| þ | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
| Delaware | 95-4388794 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
| 2525 East El Segundo Boulevard | ||
| El Segundo, California | 90245 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
2
3
4
5
6
7
8
9
10
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Other
Number of Stores
Year
California
Markets
Total
Stores Relocated
Stores Closed
at Period End
5
10
15
-
-
249
3
12
15
(4
)
-
260
6
9
15
-
-
275
5
14
19
-
(1
)
293
6
12
18
(2
)
-
309
Average
Number of
Number of Years
Employees
With Us
6
27
8
23
17
17
34
18
309
9
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Fiscal Year
2001
2002
2003
2004
16.5
%
15.9
%
16.1
%
16.2
%
30.3
30.8
30.4
30.5
46.8
46.7
46.5
46.7
53.2
53.3
53.5
53.3
100.0
%
100.0
%
100.0
%
100.0
%
Crosman
Icon (Proform)
Rawlings
Shimano
Easton
JanSport
Razor
Spalding
Everlast
K2
Reebok
Speedo
Fila
Lifetime
Remington
Timex
Footjoy
Mizuno
Rockport
Titleist
Franklin
New Balance
Rollerblade
Under Armour
Head
Nike
Russell Athletic
Wilson
Hillerich & Bradsby
Prince
Saucony
Zebco
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Year
Number
Percentage of Total
Regions
Entered
Of Stores
Number of Stores
1955
95
30.7
%
1972
79
25.6
174
56.3
1984
36
11.7
1993
25
8.1
1995
16
5.2
1995
11
3.6
1978
11
3.6
1997
11
3.6
1995
9
2.9
1994
8
2.5
2001
8
2.5
309
100.0
%
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11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
ITEM 5:
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
2004
2003
Fiscal Period
High
Low
High
Low
$
25.62
$
20.94
$
11.73
$
8.34
$
28.12
$
22.63
$
14.42
$
11.03
$
26.76
$
18.86
$
17.28
$
12.58
$
29.42
$
22.40
$
22.17
$
15.05
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Fiscal Year
(1)(2)
2000
2001
2002
2003
2004
(as restated)
(as restated)
(as restated)
(as restated)
(Dollars and shares in thousands, except per share and certain store data)
$
571,858
$
623,078
$
667,550
$
710,393
$
782,215
377,808
409,860
429,170
455,601
496,633
194,050
213,218
238,380
254,792
285,582
145,337
159,797
178,747
189,882
209,081
—
2,515
—
—
—
9,464
10,262
10,038
10,826
12,296
154,801
172,574
188,785
200,708
221,377
39,249
40,644
49,595
54,084
64,205
(148
)
(2,662
)
4,557
3,434
2,067
22,008
19,629
15,685
11,545
6,841
17,389
23,677
29,353
39,105
55,297
7.088
9,655
12,080
15,688
21,778
10,301
14,022
17,273
23,417
33,519
6,400
7,284
7,999
—
—
$
3,901
$
6,738
$
9,274
$
23,417
$
33,519
$
0.29
$
0.47
$
0.51
$
1.03
$
1.48
$
0.24
$
0.42
$
0.48
$
1.03
$
1.47
$
—
$
—
$
—
$
—
$
0.07
13,525
14,247
18,358
22,651
22,669
16,094
16,090
19,476
22,753
22,792
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Fiscal Year
(1)(2)
2000
2001
2002
2003
2004
(as restated)
(as restated)
(as restated)
(as restated)
(Dollars and shares in thousands, except per share and certain store data)
6.6
%
4.9
%
3.9
%
2.2
%
3.9
%
$
217
$
224
$
227
$
227
$
238
249
260
275
293
309
$
2,404
$
2,446
$
2,541
$
2,543
$
2,625
33.9
%
34.2
%
35.7
%
35.9
%
36.5
%
$
11,787
$
10,739
$
10,999
$
11,226
$
21,445
2.1x
2.3x
2.4x
2.4x
2.5x
$
3,753
$
7,865
$
9,441
$
9,030
$
6,746
$
77,362
$
76,177
$
87,576
$
82,013
$
80,893
$
260,919
$
260,390
$
266,903
$
281,736
$
310,665
$
172,098
$
153,351
$
125,131
$
99,686
$
81,335
$
51,721
$
58,911
—
—
—
$
(94,328
)
$
(87,591
)
$
(1,301
)
$
22,116
$
54,276
(1)
Our fiscal year is the 52 or 53-week reporting period ending on the Sunday closest to
the calendar year end. Fiscal years 2000 through 2003 consisted of 52 weeks and fiscal year
2004 consisted of 53 weeks.
(2)
“Statement of Operations Data”, “Store Data”, “Other Financial Data” and “Balance
Sheet Data” have been restated for the fiscal years 2000, 2001, 2002 and 2003 as a result of
matters discussed in Note 2 to the consolidated financial statements in Item 8, “Financial
Statements and Supplementary Data”.
(3)
Same store sales for a period reflect net sales from stores operated throughout that period as well
as the corresponding prior period, i.e., two complete fiscal years for annual comparisons and five
complete fiscal quarters for quarterly comparisons. The opening date is the date the
store is first open for business.
(4)
Net sales per gross square foot is calculated by dividing net sales for stores open
the entire period by the total gross square footage for those stores.
(5)
Average net sales per store is calculated by dividing net sales for stores open the
entire period by total store count for stores open the entire period.
(6)
Inventory turns equal fiscal year cost of goods sold, buying and occupancy costs
divided by fiscal year four-quarter average FIFO (first-in, first-out) inventory balances.
(7)
Working capital is defined as current assets less current liabilities.
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Fiscal Year
2002
2003
2004
260
275
293
15
19
18
—
—
(2
)
—
(1
)
—
275
293
309
(1)
Stores that are relocated during any period are classified as new stores. Sales from the prior
location are treated the same as sales from a closed store and thus are excluded from same store
sales calculations.
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Fiscal Year
2002
2003
2004
(as restated)
(as restated)
100.0
%
100.0
%
100.0
%
64.3
64.1
63.5
35.7
35.9
36.5
26.8
26.7
26.7
1.5
1.6
1.6
7.4
7.6
8.2
0.7
0.5
0.3
2.3
1.6
0.8
4.4
5.5
7.1
1.8
2.2
2.8
2.6
%
3.3
%
4.3
%
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Payments Due by Period
Total
Less Than 1 Year
1-3 Years
3-5 Years
After 5 Years
(in thousands)
$
316,178
$
45,745
$
83,517
$
69,935
$
116,981
61,335
—
—
61,335
—
20,000
6,667
13,333
—
—
170
170
—
—
—
$
397,683
$
52,582
$
96,850
$
131,270
$
116,981
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•
a substantial portion of our cash flow from operations will be required to service
our indebtedness;
•
our ability to obtain financing in the future for working capital, capital
expenditures and general corporate purposes might be impeded; and
•
we are more vulnerable to economic downturns and our ability to withstand
competitive pressures is limited.
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•
suitable sites may not be available for leasing;
•
we may not be able to negotiate acceptable lease terms;
•
we might not be able to hire and retain qualified store personnel; and
•
we might not have the financial resources necessary to fund our expansion plans.
•
earthquake, fire, flood and other natural disasters;
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•
power loss, computer systems failures, internet and telecommunications or data
network failure, operator negligence, improper operation by or supervision of
employees, physical and electronic loss of data or security breaches, misappropriation
and similar events; and
•
computer viruses.
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•
other traditional sporting goods stores and chains;
•
mass merchandisers, discount stores and department stores, such as Wal-Mart, Kmart,
Target, Kohl’s, JC Penney, and Sears;
•
specialty sporting goods shops and pro shops, such as Foot Locker and Gander
Mountain;
•
sporting goods superstores, such as Dick’s Sporting Goods and The Sports Authority,
Inc., and its other operating units, Oshman’s, Sportmart and Gart Sports Company; and
•
catalog and internet retailers.
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•
a board of directors that is classified such that only one-third of directors are
elected each year;
•
authorization of the issuance of “blank check” preferred stock that could be issued
by our board of directors to increase the number of outstanding shares and thwart a
takeover attempt;
•
limitations on the ability of stockholders to call special meetings of stockholders;
•
prohibition of stockholder action by written consent and requiring all stockholder
actions to be taken at a meeting of our stockholders; and
•
establishment of advance notice requirements for nominations for election to the
board of directors or for proposing matters that can be acted upon by stockholders at
stockholder meetings.
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1)
We lacked the necessary depth of personnel with sufficient technical accounting
expertise to ensure the preparation of interim and annual financial statements in
accordance with generally accepted accounting principles. This
material weakness in internal control over financial reporting
contributed to a pervasive breakdown in the Company’s interim
and annual financial reporting processes. Specifically, account
reconciliation and management review and approval controls did not
operate effectively and, accordingly,
generally accepted accounting principles were not properly applied,
resulting in the following:
a)
Our policies and procedures did not provide for
reconciliation of certain accounts payable subaccounts correctly or
on a sufficiently frequent basis, resulting in material misstatements
to accounts payable and cost of goods sold;
b)
Operating expenses were misstated because our
policies and procedures did not provide for the recognition of rent
expense over the entire lease term of our store leases and did not
provide for the recognition of landlord
incentives as deferred rent, but instead reduced the value of our leasehold
improvements;
c)
Inventory and cost of goods sold were misstated because we
incorrectly capitalized certain buyer related costs to inventory, incorrectly
determined the net realizable value of returned merchandise, and recorded sales of
damaged or returned merchandise as an offset to inventory rather than as a sale;
d)
Inventory and accounts payable were materially misstated
because our policies and procedures did not provide for the
recognition of all inventory in-transit at period end;
e)
Revenue, cost of goods sold, inventory, and the allowance for sales returns
were misstated because we did not provide an allowance for estimated sales
returns; and
f)
Accrued liabilities were misstated because our policies and
procedures did not provide for the reconciliation of certain subaccounts
timely or provide for the recognition of changes in estimates and certain transactions
in the correct accounting period.
This
material weakness resulted in the material misstatement of our annual financial
statements as of December 28, 2003, and for the fiscal years
ended December 29, 2002 and December 28, 2003, and the interim financial
information for each of the interim periods in the
fiscal year ended December 28, 2003 and for the first three interim periods in the fiscal year
ended January 2, 2005, or represented more than a remote likelihood that a material
misstatement of our annual or interim financial statements would not have been prevented or
detected. As a result, we restated our consolidated financial statements as
of December 28, 2003, and for the fiscal years ended December 29, 2002 and December 28, 2003, and
for each of the
interim periods in the fiscal year ended December 28, 2003, and for the first three interim periods in
the fiscal year ended January 2, 2005, to reflect the correction of these errors in
accounting.
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2)
We did not maintain effective controls over the documentation, review and approval of
manual journal entries. Certain individuals could create, record and approve the same
journal entry without regard to the dollar amount of the transaction and without any further
review or approval. In certain instances, journal entries relating to different accounts
were combined in a single compound journal entry. In other instances, journal entries did
not have sufficient supporting written explanation or sufficient supporting documentation
and/or the supporting documentation had not been retained for a sufficient period of time.
This material weakness resulted in material misstatements to amounts recorded for cost of
goods sold and selling and administrative expense. These material misstatements were corrected
by restating our consolidated financial statements as
of December 28, 2003 and for each of the fiscal years ended
December 29, 2002 and December 28, 2003, and for each of the interim periods in the fiscal
year ended December 28, 2003, and for the first three interim periods in the fiscal year ended January
2, 2005.
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1)
The Company lacked the necessary depth of personnel with sufficient technical
accounting expertise to ensure the preparation of interim and annual financial statements
in accordance with generally accepted accounting principles. This
material weakness in internal control over financial reporting
contributed to a pervasive breakdown in the Company’s interim
and annual financial reporting processes. Specifically, account
reconciliation and management review and approval controls did not
operate effectively and, accordingly,
generally accepted accounting principles were not properly applied,
resulting in the following:
a)
The Company’s policies and procedures did not provide for reconciliation of
certain accounts payable subaccounts correctly or on a sufficiently frequent basis,
resulting in material misstatements to accounts payable and cost of goods sold;
b)
Operating expenses were misstated because the Company’s policies and procedures
did not provide for the recognition of rent expense over the entire
lease term of the Company’s store
leases and did not provide for the recognition of landlord incentives as deferred rent,
but instead reduced the value of the Company’s leasehold improvements;
c)
Inventory and cost of goods sold were misstated because
the Company incorrectly capitalized certain buyer related costs to inventory,
incorrectly determined the net realizable value of returned merchandise, and recorded
sales of damaged or returned merchandise as an offset to inventory rather than as a
sale;
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d)
Inventory and accounts payable were materially misstated because the Company’s
policies and procedures did not provide for the recognition of all inventory in-transit
at period end;
e)
Revenue, cost of goods sold, inventory, and the allowance for sales returns
were misstated because the Company did not provide an allowance for
estimated sales returns; and
f)
Accrued liabilities were misstated because the Company’s policies
and procedures did not provide for the reconciliation of certain subaccounts timely or
provide for recognition of changes in estimates and certain
transactions in the correct accounting period.
2)
The Company did not maintain effective controls over the documentation, review and
approval of manual journal entries. Certain individuals could create, record and approve
the same journal entry without regard to the dollar amount of the transaction and without any
further review or approval. In certain instances, journal entries relating to different
accounts were combined in a single compound journal entry. In other instances, journal
entries did not have sufficient supporting written explanation or sufficient supporting
documentation and/or the supporting documentation had not been
retained for a sufficient
period of time. This material weakness resulted in material misstatements to amounts
recorded for cost of goods sold and selling and administrative
expense. These material
misstatements were corrected by restating the Company’s consolidated financial statements
as of December 28, 2003 and for the fiscal years ended
December 29, 2002 and December 28, 2003, and for each of the
interim periods in the fiscal year ended December 28, 2003 and for the
first three interim periods in the fiscal year ended January 2, 2005.
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36
37
38
39
40
41
42
43
44
45
46
47
48
Name
Age
Position
53
Chairman of the Board of Directors and
Chief Executive Officer (Class C)
53
Director (Class B)
52
Director (Class A)
49
Director (Class A)
42
Director (Class C)
55
Director (Class B)
49
Senior Vice President
59
Senior Vice President, General Counsel
and Secretary
60
Senior Vice President, Store Operations
60
Senior Vice President, Buying
48
Senior Vice President, Human Resources
51
Acting Controller (Co-Principal
Financial and Accounting Officer)
35
Assistant Treasurer (Co-Principal
Financial and Accounting Officer)
(a)
Member of audit committee
(b)
Member of compensation committee
(c)
Pending the appointment of a new Chief Financial Officer, Elizabeth F.
Chambers, our Acting Controller, and Thomas L. Robershaw, our Assistant Treasurer,
jointly will fulfill the functions of the principal financial officer and principal
accounting officer.
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Long-Term Compensation
Annual Compensation (1)
Awards
Securities
All Other
Underlying
Compensation
Name and Principal Position
Year
Salary($)
Bonus($)
Options(#)
($)(2)
2004
415,000
615,000
30,000
12,410
2003
395,000
615,000
30,000
12,542
2002
375,000
953,550
(3)
—
13,955
2004
233,000
217,000
10,000
12,410
2003
221,000
200,000
10,000
12,595
2002
211,000
263,710
(3)
—
14,692
2004
207,000
197,000
10,000
12,410
2003
195,000
180,000
10,000
11,426
2002
185,000
258,452
(3)
—
14,683
2004
217,000
170,000
10,000
12,410
2003
205,000
170,000
10,000
12,260
2002
195,000
248,452
(3)
—
12,302
2004
167,000
98,000
10,000
12,051
2003
155,000
85,000
10,000
12,260
2002
145,000
95,721
(3)
—
11,537
(1)
Excludes perquisites and other personal benefits, securities or property. The aggregate
amount of such compensation is less than the lesser of either $50,000 or 10 percent of the total
of annual salary and bonus reported for each of the named executive officers.
(2)
Represents matching and profit-sharing contributions under the Company’s 401(k) plan, and
insurance premiums paid by the Company on split-dollar executive life insurance policies. The
Company discontinued such insurance policies in October 2003.
(3)
Amounts include one-time bonuses of $368,550, $73,710, $88,452, $88,452, and $20,271
paid in 2002 to Steven G. Miller, Thomas J. Schlauch, Richard A. Johnson, Charles P. Kirk and
Gary S. Meade, respectively, in connection with the Company’s initial public offering, which
were funded by a reduction in the redemption price of the Company’s preferred stock.
Number of
% of Total
Securities
Options
Potential Realizable Value at
Underlying
Granted to
Exercise
Assumed Annual Rates of
Options Granted
Employees
of Base
Expiration
Stock Price Appreciation
Name
(#)(1)
in 2003
Price ($/Sh)
Date
for Option Term (2)
5% ($)
10% ($)
30,000
(3)
7.6
24.61
2/13/14
464,313
1,176,660
10,000
(4)
2.5
24.61
2/13/14
154,771
392,220
10,000
(4)
2.5
24.61
2/13/14
154,771
392,220
10,000
(4)
2.5
24.61
2/13/14
154,771
392,220
10,000
(4)
2.5
24.61
2/13/14
154,771
392,220
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(1)
Options are transferable under limited conditions, primarily to accommodate estate
planning purposes.
(2)
This column shows the hypothetical gains on the options granted based on assumed annual
compound price appreciation of 5% and 10% over the full ten-year term of the options. The
assumed rates of 5% and 10% appreciation are mandated by the SEC and do not represent the
Company’s estimate or projection of future prices.
(3)
These options vest in 48 equal monthly installments commencing on the first day of each month
beginning March 1, 2004.
(4)
These options vest annually in four equal installments commencing on the first anniversary
following the grant date of February 13, 2004.
Number of Securities
Value of Unexercised In-The-
Underlying Unexercised Options
Money Options at Fiscal
Shares
Value
at Fiscal Year End (#)
Year-End ($)(a)
Acquired on
Realized
Name
Exercise (#)
($)
Exercisable
Unexercisable
Exercisable
Unexercisable
0
$
0
20,000
40,000
$
287,088
$
413,413
0
$
0
2,500
17,500
$
47,050
$
186,450
0
$
0
2,500
17,500
$
47,050
$
186,450
0
$
0
2,500
17,500
$
47,050
$
186,450
0
$
0
2,500
17,500
$
47,050
$
186,450
(a)
Based on the closing price of the Company’s common stock on December 31, 2004 (the last
business day of fiscal 2004) of $29.14.
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ITEM 12:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
•
each of the Company’s directors;
•
each Named Executive Officer;
•
each person, or group or affiliated persons, who is known by the Company to
beneficially own more than 5% the Company’s common stock; and
•
all current directors and executive officers as a group.
Beneficial Ownership
Name (1)
of Common Stock
Shares
Percent (%)(2)
1,460,482
(3)
6.4
428,000
(4)
1.9
87,500
(5)
*
186,702
(6)
*
214,100
(7)
1.0
34,325
(8)
*
2,500
(9)
*
2,500
(10)
*
68,478
(11)
*
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Beneficial Ownership
Name (1)
of Common Stock
Shares
Percent (%)(2)
4,893
(12)
*
2,552,945
(13)
11.3
2,807,849
12.4
2,734,774
12.1
2,210,344
9.7
1,211,102
5.3
*
Indicates less than 1%.
(1)
The address for each stockholder is 2525 East El Segundo Boulevard, El Segundo,
California 90245, except as otherwise indicated below.
(2)
Shares of common stock subject to options that are currently exercisable or exercisable
within 60 days of August 1, 2005 are deemed to be outstanding and beneficially owned by the
person holding such options or who otherwise has beneficial ownership thereof for the
purpose of computing the percentage ownership of such person, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any other person.
(3)
Includes 1,005,000 shares of common stock held by Steven G. Miller and Jacquelyne G.
Miller, as trustees of the Steven G. Miller and Jacquelyne G. Miller Trust dated September
13, 1990, 424,232 shares of common stock held by Robert W. and Florence Miller Family
Partners, L.P., of which Steven G. Miller is a limited partner and shares dispositive power
with respect to the shares pursuant to a trading authorization dated November 12, 2004
executed by Robert W. Miller and Florence H. Miller, as general partners, and 31,250 shares
which may be acquired upon the exercise of options exercisable within 60 days of August 1,
2005. Mr. Miller disclaims beneficial ownership in the shares owned by Robert W. and
Florence Miller Family Partners, L.P. except to the extent of his pecuniary interest
therein. Jacquelyne G. Miller shares beneficial ownership of the 1,005,000 shares of
common stock held by the Steven G. Miller and Jacquelyne G. Miller Trust dated September
13, 1990.
(4)
Represents 428,000 shares of common stock held by Michael D. Miller, Trustee of the
Miller Living Trust dated December 11, 1997.
(5)
Includes 7,500 shares which may be acquired upon the exercise of options exercisable
within 60 days of August 1, 2005.
(6)
Includes 7,500 shares which may be acquired upon the exercise of options exercisable
within 60 days of August 1, 2005.
(7)
Includes 7,500 shares which may be acquired upon the exercise of options exercisable
within 60 days of August 1, 2005.
(8)
Includes 7,500 shares which may be acquired upon the exercise of options exercisable
within 60 days of August 1, 2005.
(9)
Represents 2,500 shares which may be acquired upon the exercise of options exerciseable
within 60 days of August 1, 2005.
(10)
Represents 2,500 shares which may be acquired upon the exercise of options exerciseable
within 60 days of August 1, 2005.
(11)
Includes 1,247 shares of common stock owned directly by John G. Danhakl, 11,097 shares
of common stock owned by Mr. Danhakl and his wife, Kathy Danhakl, as joint tenants, 53,634
shares of common stock owned by the Danhakl Revocable Family Trust and 2,500 shares which
may be acquired upon the
Table of Contents
exercise of options exerciseable within 60 days of August 1, 2005. The address for Mr.
Danhakl is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025.
(12)
Includes 2,393 shares of common stock held by Jennifer Holden Dunbar, Trustee of the
Lilac II Trust dated June 28, 2000, and 2,500 shares which may be acquired upon the
exercise of options exercisable within 60 days of August 1, 2005.
(13)
Includes 79,200 shares which the directors and executive officers may be deemed to have
beneficial ownership with respect to options to purchase the Company’s common stock
exercisable within 60 days of August 1, 2005.
(14)
The address for Neuberger Berman, Inc. is 605 Third Ave., New York, NY, 10158-3698, as
reported in the Schedule 13G/A filed with the SEC on February 16, 2005. According to Items
6 and 7 of the Schedule 13G/A filed by the stockholder on February 16, 2005, as a parent
holding company of Neuberger Berman LLC and Neuberger Berman Management Inc. which manage
certain accounts in which the reported shares are held, stockholder has been granted the
shared authority to dispose of and vote those shares. Stockholder’s holdings are based
upon the holdings disclosed in the Schedule 13G/A.
(15)
The address for FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109, as
reported in the Schedule 13G/A filed with the SEC on February 14, 2005. According to Items
3 and 7 of the Schedule 13G/A filed by the stockholder on February 14, 2005, as a parent
holding company of certain investment advisors and banks which manage accounts in which the
reported shares are held, stockholder has been granted the authority to dispose of the
shares. Stockholder’s holdings are based upon the holdings disclosed in the Schedule
13G/A.
(16)
The address for Wasatch Advisors, Inc. is 150 Social Hall Avenue, Salt Lake City, UT
84111, as reported in the Schedule 13G/A filed with the SEC on January 10, 2005. According
to Item 4 of the Schedule 13G/A filed by the stockholder on January 10, 2005, the
stockholder is an investment advisor and has been granted the authority to dispose of and
vote the shares reported. Stockholder’s holdings are based upon the holdings disclosed in
the Schedule 13G/A.
(17)
The address for Gilder, Gagnon, Howe & Co. LLC is 1775 Broadway, 26th Floor, New York,
New York 10019, as reported in the Schedule 13G filed with the SEC on February 14, 2005.
According to Item 4 of the Schedule 13G filed by the stockholder on February 14, 2005, the
shares reported include shares held in customer accounts over which partners and/or
employees of the stockholder have discretionary authority to dispose of or direct the
disposition of the shares, shares held in accounts owned by the partners of the stockholder
and their families, and shares held in the account of the profit-sharing plan of the
stockholder. Stockholder has been granted the shared authority to dispose of the shares.
Stockholder’s holdings are based upon the holdings disclosed in the Schedule 13G.
Table of Contents
Number of
securities
remaining
available for
Number of
future issuance
securities to be
Weighted-
under equity
issued upon
average
compensation
exercise of
exercise price of
plans
outstanding
outstanding
(excluding
options,
options,
securities
warrants and
warrants and
reflected in
Plan category
rights
rights
column (a))
(a)
(b)
(c)
720,150
$
17.74
2,911,250
(2)
—
—
—
720,150
$
17.74
2,911,250
(2)
(1)
The Company has two equity compensation plans: the 1997 Management Equity Plan and the 2002
Stock Incentive Plan.
(2)
Does not include 611,298 shares available for issuance under the 1997 Management Equity Plan
because the Company does not intend to make any more grants under such plan.
Table of Contents
Table of Contents
Type of Fees
Fiscal 2004
Fiscal 2003
$
1,504,000
$
290,500
—
68,500
—
133,720
—
—
$
1,504,000
$
492,720
Table of Contents
Table of Contents
49
50
51
(A)
Documents filed as part of this report:
(1)
Financial Statements.
See Index to Consolidated Financial Statements on page F-1 hereof.
(2)
Financial Statement Schedule.
See Index to Consolidated Financial Statements Index on page F-1 hereof.
(a)
Exhibits
3.1
Amended and Restated Certificate of Incorporation
of Big 5 Sporting Goods Corporation. (5)
3.2
4.1
Amended and Restated Bylaws. (5)
Specimen of Common Stock Certificate. (4)
4.2
Indenture dated as of November 13, 1997 between
Big 5 Corp. and First Trust National Association, as trustee. (1)
4.3
Form of Big 5 Corp. 10.875% Series B Senior Notes
due 2007 (included in Exhibit 4.2). (1)
10.1
Form of Amended and Restated Stockholders
Agreement among Big 5 Sporting Goods Corporation, Green Equity
Investors, L.P., Steven G. Miller and Robert W. Miller. (3)
10.2
10.3
1997 Management Equity Plan. (2)
2002 Stock Incentive Plan. (3)
10.4
Form of Amended and Restated Employment Agreement
between Robert W. Miller and Big 5 Sporting Goods Corporation. (3)
10.5
Form of Amended and Restated Employment Agreement
between Steven G. Miller and Big 5 Sporting Goods Corporation. (3)
10.6
Amended and Restated Indemnification
Implementation Agreement between Big 5 Corp. (successor to United
Merchandising Corp.) and Thrifty PayLess Holdings, Inc. dated as of
April 20, 1994. (5)
10.7
Agreement and Release among Pacific Enterprises,
Thrifty PayLess Holdings, Inc., Thrifty PayLess, Inc., Thrifty and Big 5
Corp. (successor to United Merchandising Corp.) dated as of March 11,
1994. (5)
10.8
Grant of Security Interest in and Collateral
Assignment of Trademarks and Licenses dated as of March 8, 1996 by Big 5
Corp. in favor of The CIT Group/ Business Credit, Inc. (5)
10.9
Guarantee dated March 8, 1996 by Big 5
Corporation (now known as Big 5 Sporting Goods Corporation) in favor of
The CIT Group/ Business Credit, Inc. (5)
10.10
10.11
Form of Indemnification Agreement. (5)
Form of Indemnification Letter Agreement. (4)
10.12
Amended and Restated Financing Agreement dated
March 20, 2003 between The CIT Group/ Business Credit, Inc., the Lenders
and Big 5 Corp. (5)
10.13
Modification and Reaffirmation of Guaranty dated
March 20, 2003 by Big 5 Sporting Goods Corporation in favor of The CIT
Group/Business Credit, Inc. (5)
10.14
First Amendment to Financing Agreement dated
October 31, 2003, amending the Financing Agreement dated March 20, 2003
between The CIT Group/Business Credit, Inc., the Lenders and Big 5 Corp. (6)
Table of Contents
10.15
Joinder Agreement, dated as of January 28, 2004,
by and among Big 5 Corp., Big 5 Services Corp., the Lenders (as defined
therein) and The CIT Group/Business Credit, Inc. (6)
10.16
Co-Obligor Agreement, dated as of January 28,
2004, made by Big 5 Corp. and Big 5 Services Corp. in favor The CIT
Group/Business Credit, Inc. as agent for the Lenders (as defined
therein). (6)
10.17
Second Amended and Restated Financing Agreement,
dated as of December 15, 2004, among The CIT Group/Business Credit,
Inc., as Agent and as Lender, the Lenders named therein, and Big 5 Corp.
and Big 5 Services Corp. (7)
10.18
Modification and Reaffirmation of Guaranty dated
as of December 15, 2004 by and between Big 5 Sporting Goods Corporation,
a Delaware corporation, and The CIT Group/Business Credit, Inc., a New
York corporation, as agent for the Lenders described therein. (7)
10.19
Reaffirmation Of Co-Obligor Agreement dated as
of December 15, 2004, by and among Big 5 Corp., a Delaware corporation
and Big 5 Services Corp., a Virginia corporation, and The CIT
Group/Business Credit, Inc., a New York corporation, as agent for the
Lenders described therein. (7)
10.20
Lease dated as of March 5, 1996 by and between
the State of Wisconsin Investment Board and United Merchandising Corp. (8)
10.21
Lease dated as of April 14, 2004 by and between
Pannatoni Development Company, LLC and Big 5 Corp. (8)
10.22
Form of Big 5 Sporting Goods Corporation Stock
Option Grant Notice and Stock Option Agreement for use with Steven G.
Miller with the 2002 Stock Incentive Plan. (9)
10.23
Form of Big 5 Sporting Goods Corporation Stock
Option Grant Notice and Stock Option Agreement for use with 2002 Stock
Incentive Plan. (9)
10.24
Summary of Director Compensation. (9)
14.1
Code of Business Conduct and Ethics. (6)
21.1
Subsidiaries of Big 5 Sporting Goods Corporation. (9)
23.1
Consent of independent registered public accounting firm, KPMG LLP. (9)
31.1
Rule 13a-14(a) Certification of Chief Executive Officer. (9)
31.2
Rule 13a-14(a) Certification of Acting Controller (jointly performing the function of
principal financial officer with the Assistant Treasurer). (9)
31.3
Rule 13a-14(a) Certification of Assistant Treasurer (jointly performing the function of
principal financial officer with the Acting Controller). (9)
32.1
Section 1350 Certification of Chief Executive Officer. (9)
32.2
Section 1350 Certification of Acting Controller (jointly performing the function of principal
financial officer with the Assistant Treasurer). (9)
32.3
Section 1350 Certification of Assistant Treasurer (jointly performing the function of
principal financial officer with the Acting Controller). (9)
(1)
Incorporated by reference to Big 5 Corp.’s
Registration Statement on Form S-4 (File No. 333-43129) filed with the
SEC on December 23, 1997.
(2)
Incorporated by reference to the Registration
Statement on Form S-1 (File No. 333-68094) filed by Big 5 Sporting Goods
Corporation on August 21, 2001.
(3)
Incorporated by reference to Amendment No. 2 to
the Registration Statement on Form S-1 filed by Big 5 Sporting Goods
Corporation on June 5, 2002.
(4)
Incorporated by reference to Amendment No. 4 to
the Registration Statement on Form S-1 filed by Big 5 Sporting Goods
Corporation on June 24, 2002.
(5)
Incorporated by reference to the Annual Report on
Form 10-K filed by Big 5 Sporting Goods Corporation on March 31, 2003.
(6)
Incorporated by reference to the Annual Report on
Form 10-K filed by Big 5 Sporting Goods Corporation on March 12, 2004.
(7)
Incorporated by reference to the Current Report
on Form 8-K filed by Big 5 Sporting Goods Corporation on December 21,
2004.
Table of Contents
(8)
Incorporated by reference to the Current Report
on Form 10-Q filed by Big 5 Sporting Goods Corporation on August 6,
2004.
(9)
Filed herewith.
Table of Contents
52
F-1
BIG 5 SPORTING GOODS CORPORATION
a Delaware corporation
Date: September 6, 2005
By
/S/Steven G. Miller
Steven G. Miller
Chairman of the Board of Directors,
President, Chief Executive Officer
and Director of the Company
Signatures
Title
Date
/S/Steven G. Miller
Chairman of the Board of Directors,
President, Chief Executive Officer
and Director of the Company
(Principal Executive Officer)
September 6, 2005
/S/Elizabeth F. Chambers
Acting Controller
(Co-Principal Financial and
Accounting Officer)
September 6, 2005
/S/Thomas L. Robershaw
Assistant Treasurer
(Co-Principal Financial and
Accounting Officer)
September 6, 2005
/S/Sandra N. Bane
Director of the Company
September 6, 2005
/S/G. Michael Brown
Director of the Company
September 6, 2005
/S/John G. Danhakl
Director of the Company
September 6, 2005
/S/Jennifer Holden Dunbar
Director of the Company
September 6, 2005
/S/Michael D. Miller
Director of the Company
September 6, 2005
Table of Contents
F-1
F-2
F-3
F-4
F-5
F-6
F-7
Schedule
II-1
Table of Contents
F-2
Big 5 Sporting Goods Corporation:
September 6, 2005
Table of Contents
| December 28, | ||||||||
| 2003 | January 2, | |||||||
| (as restated) | 2005 | |||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash
|
$ | 9,030 | $ | 6,746 | ||||
|
Trade and other receivables, net of allowances for
doubtful accounts and sales returns of $2,835 and $3,069, respectively
|
9,652 | 7,109 | ||||||
|
Merchandise inventories
|
185,118 | 206,213 | ||||||
|
Prepaid expenses
|
5,117 | 7,988 | ||||||
|
Deferred income taxes, net
|
14,273 | 15,525 | ||||||
|
Total current assets
|
223,190 | 243,581 | ||||||
|
|
||||||||
|
Property and equipment:
|
||||||||
|
Land
|
186 | 186 | ||||||
|
Buildings and improvements
|
42,901 | 49,019 | ||||||
|
Furniture and equipment
|
64,341 | 78,130 | ||||||
|
Less accumulated depreciation and amortization
|
(59,203 | ) | (68,154 | ) | ||||
|
|
||||||||
|
Net property and equipment
|
48,225 | 59,181 | ||||||
|
Leasehold interest, net of accumulated amortization of $24,842 and
$26,606, respectively
|
4,022 | 2,178 | ||||||
|
Other assets, at cost, less accumulated amortization of $2,281 and
$240, respectively
|
1,866 | 1,292 | ||||||
|
Goodwill
|
4,433 | 4,433 | ||||||
|
|
||||||||
|
Total assets
|
$ | 281,736 | $ | 310,665 | ||||
|
|
||||||||
|
|
||||||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ | 89,690 | $ | 98,298 | ||||
|
Accrued expenses
|
51,487 | 57,723 | ||||||
|
Current portion of long-term debt
|
— | 6,667 | ||||||
|
Total current liabilities
|
141,177 | 162,688 | ||||||
|
Deferred income taxes, net
|
2,704 | 2,644 | ||||||
|
Deferred rent
|
16,053 | 16,389 | ||||||
|
Long-term debt
|
99,686 | 74,668 | ||||||
|
|
||||||||
|
Total liabilities
|
259,620 | 256,389 | ||||||
|
|
||||||||
|
Commitments and contingencies and subsequent events
|
||||||||
|
|
||||||||
|
Stockholders’ equity:
|
||||||||
|
Common stock, $.01 par value. Authorized 50,000,000 shares;
issued and outstanding 22,663,927 shares at December 28, 2003 and
22,677,427 shares at January 2, 2005
|
227 | 227 | ||||||
|
Additional paid-in capital
|
84,003 | 84,231 | ||||||
|
Accumulated deficit
|
(62,114 | ) | (30,182 | ) | ||||
|
|
||||||||
|
Net stockholders’ equity
|
22,116 | 54,276 | ||||||
|
|
||||||||
|
Total liabilities and
stockholders’ equity
|
$ | 281,736 | $ | 310,665 | ||||
|
|
||||||||
F-3
| Year ended | Year ended | |||||||||||
| December 29, | December 28, | Year ended | ||||||||||
| 2002 | 2003 | January 2, | ||||||||||
| (as restated) | (as restated) | 2005 | ||||||||||
|
Net sales
|
$ | 667,550 | $ | 710,393 | $ | 782,215 | ||||||
|
Cost of goods sold, buying and occupancy,
excluding depreciation and amortization
shown separately below
|
429,170 | 455,601 | 496,633 | |||||||||
|
|
||||||||||||
|
Gross profit
|
238,380 | 254,792 | 285,582 | |||||||||
|
|
||||||||||||
|
Operating expenses:
|
||||||||||||
|
Selling and administrative
|
178,747 | 189,882 | 209,081 | |||||||||
|
Depreciation and amortization
|
10,038 | 10,826 | 12,296 | |||||||||
|
|
||||||||||||
|
Total operating expenses
|
188,785 | 200,708 | 221,377 | |||||||||
|
|
||||||||||||
|
Operating income
|
49,595 | 54,084 | 64,205 | |||||||||
|
Redemption premium and unamortized
financing fees related to redemption of
debt
|
4,557 | 3,434 | 2,067 | |||||||||
|
Interest expense, net
|
15,685 | 11,545 | 6,841 | |||||||||
|
|
||||||||||||
|
Income before income taxes
|
29,353 | 39,105 | 55,297 | |||||||||
|
Income taxes
|
12,080 | 15,688 | 21,778 | |||||||||
|
Net income
|
17,273 | 23,417 | 33,519 | |||||||||
|
Redeemable preferred stock dividends and
redemption premium
|
7,999 | — | — | |||||||||
|
|
||||||||||||
|
Net income available to
common stockholders
|
$ | 9,274 | $ | 23,417 | $ | 33,519 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Dividends per share declared
|
$ | — | $ | — | $ | 0.07 | ||||||
|
|
||||||||||||
|
Earnings per share:
|
||||||||||||
|
Basic
|
$ | 0.51 | $ | 1.03 | $ | 1.48 | ||||||
|
|
||||||||||||
|
Diluted
|
$ | 0.48 | $ | 1.03 | $ | 1.47 | ||||||
|
|
||||||||||||
|
Weighted average shares of common stock
outstanding:
|
||||||||||||
|
Basic
|
18,358 | 22,651 | 22,669 | |||||||||
|
|
||||||||||||
|
Diluted
|
19,476 | 22,753 | 22,792 | |||||||||
|
|
||||||||||||
F-4
| Net | ||||||||||||||||||||
| Additional | Stockholders’ | |||||||||||||||||||
| Common Stock | paid-in | Accumulated | Equity | |||||||||||||||||
| Shares | Amount | capital | Deficit | (Deficit) | ||||||||||||||||
|
Balance at December
30, 2001 (as previously
reported)
|
15,602,220 | $ | 156 | $ | 7,058 | $ | (91,639 | ) | $ | (84,425 | ) | |||||||||
|
Restatement adjustments
|
— | — | — | (3,166 | ) | (3,166 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
Balance at December 30,
2001 (restated)
|
15,602,220 | 156 | 7,058 | (94,805 | ) | (87,591 | ) | |||||||||||||
|
Redeemable preferred
stock dividend and
redemption premiums
|
— | — | — | (7,999 | ) | (7,999 | ) | |||||||||||||
|
Issuance of common stock
|
7,112,421 | 71 | 86,243 | — | 86,314 | |||||||||||||||
|
Repurchase of common stock
|
(536,623 | ) | (5 | ) | (6,951 | ) | — | (6,956 | ) | |||||||||||
|
Stock issuance costs
|
— | — | (2,342 | ) | — | (2,342 | ) | |||||||||||||
|
Net income (restated)
|
— | — | — | 17,273 | 17,273 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Balance at December 29,
2002 ( restated)
|
22,178,018 | 222 | 84,008 | (85,531 | ) | (1,301 | ) | |||||||||||||
|
Net income (restated)
|
— | — | — | 23,417 | 23,417 | |||||||||||||||
|
Exercise of warrant
|
485,909 | 5 | (5 | ) | — | — | ||||||||||||||
|
|
||||||||||||||||||||
|
Balance at December 28,
2003 (restated)
|
22,663,927 | 227 | 84,003 | (62,114 | ) | 22,116 | ||||||||||||||
|
Net income
|
— | — | — | 33,519 | 33,519 | |||||||||||||||
|
Issuance of common stock
|
13,500 | — | 228 | — | 228 | |||||||||||||||
|
Dividend
|
— | — | — | (1,587 | ) | (1,587 | ) | |||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Balance at January 2, 2005
|
22,677,427 | $ | 227 | $ | 84,231 | $ | (30,182 | ) | $ | 54,276 | ||||||||||
|
|
||||||||||||||||||||
F-5
| Year ended | Year ended | |||||||||||
| December 29, | December 28, | |||||||||||
| 2002 | 2003 | Year ended | ||||||||||
| (as restated) | (as restated) | January 2, 2005 | ||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net income
|
$ | 17,273 | $ | 23,417 | $ | 33,519 | ||||||
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
||||||||||||
|
Depreciation and amortization
|
10,038 | 10,826 | 12,296 | |||||||||
|
Amortization of deferred finance charges
and discounts
|
2,291 | 594 | 411 | |||||||||
|
Deferred tax provision (benefit)
|
4,188 | (761 | ) | (1,311 | ) | |||||||
|
Loss on disposal of equipment
and leasehold interest
|
314 | 140 | 68 | |||||||||
|
Premium (discount) and unamortized financing fees related to redemption of debt
|
4,557 | 3,434 | 2,067 | |||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Merchandise inventories
|
(8,351 | ) | (8,211 | ) | (21,095 | ) | ||||||
|
Trade and other receivables, net
|
(854 | ) | (2,121 | ) | 2,543 | |||||||
|
Prepaid expenses and other assets
|
(350 | ) | (2,693 | ) | (3,366 | ) | ||||||
|
Accounts payable
|
5,404 | 4,371 | 7,442 | |||||||||
|
Accrued expenses and other liabilities
|
(1,603 | ) | 4,427 | 6,572 | ||||||||
|
|
||||||||||||
|
Net cash provided by
operating activities
|
32,907 | 33,423 | 39,146 | |||||||||
|
|
||||||||||||
|
Cash flows from investing activities — purchases of
property and equipment
|
(10,999 | ) | (11,226 | ) | (21,445 | ) | ||||||
|
|
||||||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Net borrowings (repayments) under revolving credit facilities, and other
|
1,579 | 34,735 | 10,845 | |||||||||
|
Borrowings (repayments) under term loan
|
— | — | 20,000 | |||||||||
|
Issuance of common stock
|
86,314 | — | 228 | |||||||||
|
Stock issuance costs
|
(2,342 | ) | — | — | ||||||||
|
Repayment of senior discount notes and 10.875% senior notes
|
(31,006 | ) | (57,343 | ) | (49,471 | ) | ||||||
|
Redemption of preferred stock
|
(67,921 | ) | — | — | ||||||||
|
Repurchase of common stock
|
(6,956 | ) | — | — | ||||||||
|
Dividends paid
|
— | — | (1,587 | ) | ||||||||
|
|
||||||||||||
|
Net cash used in financing activities
|
(20,332 | ) | (22,608 | ) | (19,985 | ) | ||||||
|
|
||||||||||||
|
Net increase (decrease) in cash
|
1,576 | (411 | ) | (2,284 | ) | |||||||
|
Cash at beginning of year
|
7,865 | 9,441 | 9,030 | |||||||||
|
|
||||||||||||
|
Cash at end of year
|
$ | 9,441 | $ | 9,030 | $ | 6,746 | ||||||
|
|
||||||||||||
|
|
||||||||||||
|
Supplemental disclosures of non-cash financing activities:
|
||||||||||||
|
Accreted dividends on preferred stock
|
$ | 3,529 | $ | — | $ | — | ||||||
|
|
||||||||||||
|
Supplemental disclosures of cash flow information:
|
||||||||||||
|
Interest paid
|
$ | 13,066 | $ | 11,505 | $ | 7,072 | ||||||
|
|
||||||||||||
|
Income taxes paid
|
$ | 11,850 | $ | 14,908 | $ | 22,899 | ||||||
|
|
||||||||||||
F-6
| (1) | Basis of Presentation and Description of Business | |
| The accompanying consolidated financial statements as of December 28, 2003 and January 2, 2005 and for the years ended December 29, 2002 (“fiscal 2002”), December 28, 2003 (“fiscal 2003”) and January 2, 2005 (“fiscal 2004”) represent the financial position and results of operations of Big 5 Sporting Goods Corporation (“Company”) and its wholly owned subsidiary, Big 5 Corp. and Big 5 Corp.’s wholly owned subsidiary, Big 5 Services Corp. The Company operates in one business segment, as a sporting goods retailer under the Big 5 Sporting Goods name carrying a broad range of hardlines, softlines and footwear, operating 309 stores at January 2, 2005 in California, Washington, Arizona, Oregon, Texas, New Mexico, Nevada, Utah, Idaho and Colorado. | ||
| (2) | Prior Period Adjustment and Restatement | |
| The Company has restated the consolidated balance sheet at December 28, 2003 and the consolidated statements of operations, the consolidated statements of stockholders’ equity (deficit) and the consolidated statements of cash flows for the fiscal years ended December 29, 2002 and December 28, 2003 in this Annual Report on Form 10-K. The Company also has restated its quarterly financial information for fiscal 2003 and the first three quarters of fiscal 2004. The restatement reflects adjustments to correct the following: |
| • | Accounts payable, cost of goods sold, buying and occupancy (“COGS”) and sales and administrative expense (“SG&A”) were misstated because the Company did not reconcile certain accounts payable subaccounts correctly or on a sufficiently frequent basis. This failure created unmatched credits in accounts payable for each of the Company’s 2002 and 2003 fiscal years, which were erroneously assumed to be over-accruals. These assumed over-accruals were reversed at interim and year end periods and included in net income. This resulted in an understatement of accounts payable and an overstatement of net income, as well as a corresponding overstatement of stockholders’ equity, for each of these periods. The impact on net income of the adjustments necessary to correct for these errors was $(1.8) million and $(1.4) million for fiscal 2002 and fiscal 2003, or $(0.09) and $(0.06) per share (diluted), respectively. | ||
| • | Operating expenses were misstated because of the Company’s accounting treatment for leases. Following the February 7, 2005 letter from the SEC’s Chief Accountant clarifying the SEC staff’s interpretation of certain lease accounting issues, the Company revised its definition of the lease term to begin on the possession date, which may precede the commencement date as defined in the lease agreement, and to include reasonably assured renewal periods. The Company also reclassified the accrual of the current non-cash portion of rental expense and the amortization of landlord allowances for tenant improvements from depreciation and amortization to occupancy costs. The impact on net income of the adjustments necessary to correct for these errors was $(0.1) million and $(0.2) million for fiscal 2002 and fiscal 2003, or $(0.01) and $(0.01) per share (diluted), respectively. |
F-7
| • | Inventory, COGS and SG&A were misstated because the Company incorrectly capitalized certain overhead costs related to inventory, incorrectly determined the net realizable value of inventory and the shrink of returned merchandise, and recorded sales of damaged or returned merchandise as an offset to inventory rather than as revenue. The impact on net income of the adjustments necessary to correct for these errors was $0.7 million and $(0.7) million for fiscal 2002 and fiscal 2003, or $0.03 and $(0.03) per share (diluted), respectively. | ||
| • | Inventory and accounts payable were misstated because the Company did not record all inventory in-transit. Adjustments necessary to record all inventory in-transit increased (decreased) reported inventory and accounts payable by $6.3 million and $5.6 million for fiscal 2002 and fiscal 2003. There was no impact on net income. | ||
| • | Net sales, COGS and inventory were misstated because the Company did not provide an allowance for estimated sales returns. During the fiscal 2004 third quarter, the Company changed its accounting for sales returns by establishing an allowance for estimated sales returns. This resulted in a cumulative adjustment in the third quarter of fiscal 2004 to establish the allowance. As part of the restatement, the Company reversed the adjustment to the fiscal third quarter 2004 financial statements to establish the return reserve and recorded the establishment of the reserve on a quarterly basis in the individual financial statements for fiscal 2002, 2003 and 2004. The impact on net income of reversing the cumulative adjustment in the third quarter of fiscal 2004 and recording the liability on a quarterly basis was ($0.1) million and $0.0 million in fiscal 2002 and fiscal 2003, or $(0.01) and $0.00 per share (diluted), respectively. | ||
| • | COGS, SG&A and accrued liabilities were misstated and required adjustments to correct the timing, classification and method of accounting for certain transactions. The impact on net income of the adjustments necessary to correct for these errors was $(0.4) million and $(0.5) million for fiscal 2002 and fiscal 2003, or $(0.02) and $(0.02) per share (diluted), respectively. | ||
| The tax provision was adjusted for the impact of adjustments described in the preceding paragraph. | |||
| The following is a summary of the effects of the restatement on the Company’s consolidated balance sheet at December 28, 2003 and the Company’s consolidated statements of operations and cash flows for the fiscal years ended December 29, 2002 and December 28, 2003. The opening balance of accumulated deficit as of December 30, 2001 in the consolidated statements of stockholders’ equity has been reduced by $3.2 million to reflect adjustments in prior periods. | |||
| Consolidated Balance Sheet | ||||||||||||
| As previously | ||||||||||||
| reported | Adjustments | As restated | ||||||||||
| (In Thousands) | ||||||||||||
|
December 28, 2003
|
||||||||||||
|
Trade and other receivables
|
$ | 11,522 | $ | (1,870 | ) | $ | 9,652 | |||||
|
Merchandise inventories
|
179,555 | 5,563 | 185,118 | |||||||||
|
Prepaid expenses
|
5,017 | 100 | 5,117 | |||||||||
|
Deferred income taxes, net
|
— | 14,273 | 14,273 | |||||||||
|
Total current assets
|
205,124 | 18,066 | 223,190 | |||||||||
|
Property and
Equipment
|
||||||||||||
|
Buildings
and Improvements
|
38,666 | 4,235 | 42,901 | |||||||||
|
Less
accumulated depreciation and amortization
|
(56,241 | ) | (2,962 | ) | (59,203 | ) | ||||||
|
Net property and equipment
|
46,952 | 1,273 | 48,225 | |||||||||
|
Deferred income taxes, net
|
9,628 | (9,628 | ) | — | ||||||||
|
Total assets
|
272,025 | 9,711 | 281,736 | |||||||||
|
Accounts payable
|
76,004 | 13,686 | 89,690 | |||||||||
|
Accrued expenses
|
54,717 | (3,230 | ) | 51,487 | ||||||||
|
Total current liabilities
|
130,721 | 10,456 | 141,177 | |||||||||
|
Deferred income taxes, net
|
— | 2,704 | 2,704 | |||||||||
|
Deferred rent
|
11,654 | 4,399 | 16,053 | |||||||||
|
Total liabilities
|
242,061 | 17,559 | 259,620 | |||||||||
|
Accumulated deficit
|
(54,266 | ) | (7,848 | ) | (62,114 | ) | ||||||
|
Net stockholders’ equity
|
29,964 | (7,848 | ) | 22,116 | ||||||||
|
Total liabilities and stockholders’ equity
|
272,025 | 9,711 | 281,736 | |||||||||
F-8
| Consolidated Statements of Operations | ||||||||||||
| As previously | ||||||||||||
| reported | Adjustments | As restated | ||||||||||
| (In Thousands, Except per Share Data) | ||||||||||||
|
Fiscal
year ended December 29, 2002
|
||||||||||||
|
Net sales
|
$ | 667,469 | $ | 81 | $ | 667,550 | ||||||
|
Cost of goods sold, buying and occupancy
|
429,858 | (688 | ) | 429,170 | ||||||||
|
Gross profit
|
237,611 | 769 | 238,380 | |||||||||
|
Selling and administrative
|
174,868 | 3,879 | 178,747 | |||||||||
|
Depreciation and amortization
|
9,966 | 72 | 10,038 | |||||||||
|
Total
operating expenses
|
184,834 | 3,951 | 188,785 | |||||||||
|
Operating income
|
52,777 | (3,182 | ) | 49,595 | ||||||||
|
Interest expense, net
|
15,825 | (140 | ) | 15,685 | ||||||||
|
Income before income taxes
|
32,395 | (3,042 | ) | 29,353 | ||||||||
|
Income taxes
|
13,313 | (1,233 | ) | 12,080 | ||||||||
|
Net income
|
19,082 | (1,809 | ) | 17,273 | ||||||||
|
Net income available to common stockholders
|
11,083 | (1,809 | ) | 9,274 | ||||||||
|
Earnings per share (basic)
|
$ | 0.60 | $ | (0.09 | ) | $ | 0.51 | |||||
|
Earnings per share (diluted)
|
$ | 0.57 | $ | (0.09 | ) | $ | 0.48 | |||||
|
|
||||||||||||
|
Fiscal
year ended December 28, 2003
|
||||||||||||
|
Net sales
|
$ | 709,740 | $ | 653 | $ | 710,393 | ||||||
|
Cost of goods sold, buying and occupancy
|
453,814 | 1,787 | 455,601 | |||||||||
|
Gross profit
|
255,926 | (1,134 | ) | 254,792 | ||||||||
|
Selling and administrative
|
186,798 | 3,084 | 189,882 | |||||||||
|
Depreciation and amortization
|
10,412 | 414 | 10,826 | |||||||||
|
Total
operating expenses
|
197,210 | 3,498 | 200,708 | |||||||||
|
Operating income
|
58,716 | (4,632 | ) | 54,084 | ||||||||
|
Interest expense, net
|
11,405 | 140 | 11,545 | |||||||||
|
Income before income taxes
|
43,877 | (4,772 | ) | 39,105 | ||||||||
|
Income taxes
|
17,587 | (1,899 | ) | 15,688 | ||||||||
|
Net income
|
26,290 | (2,873 | ) | 23,417 | ||||||||
|
Net income available to common stockholders
|
26,290 | (2,873 | ) | 23,417 | ||||||||
|
Earnings per share (basic)
|
$ | 1.16 | $ | (0.13 | ) | $ | 1.03 | |||||
|
Earnings per share (diluted)
|
$ | 1.16 | $ | (0.13 | ) | $ | 1.03 | |||||
| Consolidated Statements of Cash Flows | ||||||||||||
| As previously | ||||||||||||
| reported | Adjustments | As restated | ||||||||||
| (In Thousands) | ||||||||||||
|
Fiscal
year ended December 29, 2002
|
||||||||||||
|
Cash flows from operating
activities
|
$ | 32,115 | $ | 792 | $ | 32,907 | ||||||
|
Cash flows from investing activities
|
(10,207 | ) | (792 | ) | (10,999 | ) | ||||||
|
|
||||||||||||
|
Fiscal
year ended December 28, 2003
|
||||||||||||
|
Cash flows
from operating activities
|
$ | 32,679 | $ | 744 | $ | 33,423 | ||||||
|
Cash flows from investing activities
|
(10,482 | ) | (744 | ) | (11,226 | ) | ||||||
| (3) | Initial Public Offering | |
| In the second quarter of fiscal 2002, the Company completed an initial public offering of 8.1 million shares of common stock, of which 1.6 million shares were sold by selling stockholders. In the third quarter of fiscal 2002, the Company’s underwriters exercised their right to purchase an additional 1.2 million shares through their over-allotment option, of which 0.5 million shares were sold by selling stockholders. With net proceeds of $76.1 million from the offering and total net proceeds of $84.0 million after exercise of the underwriters’ over-allotment option, and together with borrowings under its credit facility, the Company redeemed all of its outstanding senior discount notes for $27.5 million and preferred stock for $67.9 million, paid bonuses to executive officers and directors of $2.0 million which were funded by a reduction in the redemption price of the Company’s preferred stock and repurchased 0.5 million shares of the Company’s common stock from non-executive employees for $6.9 million. All uses of proceeds, other than the payment of a portion of the bonuses related to the initial public offering and certain initial public offering costs, occurred in the third quarter of fiscal 2002. |
F-9
| (4) | Summary of Significant Accounting Policies |
F-10
F-11
F-12
| Year Ended | Year Ended | Year Ended | ||||||||||
|
December 29,
2002 |
December 28,
2003 |
January 2,
2005 |
||||||||||
| (as restated) | (as restated) | |||||||||||
|
Net income available
to common
stockholders, as
reported
|
$ | 9,274 | $ | 23,417 | $ | 33,519 | ||||||
|
Deduct: Total
stock-based employee
compensation expense
determined under fair
value based methods
for all awards, net of
related tax effects
|
310 | 280 | 822 | |||||||||
|
Pro forma net income
|
$ | 8,964 | $ | 23,137 | $ | 32,697 | ||||||
|
Earnings per share:
|
||||||||||||
|
Basic — as reported
|
$ | 0.51 | $ | 1.03 | $ | 1.48 | ||||||
|
Basic — pro forma
|
$ | 0.49 | $ | 1.02 | $ | 1.44 | ||||||
|
Diluted — as reported
|
$ | 0.48 | $ | 1.03 | $ | 1.47 | ||||||
|
Diluted — pro forma
|
$ | 0.46 | $ | 1.02 | $ | 1.43 | ||||||
|
Risk free interest rate
|
3.6 | % | 2.9 | % | 2.7 | % | ||||||
|
Expected lives
|
4 years | 4 years | 4 years | |||||||||
|
Expected volatility
|
60 | % | 60 | % | 60 | % | ||||||
|
Expected dividends
|
— | — | — | |||||||||
F-13
| Year ended | Year ended | Year ended | ||||||||||
|
December 29,
2002 |
December 28,
2003 |
January 2,
2005 |
||||||||||
| (as restated) | (as restated) | |||||||||||
|
Net income
|
$ | 17,273 | 23,417 | 33,519 | ||||||||
|
Less: Preferred stock dividends
|
7,999 | — | — | |||||||||
|
|
||||||||||||
|
Net income available to common stockholders
|
$ | 9,274 | 23,417 | 33,519 | ||||||||
|
|
||||||||||||
|
Basic earnings per share
|
$ | 0.51 | 1.03 | 1.48 | ||||||||
|
|
||||||||||||
|
Diluted earnings per share
|
$ | 0.48 | 1.03 | 1.47 | ||||||||
|
|
||||||||||||
|
Weighted average shares of common stock outstanding:
|
||||||||||||
|
Basic
|
18,358 | 22,651 | 22,669 | |||||||||
|
Dilutive effect of common stock equivalents
arising from stock options
|
— | 87 | 123 | |||||||||
|
Dilutive effect of unvested restricted stock
|
632 | — | — | |||||||||
|
Dilutive effect of outstanding warrant
|
486 | 15 | — | |||||||||
|
|
||||||||||||
|
Diluted
|
19,476 | 22,753 | 22,792 | |||||||||
|
|
||||||||||||
F-14
F-15
| (5) | Long-Term Debt |
|
December 28,
2003 |
January 2,
2005 |
|||||||
| Revolving credit facility | $ | 51,656 | $ | 61,335 | ||||
| Term loan | — | 20,000 | ||||||
| 10.875% senior notes due 2007, net of unamortized discount | 48,030 | — | ||||||
| 99,686 | 81,335 | |||||||
| Less current portion | — | 6,667 | ||||||
| Total long-term debt | $ | 99,686 | $ | 74,668 | ||||
F-16
| (6) | Fair Values of Financial Instruments |
| (7) | Lease Commitments |
| Year ended | Year ended | Year ended | ||||||||||
| December 29, | December 28, | January 2, | ||||||||||
| 2002 | 2003 | 2005 | ||||||||||
| (as restated) | (as restated) | |||||||||||
|
Cash rental payments
|
$ | 33,693 | $ | 36,768 | $ | 41,696 | ||||||
|
Noncash rentals
|
177 | (107 | ) | (340 | ) | |||||||
|
Contingent rentals
|
1,730 | 1,730 | 1,676 | |||||||||
|
|
||||||||||||
|
Rental expense
|
$ | 35,600 | $ | 38,391 | $ | 43,032 | ||||||
|
|
||||||||||||
|
Year ending:
|
||||
|
2005
|
$ | 45,745 | ||
|
2006
|
43,234 | |||
|
2007
|
40,283 | |||
|
2008
|
37,970 | |||
|
2009
|
31,966 | |||
|
Thereafter
|
116,981 |
F-17
| (8) | Accrued Expenses |
| December 28, | January 2, | |||||||
| 2003 | 2005 | |||||||
| (as restated) | ||||||||
|
Payroll and related expenses
|
$ | 15,092 | $ | 18,402 | ||||
|
Self
Insurance
|
6,322 | 7,307 | ||||||
|
Advertising
|
4,782 | 5,867 | ||||||
|
Sales tax
|
8,831 | 8,960 | ||||||
|
Gift cards and certificates
|
4,375 | 5,888 | ||||||
|
Occupancy
costs
|
4,399 | 4,254 | ||||||
|
Income tax
|
532 | 676 | ||||||
|
Other
|
7,154 | 6,369 | ||||||
|
|
||||||||
|
|
$ | 51,487 | $ | 57,723 | ||||
|
|
||||||||
| (9) | Income Taxes |
| Current | Deferred | Total | ||||||||||
|
2002 (restated):
|
||||||||||||
|
Federal
|
$ | 6,395 | $ | 4,319 | $ | 10,714 | ||||||
|
State
|
1,497 | (131 | ) | 1,366 | ||||||||
|
|
||||||||||||
|
|
$ | 7,892 | $ | 4,188 | $ | 12,080 | ||||||
|
|
||||||||||||
|
2003 (restated):
|
||||||||||||
|
Federal
|
$ | 13,554 | $ | (853 | ) | $ | 12,701 | |||||
|
State
|
2,895 | 92 | 2,987 | |||||||||
|
|
||||||||||||
|
|
$ | 16,449 | $ | (761 | ) | $ | 15,688 | |||||
|
|
||||||||||||
|
2004:
|
||||||||||||
|
Federal
|
$ | 18,040 | $ | (206 | ) | $ | 17,834 | |||||
|
State
|
5,049 | (1,105 | ) | 3,944 | ||||||||
|
|
||||||||||||
|
|
$ | 23,089 | $ | (1,311 | ) | $ | 21,778 | |||||
|
|
||||||||||||
| Year ended | Year ended | Year ended | ||||||||||
| December 29, | December 28, | January 2, | ||||||||||
| 2002 | 2003 | 2005 | ||||||||||
| (as restated) | (as restated) | |||||||||||
|
Tax expense at statutory rate
|
$ | 10,273 | $ | 13,687 | $ | 19,354 | ||||||
|
State taxes, net of federal benefit
|
1,448 | 1,899 | 2,565 | |||||||||
|
Other
|
359 | 102 | (141 | ) | ||||||||
|
|
||||||||||||
|
|
$ | 12,080 | $ | 15,688 | $ | 21,778 | ||||||
|
|
||||||||||||
F-18
| December 28, | January 2, | |||||||
| 2003 | 2005 | |||||||
| (as restated) | ||||||||
|
Deferred assets:
|
||||||||
|
Self-insurance liabilities
|
$ | 2,520 | $ | 2,896 | ||||
|
Employee benefits
|
3,012 | 3,189 | ||||||
|
State taxes
|
1,013 | 1,539 | ||||||
|
Accrued expenses
|
6,639 | 7,104 | ||||||
|
Tax credits
|
680 | 775 | ||||||
|
Other
|
564 | 929 | ||||||
|
|
||||||||
|
Deferred tax assets
|
14,428 | 16,432 | ||||||
|
Deferred liabilities — basis difference in fixed assets
|
2,859 | 3,551 | ||||||
|
|
||||||||
|
Net deferred tax assets
|
$ | 11,569 | $ | 12,881 | ||||
|
|
||||||||
| (10) | Employee Benefit Plans |
| (11) | Related Party Transactions |
F-19
F-20
| Executive Officer and a director of the Company, and Michael D. Miller, a director of the Company. The Company recognized expenses of $1.5 million, $0.1 million and $0.2 million in fiscal 2002, 2003 and 2004, respectively, to establish a liability for future obligations under this agreement. | ||
| (12) | Contingencies | |
| On August 12, 2005, the Company was served with a complaint filed in the California Superior Court in the County of Los Angeles, entitled William Childers v. Sandra N. Bane, et al., Case No. BC337945 (“Childers”) , alleging breach of fiduciary duty, violation of the Company’s bylaws and unjust enrichment by certain executive officers. This complaint was brought both as a purported stockholder class action and as a purported derivative action on behalf of the Company against all of the members of the Company’s board of directors and certain executive officers. The complaint alleges that the Company’s directors breached their fiduciary duties and violated the Company’s bylaws by, among other things, failing to hold an annual stockholders’ meeting on a timely basis and allegedly ignoring certain unspecified internal control problems, and that certain executive officers were unjustly enriched by their receipt of certain compensation items. The complaint seeks an order requiring that an annual meeting of the Company’s stockholders be held, an award of unspecified damages in favor of the Company and against the individual defendants and an award of attorneys’ fees. The Company believes that the complaint is without merit and intends to defend the suit vigorously. An adverse result in this litigation could harm the Company’s financial condition and results of operations, and the costs of defending this litigation could have a negative impact on the Company’s results of operations. The Company has entered into indemnification agreements with each of its directors and executive officers. These agreements, among other things, provide for indemnification of the Company’s directors and executive officers for expenses, judgments, fines and settlement amounts (collectively, “Liabilities”) incurred by any such person in any action or proceeding arising out of such person’s services as a director or executive officer or at the Company’s request, including as a result of this complaint, if the applicable director or executive officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. Pursuant to these agreements, the Company may advance expenses and indemnify, and in certain cases is required to advance expenses and indemnify, its directors and executive officers for certain Liabilities incurred in connection with or related to the Childers action. | ||
| In addition, the Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity. | ||
| (13) | Selected Quarterly Financial Data (unaudited) | |
| The Selected Quarterly Financial Data set forth in this Note 13 has been revised to reflect the restatement items described in Note 2, “Prior Period Adjustment and Restatement”, above. |
F-21
| First | Second | Third | Fourth | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Total | ||||||||||||||||
|
As previously reported
|
||||||||||||||||||||
|
Net sales
|
$ | 164,517 | $ | 170,125 | $ | 183,275 | $ | 191,823 | $ | 709,740 | ||||||||||
|
Gross profit
|
$ | 57,852 | $ | 62,595 | $ | 65,210 | $ | 70,269 | $ | 255,926 | ||||||||||
|
Net income
|
$ | 3,397 | $ | 6,268 | $ | 6,744 | $ | 9,881 | $ | 26,290 | ||||||||||
|
Net income per share (basic)
|
$ | 0.15 | $ | 0.28 | $ | 0.30 | $ | 0.44 | $ | 1.16 | ||||||||||
|
Net income per share (diluted)
|
$ | 0.15 | $ | 0.28 | $ | 0.30 | $ | 0.43 | $ | 1.16 | ||||||||||
|
|
||||||||||||||||||||
|
Adjustments
|
||||||||||||||||||||
|
Net sales
|
$ | 980 | $ | 126 | $ | 334 | $ | (787 | ) | $ | 653 | |||||||||
|
Gross profit
|
$ | 488 | $ | (580 | ) | $ | (130 | ) | $ | (913 | ) | $ | (1,134 | ) | ||||||
|
Net income
|
$ | 3 | $ | (576 | ) | $ | (454 | ) | $ | (1,846 | ) | $ | (2,873 | ) | ||||||
|
Net income per share (basic)
|
$ | — | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.09 | ) | $ | (0.13 | ) | ||||||
|
Net income per share (diluted)
|
$ | — | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.13 | ) | ||||||
|
|
||||||||||||||||||||
|
As restated
|
||||||||||||||||||||
|
Net sales
|
$ | 165,497 | $ | 170,251 | $ | 183,609 | $ | 191,036 | $ | 710,393 | ||||||||||
|
Gross profit
|
$ | 58,340 | $ | 62,015 | $ | 65,080 | $ | 69,356 | $ | 254,792 | ||||||||||
|
Net income
|
$ | 3,400 | $ | 5,692 | $ | 6,290 | $ | 8,035 | $ | 23,417 | ||||||||||
|
Net income per share (basic)
|
$ | 0.15 | $ | 0.25 | $ | 0.28 | $ | 0.35 | $ | 1.03 | ||||||||||
|
Net income per share (diluted)
|
$ | 0.15 | $ | 0.25 | $ | 0.28 | $ | 0.35 | $ | 1.03 | ||||||||||
| First | Second | Third | Fourth | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Total | ||||||||||||||||
|
As previously reported
|
||||||||||||||||||||
|
Net sales
|
$ | 181,005 | $ | 184,487 | $ | 195,818 | N/A | N/A | ||||||||||||
|
Gross profit
|
$ | 65,639 | $ | 67,681 | $ | 70,412 | N/A | N/A | ||||||||||||
|
Net income
|
$ | 6,799 | $ | 7,504 | $ | 8,351 | N/A | N/A | ||||||||||||
|
Net income per share (basic)
|
$ | 0.30 | $ | 0.33 | $ | 0.37 | N/A | N/A | ||||||||||||
|
Net income per share (diluted)
|
$ | 0.30 | $ | 0.33 | $ | 0.37 | N/A | N/A | ||||||||||||
|
|
||||||||||||||||||||
|
Adjustments
|
||||||||||||||||||||
|
Net sales
|
$ | 944 | $ | 186 | $ | 2,179 | N/A | N/A | ||||||||||||
|
Gross profit
|
$ | 2,591 | $ | 381 | $ | 349 | N/A | N/A | ||||||||||||
|
Net income
|
$ | 1,078 | $ | 208 | $ | 126 | N/A | N/A | ||||||||||||
|
Net income per share (basic)
|
$ | 0.05 | $ | 0.01 | $ | — | N/A | N/A | ||||||||||||
|
Net income per share (diluted)
|
$ | 0.04 | $ | 0.01 | $ | — | N/A | N/A | ||||||||||||
F-22
| First | Second | Third | Fourth | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Total | ||||||||||||||||
|
As restated
(1)
|
||||||||||||||||||||
|
Net sales
|
$ | 181,949 | $ | 184,673 | $ | 197,997 | $ | 217,596 | $ | 782,215 | ||||||||||
|
Gross profit
|
$ | 68,230 | $ | 68,062 | $ | 70,761 | $ | 78,529 | $ | 285,582 | ||||||||||
|
Net income
|
$ | 7,877 | $ | 7,712 | $ | 8,477 | $ | 9,453 | $ | 33,519 | ||||||||||
|
Net income per share (basic)
|
$ | 0.35 | $ | 0.34 | $ | 0.37 | $ | 0.42 | $ | 1.48 | ||||||||||
|
Net income per share (diluted)
|
$ | 0.34 | $ | 0.34 | $ | 0.37 | $ | 0.42 | $ | 1.47 | ||||||||||
| (1) | The fourth quarter and full year of fiscal 2004 had not been reported previously, and therefore did not require restatement. |
| (14) | Stock Options, Restricted Stock and Warrant | |
| 1997 Management Equity Plan | ||
| The 1997 Management Equity Plan (“1997 Plan”) provides for the sale of shares or granting of incentive stock options or non-qualified stock options to officers, directors and selected key employees of the Company to purchase shares of the Company’s common stock. The 1997 Plan is administered by the board of directors of the Company and the granting of awards under the 1997 Plan is discretionary with respect to the individuals to whom and the times at which awards are made, the number of options awarded or shares sold, and the vesting and exercise period of such awards. The options and stock granted under the 1997 Plan must have an exercise or sale price that is no less than 85% of the fair value of the Company’s common stock at the time the stock option or stock is granted or sold. The aggregate number of common shares that may be allocated to awards under the 1997 Plan is 4,536,000 shares. No more than 810,000 of these shares shall be subject to stock options outstanding at any time. Options granted or restricted stock sold under the 1997 Plan vest ratably over five years from the date the options are granted or the restricted stock is issued and have an exercise period not to exceed 120 months from the date the stock options are granted or the restricted stock is issued. The 1997 Plan does not allow for the transfer of options or stock purchase rights. As of December 29, 2002, December 28, 2003 and January 2, 2005, no options had been granted under the 1997 Plan and 3,744,702 shares of restricted common stock had been sold under the 1997 Plan. The Company does not intend to make additional grants under the 1997 Plan. At January 2, 2005, all shares granted under the 1997 Plan were fully vested. | ||
| Warrant | ||
| In connection with the issuance of the senior discount notes in 1997, the Company issued a warrant to purchase 486,000 shares of common stock. The warrant was exercisable at any time with an exercise price of $0.00123 per share and would have expired on November 30, 2008. The fair value of the warrant at the time of issuance was $0.3 million, determined by cash purchases of common stock by third parties on the same date. The warrant was exercised in the first quarter of fiscal 2003. | ||
| 2002 Stock Incentive Plan | ||
| In June 2002, the Company adopted the 2002 Stock Incentive Plan (“2002 Plan”). The 2002 Plan provides for the grant of incentive stock options and non-qualified stock options to the Company’s employees, directors, and specified consultants. Under the 2002 Plan, the Company may grant options to purchase up to 3,645,000 shares of common stock. Options granted under the 2002 Plan vest ratably over various terms with a maximum life of ten years. At January 2, 2005, options to |
F-23
| purchase 720,150 shares of common stock had been granted and remain outstanding under the 2002 Plan. | ||
| Stock option activity for all plans during the periods presented was as follows: |
| No. of | Weighted Average | |||||||
| Shares | Exercise Price | |||||||
|
Balance at December 30, 2001
|
— | — | ||||||
|
Granted
|
61,000 | $ | 12.91 | |||||
|
Exercised
|
— | — | ||||||
|
Forfeited
|
— | — | ||||||
|
|
||||||||
|
Balance at December 29, 2002
|
61,000 | 12.91 | ||||||
|
Granted
|
339,800 | 10.32 | ||||||
|
Exercised
|
— | — | ||||||
|
Forfeited
|
(17,000 | ) | 10.69 | |||||
|
|
||||||||
|
Balance at December 28, 2003
|
383,800 | 10.72 | ||||||
|
Granted
|
393,200 | 24.36 | ||||||
|
Exercised
|
(13,500 | ) | 11.37 | |||||
|
Forfeited
|
(43,350 | ) | 17.63 | |||||
|
|
||||||||
|
Balance at January 2, 2005
|
720,150 | $ | 17.74 | |||||
|
|
||||||||
| Outstanding | Exercisable | |||||||||||||||||||
| Number of | Weighted Average | Weighted Average | Number of | Weighted Average | ||||||||||||||||
| Exercise Prices | Options | Years Remaining | Exercise Price | Options | Exercise Price | |||||||||||||||
|
$10.50
|
2,000 | 7.6 | $ | 10.50 | 1,000 | $ | 10.50 | |||||||||||||
|
13.00
|
49,050 | 7.5 | 13.00 | 22,350 | 13.00 | |||||||||||||||
|
10.32
|
297,600 | 7.5 | 10.32 | 77,200 | 10.32 | |||||||||||||||
|
24.61
|
326,500 | 8.5 | 24.61 | 9,500 | 24.61 | |||||||||||||||
|
22.00
|
40,000 | 9.6 | 22.00 | — | 22.00 | |||||||||||||||
|
24.32
|
2,500 | 9.8 | 24.32 | — | 24.32 | |||||||||||||||
|
27.23
|
2,500 | 9.9 | 27.23 | — | 27.23 | |||||||||||||||
|
|
||||||||||||||||||||
|
|
720,150 | 110,050 | ||||||||||||||||||
|
|
||||||||||||||||||||
F-24
| Balance at | Charged to costs | Balance at end of | ||||||||||||||
| beginning of period | and expenses | Deductions | period | |||||||||||||
|
December 29, 2002 (as restated)
|
||||||||||||||||
|
Allowance for doubtful receivables
|
554 | 229 | (323 | ) | 460 | |||||||||||
|
Allowance for sales returns
|
1,897 | 1,011 | (452 | ) | 2,456 | |||||||||||
|
Inventory valuation allowance
|
1,403 | 2,070 | (2,361 | ) | 1,112 | |||||||||||
|
December 28, 2003 (as restated)
|
||||||||||||||||
|
Allowance for doubtful receivables
|
460 | 175 | (376 | ) | 259 | |||||||||||
|
Allowance for sales returns
|
2,456 | 1,066 | (946 | ) | 2,576 | |||||||||||
|
Inventory valuation allowance
|
1,112 | 3,015 | (2,822 | ) | 1,305 | |||||||||||
|
January 2, 2005
|
||||||||||||||||
|
Allowance for doubtful receivables
|
259 | 205 | (206 | ) | 258 | |||||||||||
|
Allowance for sales returns
|
2,576 | 1,083 | (848 | ) | 2,811 | |||||||||||
|
Inventory valuation allowance
|
1,305 | 2,423 | (2,330 | ) | 1,398 | |||||||||||
II-1
Exhibit 10.22
BIG 5 SPORTING GOODS CORPORATION
STOCK OPTION GRANT NOTICE
(2002 Stock Incentive Plan)
Big 5 Sporting Goods Corporation (the
“Company”
), pursuant to its 2002 Stock
Incentive Plan (the
“Plan”
), hereby grants to Optionee the option to purchase
the number of Shares of the Company set forth below (the
“Option”
). This Option
is subject to all of the terms and conditions as set forth in this Grant Notice,
the Stock Option Agreement (the
“Option Agreement”
) and the Plan, all of which
are attached hereto and incorporated herein in their entirety, and the Amended
and Restated Employment Agreement dated June 14, 2002 by and among the Company,
Big 5 Corp. and the Optionee (the
“Employment Agreement”
).
Steven G. Miller
$
[First day of
month following month in which option is granted]
Vesting Schedule: Subject to the restrictions and limitations of the Option Agreement, the Plan and the Employment Agreement, this Option shall vest and become exercisable in forty-eight (48) equal monthly installments commencing on the Initial Vesting Date. On the first day of each month following the Initial Vesting Date, this Option shall become vested and exercisable with respect to an additional 625 Shares.
Additional Terms/Acknowledgements: The undersigned Optionee acknowledges receipt of, and has read and understands and agrees to, the Option Agreement and the Plan. Optionee further acknowledges that as of the Date of Grant, the Option Agreement, the Plan and the Employment Agreement set forth the entire understanding between Optionee and the Company regarding the grant by the Company of the Option referred to in this Grant Notice. Subject to the terms and conditions of the Employment Agreement, Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or the Administrator upon any questions arising under the Plan.
ATTACHMENTS: Stock Option Agreement and 2002 Stock Incentive Plan
SPOUSE OF OPTIONEE:
Spouse has read and understands the Option Agreement and the Plan and is executing this Grant Notice to evidence Spouse’s consent and agreement to be bound by all of the terms and conditions of the Option Agreement and the Plan (including those relating to the appointment of the Optionee as agent for any interest that Spouse may have in the Option Shares).
|
|
Date: | |||
|
|
||||
|
Signature
|
Optionee Address:
|
|
||||
|
|
||||
|
|
BIG 5 SPORTING GOODS CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (together with the attached grant notice (the “Grant Notice” ), the “Agreement” ) is made and entered into as of the date set forth on the Grant Notice by and between Big 5 Sporting Goods Corporation, a Delaware corporation (the “Company” ), and the individual (the “Optionee” ) set forth on the Grant Notice.
A. Pursuant to the Big 5 Sporting Goods Corporation 2002 Stock Incentive Plan (the “Plan” ), the Administrator has determined that it is to the advantage and best interest of the Company to grant to Optionee an option (the “Option” ) to purchase the number of shares of the Common Stock of the Company (the “Shares” or the “Option Shares” ) set forth on the Grant Notice, at the exercise price determined as provided herein, and in all respects subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Optionee and the Company hereby agree as follows:
1. Grant and Terms of Stock Option .
1.1 Grant of Option . Pursuant to the Grant Notice, the Company has granted to the Optionee the right and option to purchase, subject to the terms and conditions set forth in the Plan and this Agreement, all or any part of the number of shares of the Common Stock of the Company set forth on the Grant Notice at a purchase price per share equal to the exercise price per Share set forth on the Grant Notice. If the Grant Notice indicates (under “Type of Option”) that this Option is an “ISO”, then this Option is intended by the Company and Optionee to be an Incentive Stock Option. However, if the Grant Notice indicates that this Option is a “NQSO”, then this Option is not intended to be an Incentive Stock Option and is instead intended to be a Nonqualified Stock Option.
1.2 Vesting and Exercisability . Subject to the provisions of the Plan and the other provisions of this Agreement, this Option shall vest and become exercisable in accordance with the schedule set forth in the Grant Notice. Notwithstanding the foregoing, in the event of termination of Optionee’s Continuous Status as an Employee, Director or Consultant for any reason, with or without Cause, including as a result of death or Disability, this Option shall immediately cease vesting and shall be cancelled to the extent of the number of Shares as to which this Option has not vested as of the date of termination.
1.3 Term of Option . No portion of this Option may be exercised more than ten years from the date of this Agreement. In the event of termination of Optionee’s Continuous Status as an Employee, Director or Consultant, this Option shall be cancelled as to any
unvested Shares as provided in Section 1.2, and shall terminate and be cancelled with respect to any vested Shares on the earlier of (i) the expiration of the ten year period set forth in the first sentence of this Section 1.3, or (ii) 90 days after termination of Optionee’s Continuous Status as an Employee, Director or Consultant (or 12 months in the case of termination as a result of Optionee’s Disability or death); provided, however, if Optionee’s Continuous Status as an Employee, Director or Consultant is terminated for Cause, this entire Option shall be cancelled and terminated as of the date of such termination and shall no longer be exercisable as to any Shares, whether or not previously vested.
2. Method of Exercise .
2.1 Delivery of Notice of Exercise . This Option shall be exercisable by written notice in the form attached hereto as Exhibit A which shall state the election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements with respect to such Shares as may be required by the Company pursuant to the provisions of this Agreement and the Plan. Such written notice shall be signed by Optionee (or by Optionee’s beneficiary or other person entitled to exercise this Option in the event of Optionee’s death under the Plan) and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. This Option shall not be deemed exercised until the Company receives such written notice accompanied by the exercise price and any other applicable terms and conditions of this Agreement are satisfied. This Option may not be exercised for a fraction of a Share.
2.2 Restrictions on Exercise . No Shares will be issued pursuant to the exercise of this Option unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (whether by registration or satisfaction of exemption conditions), all Applicable Laws, and all applicable listing requirements of any national securities exchange or other market system on which the Common Stock is then listed. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be necessary or appropriate, in the judgment of the Administrator, to comply with any Applicable Law.
2.3 Method of Payment . Payment of the exercise price shall be made in full at the time of exercise in cash or by check payable to the order of the Company, or, subject in each case to the advance approval of the Administrator in its sole discretion, (a) by delivery of shares of Common Stock already owned by Optionee, (b) by delivery of a full recourse promissory note made by Optionee in favor of the Company, (c) by a “broker’s exercise” involving the sale, at the time of the exercise of the Option, of Shares having a Fair Market Value equal to the exercise price, and the simultaneous remission of the exercise price to the Company, or (d) by any combination of the foregoing. Shares of Common Stock used to satisfy the exercise price of this Option shall be valued at their Fair Market Value determined on the date of exercise (or if such date is not a business day, as of the close of the business day immediately preceding such date). In addition, the Administrator may impose such other conditions in connection with the delivery of shares of Common Stock in satisfaction of the exercise price as it deems appropriate in its sole discretion, including without limitation a requirement that the shares of Common Stock delivered have been held
-2-
by the Optionee for a specified period of time. Any promissory note delivered pursuant to this Section 2.3 shall have terms and provisions (including, without limitation, those relating to the maturity date, payment schedule and interest rate) as determined by the Administrator in its sole discretion, shall be secured by the Shares acquired and shall comply with all Applicable Laws (including, without limitation, state and federal margin requirements).
2.4 Notice of Disqualifying Disposition of Incentive Stock Option . If this Option is an Incentive Stock Option and the Optionee sells or otherwise disposes of any of the Shares acquired upon exercise of this Option on or before the later of (i) two years after the date of grant, or (ii) one year after the date such Shares were acquired, the Optionee shall immediately notify the Company in writing of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the taxable income recognized as a result of such disposition and that the Optionee shall be required to satisfy such withholding obligations either by making a payment to the Company in cash or by withholding from current earnings of the Optionee.
3. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution or to a beneficiary designated pursuant to the Plan, and may be exercised during the lifetime of Optionee only by Optionee. Subject to all of the other terms and conditions of this Agreement, following the death of Optionee, this Option may, to the extent it remained unexercised (but vested and exercisable by Optionee in accordance with its terms) on the date of death, be exercised by Optionee’s beneficiary or other person entitled to exercise this Option in the event of Optionee’s death under the Plan. Notwithstanding the first sentence of this Section 3, (i) if this Option is a Nonqualified Stock Option, this Option may be assigned pursuant to a qualified domestic relations order as defined by the Code, and exercised by the spouse of the Optionee who obtained such Option pursuant to such qualified domestic relations order, and (ii) this Option may be assigned, in connection with the Optionee’s estate plan, in whole or in part, during the Optionee’s lifetime to one or more members of the Optionee’s immediate family or to a trust established exclusively for one or more of such immediate family members. Rights under the assigned portion may be exercised by the person or persons who acquire a proprietary interest in such Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the Option immediately before such assignment and shall be set forth in such documents issued to the assignee as the Administrator deems appropriate. For purposes of this Section 3, the term “immediate family” means an individual’s spouse, children, stepchildren, grandchildren and parents.
4. Market StandOff . The Optionee agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of (including by means of sales pursuant to Rule 144) any shares of Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, during the 180-day period beginning on the effective date of the registration statement for the initial public offering of the Company’s stock and during the 90-day period beginning on the effective date of the registration statement for any other underwritten offering (except as part of such underwritten registration), unless the managing underwriters for the registered public offering otherwise agree. This provision shall expire two years after the date of the initial public offering of the Company’s stock.
-3-
5. General .
5.1 Governing Law . This Agreement shall be governed by and construed under the laws of the state of Delaware applicable to Agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other jurisdiction.
5.2 Notices. Any notice required or permitted under this Agreement shall
be given in writing by express courier or by postage prepaid, United States
registered or certified mail, return receipt requested, to the address set forth
below or to such other address for a party as that party may designate by 10
days advance written notice to the other parties. Notice shall be effective upon
the earlier of receipt or 3 days after the mailing of such notice.
If to the Company:
Big 5 Sporting Goods Corporation
2525 East El Segundo Boulevard
El Segundo, CA 90245
Attention: Senior Vice President and General Counsel
If to Optionee, at the address set forth on the Grant Notice.
5.3 Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this Agreement, the Optionee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect to this Option and the parties hereto shall act in all matters as if the Optionee was the sole owner of this Option. This appointment is coupled with an interest and is irrevocable.
5.4 Modifications . This Agreement may be amended, altered or modified only by a writing signed by each of the parties hereto
5.5 Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on, with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Option Shares on or with respect to which such other capital stock was distributed.
5.6 Additional Documents . Each party agrees to execute any and all further documents and writings, and to perform such other actions, which may be or become reasonably necessary or expedient to be made effective and carry out this Agreement.
5.7 No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
-4-
5.8 Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns.
5.9 No Assignment . Except as otherwise provided in this Agreement, the Optionee may not assign any of his, her or its rights under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the Company of any obligations pursuant to this Agreement.
5.10 Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
5.11 Equitable Relief . The Optionee acknowledges that, in the event of a threatened or actual breach of any of the provisions of this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and irreparable injury and damage. Accordingly, the Optionee agrees that the Company shall be entitled to injunctive and other equitable relief, and that such relief shall be in addition to, and not in lieu of, any remedies they may have at law or under this Agreement.
5.12 Arbitration .
5.12.1 General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled exclusively by arbitration, before a single arbitrator, in accordance with this section 5.12 and the then most applicable rules of the American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an appropriate matter apply to a court pursuant to California Code of Civil Procedure Section 1281.8, or any comparable provision, for provisional relief, including a temporary restraining order or a preliminary injunction, on the ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief. Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Los Angeles, California.
5.12.2 Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a single arbitrator from a list of nine arbitrators drawn by the parties at random from a list of twenty persons (which shall be retired judges or corporate or litigation attorneys experienced in stock options and buy-sell agreements) provided by the office of the American Arbitration Association having jurisdiction over Los Angeles, California. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the remaining name
-5-
on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process until an arbitrator is selected.
5.12.3 Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer, director, shareholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to summary judgement if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the American Arbitration Association and these procedures, the provisions of these procedures shall govern.
5.12.4 Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The Company shall be responsible for the costs and fees of the arbitration, unless the Optionee wishes to contribute (up to 50%) to the costs and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
5.12.5 Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of fact, and treated as determinative to the maximum extent permitted by law.
5.13 Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, extend or interpret the scope of this Agreement or of any particular section.
5.14 Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
-6-
plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past; (d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
5.15 Counterparts . This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
5.16 Complete Agreement . The Grant Notice, this Agreement and the Plan constitute the parties’ entire agreement with respect to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings, whether oral or written, with respect to the subject matter hereof.
-7-
EXHIBIT A
NOTICE OF EXERCISE OF STOCK OPTION
Big 5 Sporting Goods Corporation
2525 East El Segundo Boulevard
El Segundo, CA 90245
Attn: Senior Vice President and General Counsel
Ladies and Gentlemen:
The undersigned hereby elects to exercise the option indicated below:
Option Grant Date:
Type of Option: Incentive Stock Option / Nonqualified Stock Option
Number of Shares Being Exercised:
Exercise Price Per Share:
Total Exercise Price: $
Method of Payment:
Enclosed herewith is payment in full of the total exercise price and a copy of the Grant Notice.
My exact name, current address and social security number for purposes of the stock certificates to be issued and the shareholder list of the Company are:
|
Name:
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|
|
Address:
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|
|
|
Social Security Number:
|
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|
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|
Sincerely, | |||
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|
||||
|
|
||||
|
Dated:
|
||||
|
|
||||
|
|
(Optionee’s Signature) |
-8-
Exhibit 10.23
BIG 5 SPORTING GOODS CORPORATION
STOCK OPTION GRANT NOTICE
(2002 Stock Incentive Plan)
Big 5 Sporting Goods Corporation (the
“Company”
), pursuant to its 2002 Stock Incentive Plan (the
“Plan”
), hereby grants to Optionee the option to purchase the number of Shares of the Company set
forth below (the
“Option”
). This Option is subject to all of the terms and conditions as set forth
in this Grant Notice, the Stock Option Agreement (the
“Option Agreement”
) and the Plan, all of
which are attached hereto and incorporated herein in their entirety.
«Name»
$
[One year after date of grant]
Vesting Schedule: Subject to the restrictions and limitations of the Option Agreement and the Plan, this Option shall vest and become exercisable with respect to 25.00% of the Shares subject to this Option on the Initial Vesting Date. On each subsequent anniversary of the Initial Vesting Date, this Option shall become vested and exercisable with respect to an additional 25.00% of the Shares subject to this Option.
Additional Terms/Acknowledgements: The undersigned Optionee acknowledges receipt of, and has read and understands and agrees to, the Option Agreement and the Plan. Optionee further acknowledges that as of the Date of Grant, the Option Agreement and the Plan set forth the entire understanding between Optionee and the Company regarding the grant by the Company of the Option referred to in this Grant Notice. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or the Administrator upon any questions arising under the Plan.
ATTACHMENTS: Stock Option Agreement and 2002 Stock Incentive Plan
SPOUSE OF OPTIONEE:
Spouse has read and understands the Option Agreement and the Plan and is executing this Grant Notice to evidence Spouse’s consent and agreement to be bound by all of the terms and conditions of the Option Agreement and the Plan (including those relating to the appointment of the Optionee as agent for any interest that Spouse may have in the Option Shares).
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Date: | |||
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Signature
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Optionee Address:
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BIG 5 SPORTING GOODS CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (together with the attached grant notice (the “Grant Notice” ), the “Agreement” ) is made and entered into as of the date set forth on the Grant Notice by and between Big 5 Sporting Goods Corporation, a Delaware corporation (the “ Company ”), and the individual (the “Optionee” ) set forth on the Grant Notice.
A. Pursuant to the Big 5 Sporting Goods Corporation 2002 Stock Incentive Plan (the “Plan” ), the Administrator has determined that it is to the advantage and best interest of the Company to grant to Optionee an option (the “Option” ) to purchase the number of shares of the Common Stock of the Company (the “Shares” or the “Option Shares” ) set forth on the Grant Notice, at the exercise price determined as provided herein, and in all respects subject to the terms, definitions and provisions of the Plan, which is incorporated herein by reference.
B. Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in the Plan.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Optionee and the Company hereby agree as follows:
1. Grant and Terms of Stock Option.
1.1 Grant of Option . Pursuant to the Grant Notice, the Company has granted to the Optionee the right and option to purchase, subject to the terms and conditions set forth in the Plan and this Agreement, all or any part of the number of shares of the Common Stock of the Company set forth on the Grant Notice at a purchase price per share equal to the exercise price per Share set forth on the Grant Notice. If the Grant Notice indicates (under “Type of Option”) that this Option is an “ISO”, then this Option is intended by the Company and Optionee to be an Incentive Stock Option. However, if the Grant Notice indicates that this Option is a “NQSO”, then this Option is not intended to be an Incentive Stock Option and is instead intended to be a Nonqualified Stock Option.
1.2 Vesting and Exercisability . Subject to the provisions of the Plan and the other provisions of this Agreement, this Option shall vest and become exercisable in accordance with the schedule set forth in the Grant Notice. Notwithstanding the foregoing, in the event of termination of Optionee’s Continuous Status as an Employee, Director or Consultant for any reason, with or without Cause, including as a result of death or Disability, this Option shall immediately cease vesting and shall be cancelled to the extent of the number of Shares as to which this Option has not vested as of the date of termination.
1.3 Term of Option . No portion of this Option may be exercised more than ten years from the date of this Agreement. In the event of termination of Optionee’s Continuous Status as an Employee, Director or Consultant, this Option shall be cancelled as to any
unvested Shares as provided in Section 1.2, and shall terminate and be cancelled with respect to any vested Shares on the earlier of (i) the expiration of the ten year period set forth in the first sentence of this Section 1.3, or (ii) 90 days after termination of Optionee’s Continuous Status as an Employee, Director or Consultant (or 12 months in the case of termination as a result of Optionee’s Disability or death); provided, however, if Optionee’s Continuous Status as an Employee, Director or Consultant is terminated for Cause, this entire Option shall be cancelled and terminated as of the date of such termination and shall no longer be exercisable as to any Shares, whether or not previously vested.
2. Method of Exercise.
2.1 Delivery of Notice of Exercise . This Option shall be exercisable by written notice in the form attached hereto as Exhibit A which shall state the election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements with respect to such Shares as may be required by the Company pursuant to the provisions of this Agreement and the Plan. Such written notice shall be signed by Optionee (or by Optionee’s beneficiary or other person entitled to exercise this Option in the event of Optionee’s death under the Plan) and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the exercise price. This Option shall not be deemed exercised until the Company receives such written notice accompanied by the exercise price and any other applicable terms and conditions of this Agreement are satisfied. This Option may not be exercised for a fraction of a Share.
2.2 Restrictions on Exercise . No Shares will be issued pursuant to the exercise of this Option unless and until there shall have been full compliance with all applicable requirements of the Securities Act of 1933, as amended (whether by registration or satisfaction of exemption conditions), all Applicable Laws, and all applicable listing requirements of any national securities exchange or other market system on which the Common Stock is then listed. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be necessary or appropriate, in the judgment of the Administrator, to comply with any Applicable Law.
2.3 Method of Payment . Payment of the exercise price shall be made in full at the time of exercise in cash or by check payable to the order of the Company, or, subject in each case to the advance approval of the Administrator in its sole discretion, (a) by delivery of shares of Common Stock already owned by Optionee, (b) by delivery of a full recourse promissory note made by Optionee in favor of the Company, (c) by a “broker’s exercise” involving the sale, at the time of the exercise of the Option, of Shares having a Fair Market Value equal to the exercise price, and the simultaneous remission of the exercise price to the Company, or (d) by any combination of the foregoing. Shares of Common Stock used to satisfy the exercise price of this Option shall be valued at their Fair Market Value determined on the date of exercise (or if such date is not a business day, as of the close of the business day immediately preceding such date). In addition, the Administrator may impose such other conditions in connection with the delivery of shares of Common Stock in satisfaction of the exercise price as it deems appropriate in its sole discretion, including without limitation a requirement that the shares of Common Stock delivered have been held
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by the Optionee for a specified period of time. Any promissory note delivered pursuant to this Section 2.3 shall have terms and provisions (including, without limitation, those relating to the maturity date, payment schedule and interest rate) as determined by the Administrator in its sole discretion, shall be secured by the Shares acquired and shall comply with all Applicable Laws (including, without limitation, state and federal margin requirements).
2.4 Notice of Disqualifying Disposition of Incentive Stock Option . If this Option is an Incentive Stock Option and the Optionee sells or otherwise disposes of any of the Shares acquired upon exercise of this Option on or before the later of (i) two years after the date of grant, or (ii) one year after the date such Shares were acquired, the Optionee shall immediately notify the Company in writing of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the taxable income recognized as a result of such disposition and that the Optionee shall be required to satisfy such withholding obligations either by making a payment to the Company in cash or by withholding from current earnings of the Optionee.
3. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution or to a beneficiary designated pursuant to the Plan, and may be exercised during the lifetime of Optionee only by Optionee. Subject to all of the other terms and conditions of this Agreement, following the death of Optionee, this Option may, to the extent it remained unexercised (but vested and exercisable by Optionee in accordance with its terms) on the date of death, be exercised by Optionee’s beneficiary or other person entitled to exercise this Option in the event of Optionee’s death under the Plan. Notwithstanding the first sentence of this Section 3, (i) if this Option is a Nonqualified Stock Option, this Option may be assigned pursuant to a qualified domestic relations order as defined by the Code, and exercised by the spouse of the Optionee who obtained such Option pursuant to such qualified domestic relations order, and (ii) this Option may be assigned, in connection with the Optionee’s estate plan, in whole or in part, during the Optionee’s lifetime to one or more members of the Optionee’s immediate family or to a trust established exclusively for one or more of such immediate family members. Rights under the assigned portion may be exercised by the person or persons who acquire a proprietary interest in such Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the Option immediately before such assignment and shall be set forth in such documents issued to the assignee as the Administrator deems appropriate. For purposes of this Section 3, the term “immediate family” means an individual’s spouse, children, stepchildren, grandchildren and parents.
4. Market StandOff . The Optionee agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of (including by means of sales pursuant to Rule 144) any shares of Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, during the 180-day period beginning on the effective date of the registration statement for the initial public offering of the Company’s stock and during the 90-day period beginning on the effective date of the registration statement for any other underwritten offering (except as part of such underwritten registration), unless the managing underwriters for the registered public offering otherwise agree. This provision shall expire two years after the date of the initial public offering of the Company’s stock.
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5. General.
5.1 Governing Law . This Agreement shall be governed by and construed under the laws of the state of Delaware applicable to Agreements made and to be performed entirely in Delaware, without regard to the conflicts of law provisions of Delaware or any other jurisdiction.
5.2
Notices
. Any notice required or permitted under this Agreement shall be given in
writing by express courier or by postage prepaid, United States registered or certified mail,
return receipt requested, to the address set forth below or to such other address for a party as
that party may designate by 10 days advance written notice to the other parties. Notice shall be
effective upon the earlier of receipt or 3 days after the mailing of such notice.
Big 5 Sporting Goods Corporation
2525 East El Segundo Boulevard
El Segundo, CA 90245
Attention: Senior Vice President and General Counsel
If to Optionee, at the address set forth on the Grant Notice.
5.3 Community Property . Without prejudice to the actual rights of the spouses as between each other, for all purposes of this Agreement, the Optionee shall be treated as agent and attorney-in-fact for that interest held or claimed by his or her spouse with respect to this Option and the parties hereto shall act in all matters as if the Optionee was the sole owner of this Option. This appointment is coupled with an interest and is irrevocable.
5.4 Modifications . This Agreement may be amended, altered or modified only by a writing signed by each of the parties hereto.
5.5 Application to Other Stock . In the event any capital stock of the Company or any other corporation shall be distributed on, with respect to, or in exchange for shares of Common Stock as a stock dividend, stock split, reclassification or recapitalization in connection with any merger or reorganization or otherwise, all restrictions, rights and obligations set forth in this Agreement shall apply with respect to such other capital stock to the same extent as they are, or would have been applicable, to the Option Shares on or with respect to which such other capital stock was distributed.
5.6 Additional Documents . Each party agrees to execute any and all further documents and writings, and to perform such other actions, which may be or become reasonably necessary or expedient to be made effective and carry out this Agreement.
5.7 No Third-Party Benefits . Except as otherwise expressly provided in this Agreement, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third-party beneficiary.
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5.8 Successors and Assigns . Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns.
5.9 No Assignment . Except as otherwise provided in this Agreement, the Optionee may not assign any of his, her or its rights under this Agreement without the prior written consent of the Company, which consent may be withheld in its sole discretion. The Company shall be permitted to assign its rights or obligations under this Agreement, but no such assignment shall release the Company of any obligations pursuant to this Agreement.
5.10 Severability . The validity, legality or enforceability of the remainder of this Agreement shall not be affected even if one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable in any respect.
5.11 Equitable Relief . The Optionee acknowledges that, in the event of a threatened or actual breach of any of the provisions of this Agreement, damages alone will be an inadequate remedy, and such breach will cause the Company great, immediate and irreparable injury and damage. Accordingly, the Optionee agrees that the Company shall be entitled to injunctive and other equitable relief, and that such relief shall be in addition to, and not in lieu of, any remedies they may have at law or under this Agreement.
5.12 Arbitration .
5.12.1 General . Any controversy, dispute, or claim between the parties to this Agreement, including any claim arising out of, in connection with, or in relation to the formation, interpretation, performance or breach of this Agreement shall be settled exclusively by arbitration, before a single arbitrator, in accordance with this section 5.12 and the then most applicable rules of the American Arbitration Association. Judgment upon any award rendered by the arbitrator may be entered by any state or federal court having jurisdiction thereof. Such arbitration shall be administered by the American Arbitration Association. Arbitration shall be the exclusive remedy for determining any such dispute, regardless of its nature. Notwithstanding the foregoing, either party may in an appropriate matter apply to a court pursuant to California Code of Civil Procedure Section 1281.8, or any comparable provision, for provisional relief, including a temporary restraining order or a preliminary injunction, on the ground that the award to which the applicant may be entitled in arbitration may be rendered ineffectual without provisional relief. Unless mutually agreed by the parties otherwise, any arbitration shall take place in the City of Los Angeles, California.
5.12.2. Selection of Arbitrator . In the event the parties are unable to agree upon an arbitrator, the parties shall select a single arbitrator from a list of nine arbitrators drawn by the parties at random from a list of twenty persons (which shall be retired judges or corporate or litigation attorneys experienced in stock options and buy-sell agreements) provided by the office of the American Arbitration Association having jurisdiction over Los Angeles, California. If the parties are unable to agree upon an arbitrator from the list so drawn, then the parties shall each strike names alternately from the list, with the first to strike being determined by lot. After each party has used four strikes, the remaining name
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on the list shall be the arbitrator. If such person is unable to serve for any reason, the parties shall repeat this process until an arbitrator is selected.
5.12.3 Applicability of Arbitration; Remedial Authority . This agreement to resolve any disputes by binding arbitration shall extend to claims against any parent, subsidiary or affiliate of each party, and, when acting within such capacity, any officer, director, shareholder, employee or agent of each party, or of any of the above, and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law. In the event of a dispute subject to this paragraph the parties shall be entitled to reasonable discovery subject to the discretion of the arbitrator. The remedial authority of the arbitrator (which shall include the right to grant injunctive or other equitable relief) shall be the same as, but no greater than, would be the remedial power of a court having jurisdiction over the parties and their dispute. The arbitrator shall, upon an appropriate motion, dismiss any claim without an evidentiary hearing if the party bringing the motion establishes that he or it would be entitled to summary judgement if the matter had been pursued in court litigation. In the event of a conflict between the applicable rules of the American Arbitration Association and these procedures, the provisions of these procedures shall govern.
5.12.4 Fees and Costs . Any filing or administrative fees shall be borne initially by the party requesting arbitration. The Company shall be responsible for the costs and fees of the arbitration, unless the Optionee wishes to contribute (up to 50%) to the costs and fees of the arbitration. Notwithstanding the foregoing, the prevailing party in such arbitration, as determined by the arbitrator, and in any enforcement or other court proceedings, shall be entitled, to the extent permitted by law, to reimbursement from the other party for all of the prevailing party’s costs (including but not limited to the arbitrator’s compensation), expenses, and attorneys’ fees.
5.12.5 Award Final and Binding . The arbitrator shall render an award and written opinion, and the award shall be final and binding upon the parties. If any of the provisions of this paragraph, or of this Agreement, are determined to be unlawful or otherwise unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible and to insure that the resolution of all conflicts between the parties, including those arising out of statutory claims, shall be resolved by neutral, binding arbitration. If a court should find that the arbitration provisions of this Agreement are not absolutely binding, then the parties intend any arbitration decision and award to be fully admissible in evidence in any subsequent action, given great weight by any finder of fact, and treated as determinative to the maximum extent permitted by law.
5.13 Headings . The section headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, extend or interpret the scope of this Agreement or of any particular section.
5.14 Number and Gender . Throughout this Agreement, as the context may require, (a) the masculine gender includes the feminine and the neuter gender includes the masculine and the feminine; (b) the singular tense and number includes the plural, and the
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plural tense and number includes the singular; (c) the past tense includes the present, and the present tense includes the past; (d) references to parties, sections, paragraphs and exhibits mean the parties, sections, paragraphs and exhibits of and to this Agreement; and (e) periods of days, weeks or months mean calendar days, weeks or months.
5.15 Counterparts . This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
5.16 Complete Agreement . The Grant Notice, this Agreement and the Plan constitute the parties’ entire agreement with respect to the subject matter hereof and supersede all agreements, representations, warranties, statements, promises and understandings, whether oral or written, with respect to the subject matter hereof.
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EXHIBIT A
NOTICE OF EXERCISE OF STOCK OPTION
Big 5 Sporting Goods Corporation
2525 East El Segundo Boulevard
El Segundo, CA 90245
Attn: Senior Vice President and General Counsel
Ladies and Gentlemen:
The undersigned hereby elects to exercise the option indicated below:
Option Grant Date:
Type of Option: Incentive Stock Option / Nonqualified Stock Option
Number of Shares Being Exercised:
Exercise Price Per Share:
Total Exercise Price: $
Method of Payment:
Enclosed herewith is payment in full of the total exercise price and a copy of the Grant Notice.
My exact name, current address and social security number for purposes of the stock certificates to be issued and the shareholder list of the Company are:
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Address:
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Social Security Number:
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Dated:
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(Optionee’s Signature) |
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Exhibit 21.1
Subsidiaries of Big 5 Sporting Goods Corporation
| Exact Name of Subsidiary | State or Other Jurisdiction | |
| as Specified in its Charter | of Incorporation or Organization | |
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Big 5 Corp.
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Delaware | |
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Big 5 Services Corp.*
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Virginia |
| * | Indicates indirect subsidiary of Big 5 Sporting Goods Corporation |
Big 5 Sporting Goods Corporation:
1)
The Company lacked the necessary depth of personnel with sufficient technical
accounting expertise to ensure the preparation of interim and annual financial statements
in accordance with generally accepted accounting principles. This
material weakness in internal control over financial reporting
contributed to a pervasive breakdown in the Company’s interim
and annual financial reporting processes. Specifically, account
reconciliation and management review and approval controls did not
operate effectively and, accordingly,
generally accepted accounting principles were not properly applied,
resulting in the following:
a)
The Company’s policies and procedures did not provide for reconciliation of
certain accounts payable subaccounts correctly or on a sufficiently frequent basis,
resulting in material misstatements to accounts payable and cost of goods sold;
b)
Operating expenses were misstated because the Company’s policies and procedures
did not provide for the recognition of rent expense over the entire
lease term of the Company’s store
leases and did not provide for the recognition of landlord incentives as deferred rent,
but instead reduced the value of the Company’s leasehold improvements;
c)
Inventory and cost of goods sold were misstated because
the Company incorrectly capitalized certain buyer related costs to inventory,
incorrectly determined the net realizable value of returned merchandise, and recorded
sales of damaged or returned merchandise as an offset to inventory rather than as a
sale;
d)
Inventory and accounts payable were materially misstated because the Company’s
policies and procedures did not provide for the recognition of all inventory in-transit
at period end;
e)
Revenue, cost of goods sold, inventory, and the allowance for sales returns
were misstated because the Company did not provide an allowance for
estimated sales returns; and
f)
Accrued liabilities were misstated because the Company’s policies
and procedures did not provide for the reconciliation of certain subaccounts timely or
provide for recognition of changes in estimates and certain
transactions in the correct accounting period.
This
material weakness resulted in the material misstatement of the Company’s annual financial
statements as of December 28, 2003, and for the fiscal years ended December 29, 2002 and
December 28, 2003, and for the interim financial information for each of the interim periods in the
fiscal year ended December 28, 2003 and for the first three interim periods in the fiscal year ended
January 2, 2005, or represented more than a remote likelihood that a material misstatement of
the Company’s annual or interim financial statements would not have been prevented or detected. As a
result, the Company restated its consolidated financial statements as
of December 28, 2003 and for
the fiscal years ended December 29, 2002 and December 28, 2003,
and for each of the interim periods in the fiscal year ended December
28, 2003 and for the first three interim periods in the fiscal year ended January 2, 2005, to reflect the correction
of these errors in accounting.
2)
The Company did not maintain effective controls over the documentation, review and
approval of manual journal entries. Certain individuals could create, record and approve
the same journal entry without regard to the dollar amount of the transaction and without any
further review or approval. In certain instances, journal entries relating to different
accounts were combined in a single compound journal entry. In other instances journal
entries did not have sufficient supporting written explanation or sufficient supporting
documentation and/or the supporting documentation had not been
retained for a sufficient
period of time. This material weakness resulted in material misstatements to amounts
recorded for cost of goods sold and selling and administrative
expense. These material
misstatements were corrected by restating the Company’s consolidated financial statements
as of December 28, 2003 and for the fiscal years ended
December 29, 2002 and December 28, 2003, and for each of the
interim periods in the fiscal year ended December 28, 2003 and for the
first three interim periods in the fiscal year ended January 2, 2005.
September 6, 2005
Exhibit 31.1
CERTIFICATIONS
I, Steven G. Miller, President and Chief Executive Officer, certify that:
Date: September 6, 2005
1.
I have reviewed this Annual Report on Form 10-K of Big 5 Sporting Goods Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant’s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a)
All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information;
and
b)
Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.
/s/ Steven G. Miller
Steven G. Miller
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Elizabeth F. Chambers,
Acting Controller, certify that:
Date: September 6, 2005
1.
I have reviewed this Annual Report on Form 10-K of Big 5 Sporting Goods Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant’s other certifying officers and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which
this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial
information; and
b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant’s internal control over financial
reporting.
/s/
Elizabeth F. Chambers
Elizabeth F. Chambers
Acting Controller (jointly
performing the function of principal financial officer with the Assistant Treasurer)
| 1. | I have reviewed this Annual Report on Form 10-K of Big 5 Sporting Goods Corporation; | ||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 6, 2005
| /s/ Thomas L. Robershaw | ||||
| Thomas L. Robershaw | ||||
| Assistant Treasurer (jointly performing the function of principal financial officer with the Acting Controller) | ||||
Exhibit 32.1
CERTIFICATION
In connection with the Annual Report of Big 5 Sporting Goods Corporation (the “
Company
”) on
Form 10-K for the fiscal year ending January 2, 2005 as filed with the Securities and Exchange
Commission on the date hereof (the “
Report
”), I, Steven G. Miller, President and Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that, to my knowledge:
/s/ Steven G. Miller
Steven G. Miller
A signed original of this written statement required by Section 906 has been provided to Big 5
Sporting Goods Corporation and will be retained by Big 5 Sporting Goods Corporation and furnished
to the Securities and Exchange Commission or its staff upon request.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
President and Chief Executive Officer
September 6, 2005
Exhibit 32.2
CERTIFICATION
In connection with the Annual Report of Big 5 Sporting Goods Corporation (the “
Company
”) on
Form 10-K for the fiscal year ending January 2, 2005 as filed with the Securities and Exchange
Commission on the date hereof (the “
Report
”), I,
Elizabeth F. Chambers, Acting Controller of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §
906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
/s/ Elizabeth F. Chambers
Elizabeth F. Chambers
A signed original of this written statement required by Section 906 has been provided to Big 5
Sporting Goods Corporation and will be retained by Big 5 Sporting Goods Corporation and furnished
to the Securities and Exchange Commission or its staff upon request.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Acting Controller (joint performing the function of principal
financial officer with the Assistant Treasurer)
September 6, 2005
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | ||
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Thomas L. Robershaw
Thomas L. Robershaw
Assistant Treasurer (jointly performing the function of principal
financial officer with the Acting Controller)
September 6, 2005