consideration of the facts presented on behalf of both the Corporation
and a former Participant, that the Participant was discharged by the
Corporation for fraud, embezzlement, theft, commission of a felony, or
for proven dishonesty in the course of his or her employment by the
Corporation which damaged the Corporation, the entire benefit under the
Plan will be forfeited. The decision of the Compensation Committee as
to the cause of a former Participant's discharge and the damage done to
the Corporation will be final. No decision of the Compensation
Committee will affect the finality of the discharge of the Participant
by the Corporation in any manner.
9
<PAGE>
ARTICLE VI
ADMINISTRATION
6.1 POWERS OF THE COMPENSATION COMMITTEE. The Compensation Committee will
have the responsibility for the general administration of the Plan
according to the terms and provisions of the Plan and will have all
powers necessary to accomplish those purposes, including, but not by
way of limitation, the right, power and authority:
(a) to make rules and regulations for the administration of the
Plan which are not inconsistent with its terms and provisions;
(b) to construe all terms, provisions, conditions and limitations
of the Plan, and its construction of the Plan will be final
as to all parties;
(c) to correct any defect, supply any omission or reconcile any
inconsistency that may appear in the Plan in the manner and to
the extent it deems expedient to carry the Plan into effect
and its judgment in those matters will be final as to all
parties;
(d) to delegate by written notice those clerical and recordation
duties of the Compensation Committee, as it deems necessary or
advisable for the proper and efficient administration of the
Plan.
No member of the Board of Directors or the Compensation
Committee shall be liable for any action taken or determination made in
good faith with respect to the Plan.
6.2 CONFLICT OF INTEREST. A member of the Compensation Committee who is
also a Participant shall not vote or act on any matter relating solely
to himself or herself.
6.3 CLAIMS PROCEDURE. The Compensation Committee shall make all
determinations as to the right of any person to a benefit. If any
application for payment of a benefit under the Plan shall be denied,
the Compensation Committee shall notify the claimant within ninety (90)
days of such denial setting forth the specific reason therefor and
afford such claimant a reasonable opportunity for a full and fair
review of the decision denying his or her claim. Notice of such denial
shall set forth, in addition to the specific reasons for the denial,
reference to pertinent provisions of the Plan, such additional
information as may be relevant to denial of the claim, an explanation
of the claims review procedure and advice that such claimant may
request the opportunity to review pertinent Plan documents and
10
<PAGE>
submit a statement of issues and comments. Within sixty (60) days
following advice of denial of his or her claim, upon request made by
any claimant for a review of such denial, the Compensation Committee
shall take appropriate steps to review its decision in light of any
further information or comments submitted by such claimant. The
Compensation Committee may, in its discretion, hold a hearing at which
such claimant shall be entitled to present the basis of his or her
claim for review and at which he may be represented by counsel. The
Compensation Committee shall render a decision within sixty (60) days
after claimant's request for review (which may be extended to 120 days
if circumstances so require) and shall advise claimant in writing of
its decision on such review, specifying its reasons and identifying
appropriate provisions of the Plan.
11
<PAGE>
ARTICLE VII
AMENDMENT AND/OR TERMINATION
7.1 AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may amend
or terminate the Plan at any time by an instrument in writing.
7.2 NO RETROACTIVE EFFECT ON ACCRUED BENEFITS. No amendment or termination
of the Plan shall adversely affect the rights of any Participant or
Beneficiary to the benefit provided under the Plan previously accrued
by the Participant without his or her consent. However, the Board of
Directors shall retain the right at any time to change in any manner
the benefit provided in Article IV, but only as to accruals after the
date of the amendment.
7.3 EFFECT OF TERMINATION. If the Plan is terminated, no further benefit
under the Plan will accrue. The Plan benefit accrued to the date of
termination will be payable under the conditions, at the time and in
the form then provided in the Plan.
12
<PAGE>
ARTICLE VIII
CORPORATE OBLIGATION
The Corporation shall pay the benefits due the Participants under the
Plan. It is specifically recognized by both the Corporation and the Participants
that the Plan is only an unsecured corporate commitment and that each
Participant must rely upon the general credit of the Corporation for the
fulfillment of its obligations hereunder. Under all circumstances, the rights of
Participants to any asset held by the Corporation will be no greater than the
rights expressed in the Plan. Nothing contained in the Plan will constitute a
guarantee by the Corporation that the assets of the Corporation will be
sufficient to pay any benefits under the Plan or would place the Participant in
a secured position ahead of general creditors of the Corporation. Though the
Corporation may establish a Trust to accumulate assets to fulfill its
obligations, the Plan and any such trust will not create any lien, claim,
encumbrance, right, title or other interest of any kind whatsoever of any
Participant in any asset held by the Corporation, contributed to any such trust
or otherwise designated to be used for payment of any of its obligations created
in the Plan. No policy or other specific asset of the Corporation has been or
will be set aside, or will in any way be transferred to any trust or will be
pledged in any way for the performance of the Corporation's obligations under
the Plan which would remove the policy or asset from being subject to the
general creditors of the Corporation.
13
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 LIMITATION OF RIGHTS. Nothing in the Plan will be construed:
(a) to give a Participant any right with respect to any benefit
except in accordance with the terms of the Plan;
(b) to limit in any way the right of the Corporation to terminate
a Participant's employment with the Corporation at any time;
(c) to evidence any agreement or understanding, expressed or
implied, that the Corporation will employ a Participant in
any particular position or for any particular remuneration; or
(d) to give a Participant or any other person claiming through him
any interest or right under the Plan other than that of any
unsecured general creditor of the Corporation.
9.2 DISTRIBUTIONS TO INCOMPETENTS OR MINORS. Should a Participant become
incompetent or should a Participant designate a Beneficiary who is a
minor or incompetent, the Corporation is authorized to pay the funds
due to the parent of the minor or to the guardian of the minor or
incompetent or directly to the minor or to apply those funds for the
benefit of the minor or incompetent in any manner the Compensation
Committee determines in its sole discretion.
9.3 NONALIENATION OF BENEFITS. No right or benefit provided in the Plan
will be transferable by the Participant except, upon his or her death,
to a named Beneficiary as provided in the Plan. No right or benefit
under the Plan will be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge (except as provided in
Section 206(d)(3) of the Employee Retirement Income Security Act of
1974 relating to domestic relations orders), and any attempt to
anticipate, alienate, sell, assign, pledge, encumber, or charge the
same will be void. No right or benefit under the Plan will in any
manner be liable for or subject to any debts, contracts, liabilities or
torts of the person entitled to such benefits.
9.4 RESPONSIBILITY FOR DISTRIBUTIONS AND WITHHOLDING OF TAXES. The
Compensation Committee will furnish information to the Corporation,
concerning the amount and form of distribution to any Participant
entitled to a distribution so that the Corporation may make or cause
the Trust to make the distribution required. It will also calculate the
deductions from the amount of the benefit paid under the Plan for any
taxes required to be withheld by federal, state or local government
based on the Participant's instructions, and will cause them to be
withheld.
14
<PAGE>
9.5 RELIANCE UPON INFORMATION. No member of the Board of Directors or the
Compensation Committee shall be liable for any decision or action taken
in good faith in connection with the administration of the Plan.
Without limiting the generality of the foregoing, any decision or
action taken by the Board of Directors or the Compensation Committee
when it relies upon information supplied it by any officer of the
Corporation, the Corporation's legal counsel, the Corporation's
actuary, the Corporation's independent accountants or other advisors in
connection with the administration of the Plan will be deemed to have
been taken in good faith.
9.6 SEVERABILITY. If any term, provision, covenant or condition of the Plan
is held to be invalid, void or otherwise unenforceable, the rest of the
Plan will remain in full force and effect and will in no way be
affected, impaired or invalidated.
9.7 NOTICE. Any notice or filing required or permitted to be given to the
Compensation Committee or a Participant will be sufficient if in
writing and hand delivered or sent by U. S. mail to the principal
office of the Corporation or to the residential mailing address of the
Participant. Notice will be deemed to be given as of the date of hand
delivery or if delivery is by mail, as of the date shown on the
postmark.
9.8 GENDER. Whenever any words are used in the Plan in the masculine,
feminine, or neuter gender, they are to be construed as though they
were also used in another gender in all cases where they would so
apply.
9.9 GOVERNING LAW. The Plan will be construed, administered and governed
in all respects by the laws of the State of Delaware to the extent they
are not preempted by Federal law.
9.10 EFFECTIVE DATE. The Plan will be operative and effective on January 1,
1996.
15
<PAGE>
===============================================================================
EXHIBIT A
===============================================================================
Name Monthly Benefit Payable at Age 65
===============================================================================
Jack A. Smith $2,220.15
- -------------------------------------------------------------------------------
Richard Lynch $371.54
- -------------------------------------------------------------------------------
Arnold Sedel $127.92
- -------------------------------------------------------------------------------
Roy Cohen $15.49
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
16
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 27, JULY 28, JULY 27, JULY 28,
1997 1996 1997 1996
------------- ------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Financial statement computations:
Income before income taxes $ 15,760 $ 14,986 $ 19,502 $ 18,158
Income tax expense 6,446 6,175 7,954 7,475
Minority interest (241) (372) (611) (553)
----------- ----------- ----------- -----------
Net income $ 9,555 $ 9,183 $ 12,159 $ 11,236
=========== =========== =========== ===========
Earnings per share:
Shares used in primary earnings per share
computation:
Weighted average common shares outstanding 31,505 31,375 31,488 31,337
Net additional shares assuming options
exercised and proceeds used to purchase
treasury shares at average market price 311 476 326 343
----------- ----------- ----------- -----------
Common and common share equivalents 31,816 31,851 31,814 31,680
=========== =========== =========== ===========
Earnings per share assuming primary dilution $ 0.30 $ 0.29 $ 0.38 $ 0.35
=========== =========== =========== ===========
Shares used in fully diluted earnings per share
computation: (1)
Net income $ 9,555
After-tax interest add-back 1,278
-----------
Adjusted net income $ 10,833
===========
Weighted average common shares outstanding 31,505 31,375 31,488 31,337
Shares issuable pursuant to conversion rights 4,581
Net additional shares assuming options
exercised and proceeds used to purchase
treasury shares at higher of average market
price and period-end market price 312 476 326 429
----------- ----------- ----------- -----------
Common and common share equivalents 36,398 31,851 31,814 31,766
=========== =========== =========== ===========
Earnings per share assuming full dilution $ 0.30 $ 0.29 $ 0.38 $ 0.35
=========== =========== =========== ===========
</TABLE>
(1) The calculation of fully diluted earnings per share for the 26 weeks ended
July 27, 1997 excludes convertible shares under the Company's 5.25%
Convertible Subordinated Notes because they have an antidilutive effect.
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<S> <C>
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<PERIOD-START> JAN-27-1997
<PERIOD-END> JUL-27-1997
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0
0
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<EPS-PRIMARY> 0.38
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</TABLE>
