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Home My WebLink About2001 Resolution No. 045.. RESOLUTION NO. 'K. SERIES OF 2001 A RESOLUTION AUTHORIZING AN INCENTIVE PAYMENT AGREEMENT BETWEEN GART BROS. SPORTING GOODS COMPANY AND THE CITY OF ENGLEWOOD FOR REDEVELOPMENT AND CONSOLIDATION OF GART BROS. SPORTING GOODS COMPANY CORPORATE HEADQUARTERS TO BE LOCATED AT 1050 WEST HAMPDEN A VENUE, IN THE CITY OF ENGLEWOOD, COLORADO . WHEREAS, pursuant to the provisione of Section 31·16·903, C.R.S ., the City bas the authority to negotiate for incentive payments or credits with tarpayers who establish new business facilities or who expand existing buaineea facilities; and WHEREAS, City ~ouncil bas established goals regarding economic development and improvement of the quality of life in Englewood, including business, industrial renovation and growth strategies; and WHEREAS, pursuant to this legislation, a City and a taxpayer may negotiate a contr,ct for an incentive payment or a credit from a City to a taxpayer relating to the new or expanded business facilities ; NOW, THEREFORE, BE IT RESOLVED BY TH~ CITY COUNCIL OF THE CITY OF ENGLEWOOD , COLORADO, THAT : ~-The City Council of the City of Englewood , Colorado hereby authorizes the Incentive Payment Agreement between Gart Bros. Sporting Goods Company and the City of Englewood, attached hereto as 'Exhibit 1". ADOPTED AND APPROVED this 21st of May, 2001. I. Loucrishia A. Ellis, City Clerk fo~)~City of En lewood .1.bove is a tru e co py of Re so lution No.t2, Series of 2 . Loucrishia A. Ellis EXWlllI..l INCENTIVE PAYMENT AGREEMENT This Ar,eement is entered into by and between the City of Englewood of the CoWlty of Arapahoe, State of Colorado (The City"), and Gart Bros. Sporting Goods Company ("Taxpayer"). WHEREAS, punuant to the provisions of Section 31-15-903, C.R.S., the City has the authority to negotiate for incentive payments or credits with taxpayers who establish new business facilities or who expand existing business facilities; and WHEREAS , City Council has established goals regarding economic development and improvement of the quality of life m Englewood. including business, industrial renovation and growth etrategies; and WHEREAS, pursuant to this legislation, a city and a taxpayer may negotiate a contract for an iucentive payment or a credit from a city to a ta.~ayer relating to the new or expanded business facilities; and WHEREAS , the City and the Ta.q,ayer desire to negotiate such contract. NOW, THEREFORE, IT IS AGREED by the City of Engl.el':o.,d and tho Taxpayer as follows: 1. The Taxpayer will establish a new business facility , as defined in ~,ection 39-22· 508.2(3), C.R.S., but exclrding the requiren.,nts or paragraph (b) of said subsection (3), in the City of Englewood. This new busir.ess facility will be located at 1060 West Hampden, Englewood , Colorado 1:0110. The purposes and functions of this new b••qi.1ess facility includ,. executive offices, accounting, buyers of merchandise, ad11e · :jing and other corporate off.ce headquaners functions. 2. TlJe '.'upayer shall comply .;i,~-all of the provisions of Sections 39-6-107 and 39-5- 108. C.R.S., concerning the filing of personal property schedules associated with the tixable personal property located at or within such new business facility and used in conneci.i~:i ,:itb the operation of such new business facility . 3 . The City shall :nform the School District and Collllty, in wluch the Taxpayer's new b•ts 'ness facility or expanded business facility is located. of this Agreement. The Ta."tpayer shall be responsible for negotiatir g separate incentive payment agreements with the affected School D:-,rict and County. 4. The City shall make an annual incentive rebate to the Taxpayer, which payment shall equal one hundred percent (100%) of the amoW1t of ta.es levied by the City for the City mill levy upon the !JWl.hl!: 12lllll2Wil llilU2tm located at or within the ne w basiness facility and used in connection with the operation of such new business facility for five (5) years. '!'his incentive payment relates to the tax levied only by the City of Englewood and not to any othe r tax levied by another ta:ting entity. 5. This incentive payment to the Taxpayer shall be made by the City on or about September 1, 2002, and each year thereafter for five (5) years, provided the Taxpayer has complied with the provisions of Sections 39-5-107 and 39-5-108 C.R .S., and provided the 1'axpayer baa paid and is therefore not delinquent in the payment of the property taxes . (See Exhibit A). 6 . The City shall provide a rebate to Gart Bros. Sporting Goods Company in the amount of one hundred percent (100%) for actual use taxes paid by Gart Broe. Sporting Goods Company for building materials in year one (Jl and fifty percent (50%) actual use tax paid in years two (2) through five (5). 7. The City shall waive or rebate one hundred percent (100%) in actual use :ax on equipment purchased for the 1050 Hampden Center location in year one (1) and fifty percent (50%) of actual use taxes for years two (2) through five (5). The City sales/use ta"< on equipment is 3.5%. 8. Prior to any payment, the Ta:cpayer shall invoice the City for the incentive payment and provide the City with any documentation deemed necessary by the City to meet the requirements of this Agreement. 9. If the Taxpayer should fail to meet ita capital investment obligations set forth in Exhibit A during any period of the Agreement a rebate will not be given for that ta."<able year. 10 . The Taxpayer shall not assign or transfer its interest in this Agreement without the written consent of the City, which consent shall not be unreasonably withheld. The City understands, how,ver, that Taxpayer is a publicly traded company and, therefore, agrees that any transfers o:-changes in the stock ownership of the Ta.'tl)ayer dhall nut be deemed an assignment or transfer of Taxpayer's interest in this Agreement. Any unauthorized assignment or transfer shall render this Agreement null and void and of no effect as to the City. 11. This ..\ifteement may not be modified, amended or otherwise altered unless mutually agreed upon in writing by the parties hereto. 12 , Either party may terminate this Agreement with or without good cause shown upon une (1) year writtt!\ notice to the other party prior to termination. ln the event of termination by the Cn.~·. no damages, liquidated or otherwise , shall inure to the benefit of the Taxpayer. 13. Unless otherwise agreed in w:iting, tlus Agreement and the interpretation thereof shall be governed by the laws of the State of ColoradJ . 14 . Should any provi:non of this Agrt."'ment be determined by a court of competent jurisd.ictiou to be unconsti1:utional or otherwise null and void , it is the intent of the parties hereto that the remaining provisions of this Agreement shall be of full force and effoct. -2- • 15. Notu:ea to be provided under this Agreement ablill be given in w,iting, whether by hand delivery or depoaited in the United Stet<• mail, certified mail, return receipt requeoted, with sufficient postage, to the fo!Jowing persona: City of Englewood Attn: City Ma11qer Gart Bros . Sporting Goods Company Attn:. ________ _ 1000 Englew0<d Parkway Englewood, Colorado 80110 16 . This Agreement represents the entire and integrated agreement between the parties and supersedes all prior n ~gotiations and representations whether written or oral . Nothing herein shall be d.eemed to create any contractual rel,tionahip, either express or implied, between the Ci,y and any other consultant or co ntractor or material supplier tc the City of Englewood . Nothing herein shall be deemed to give anyone not a party to this Agnement any right of action agawt a party which does not otherwise exist without regard to this Agreement. SIGNED this __ day of ____ ~ 2001. GART BROS . SPORTING GOODS COMPANY By _____________ _ ATTEST: Title _____________ _ CI TY OF ENGLEWOOD .,u._~l=c ()() -3- Estimated Year Capital Investment $3 .8 million 1 in remodel Additional 2 Capital Investment Additional 3 ' Capital Investment Additional 4 Capital Investment Additional 5 Capital Investment 'Based on 1997 mi!I ievy. Exhibit "A" Gari Sports Redevelopment Incentive Package Personal Property Tax Actual Assessment Taxable Mill Levy' Value Rate Value $3.4 million 29% $986,000 7.663 $3.4 million 29% $S36,000 7.663 $3.4 million 29% $986,000 7.663 $3.4 million 29% $986,000 7.663 $3.4 million 29% $986,000 7.6 6)' Taxes Due City Assessment incentive Year GivP.n $7,555.72 $7,555.72 Commence Up lo 1/1/02 $10,0('0.00 Actuil $7,555.72 -Upto $15,000.00 of actual $"',555.72 Upto $15,000.00 of actual $7,555.72 Upto $15,000.00 of actual $7,555.72 Upto Expiration: $15,000.00 1/1/u7 of actual Item Building Permit Plan Review Fee Use Tax on Construction Materials 3.5% current rate GART SPORTS INVESTMENT PROPOSAL -CITY OF ENGLEWOOD MAY 16, 2001 Year One YeanTwo-lnvest1nent Proposal City Benefit Fees & Taxes Five Fees & Taxes $14,428 .75 $11,908 .75 N/A $26,337 .50 in permit fees to the City. Based on Based on $3 .0 Redevelopment of vacant 92 ,000 s/f retail/industrial, $3.8 million million in includin g influencing redevelopment of northern in Expansion parcel. Constructi on Value i11cl11des increasing positive perception of Englewood as well as increased redevelopment ootential of GIW Elati Acoma and other sites. $9,378.69 $7,740.69 N/A $17,119.38 in plan review fees to the City . Based on Based on $3 .0 Current zoning is industrial. $3.8 million million in in Expansion Value includes higher property tax values, higher Constru ction profile user and increased demand for auxiliary office and suooort users in vicinity. $66,500 .00 $52,500 .00 $66 ,500.00 $3.4 million in labor costs for the remodel in Year Rebate in Year One One and the expansion in Year Two -Five. Based on Based on $1.5 Estim ated 125 short-term construction jobs created $1.9 million million in $26 ,250.00 for six months of remodel . Expansion in Year Two - in Materials Materials Rebate 50% of Actual Year Five would bring estimated 75 short-term in Year Two-Five construction jobs creating an indirect benefit to community throu~h oavroll and sales tax . • • llem Use Tax on New Equipment 3.5% current rate Personal Property Tax GART SPORTS INVESTMENT PROPOSAl -Orv OF ENGLEWOOD MAY 16, 2001 -Year One Years Two -Investment PropoJal City Benefit Fees & Taxes Five Fees & Tue, $35,000 .00 $35,000 .00 -$35,000.00 Ne-.v equlpm~11t purchase . in Year Two-Year Five $52,500.00 Rebate in Year One would result in $17,SOO.OO In $26,250.00 in Use Tax. Based on $1 (average million in $43,750.00) City would collect 100% ol Actual Use Taxes alter New $17,500 .00 to Year Five for any additional site investments. Equipment Based on$ I $26,250 .00 for Year One. million to $1.5 (average $21,875.00) million in Rebate 50% ol Actual additional New in Year Two-Five Equipment for Year Two through Year Five. $7,555.72 $10,000 .00 -$7,555 . 72-1 0,000.00 TI1e City would rebate personal property taxes to a Maximum $15,000.00 in Year One Based on maximum of $10,000.00 for Year One. In Year Two $10,000.00 (average Actual Taxes Paid thru-Year Five up to a maximum ol $15,000 .00. After $12,000 X 4 Year Five, the City would retain all personal property Based on year= Up to $15,000.00 in taxes. $3.4 million $48,000 .00) Year Two-Five Based value on Actual Taxes Paid Estimated revenue from Personal Property Tax at Estimated ( estimate $12 ,000 x 4 base value of$ I million is $22,222.70 over final ten increase in years = $48,000.00) years ol the fifteen-year lease. value to $4 .5 million • $6 .7 5 million Item Gari Sports Total Economic 8£:-:cfii:, !o the City of Englewood • GART SPORTS INVESTMENT PROPOSAL -CITY OF ENGLEWOOD MAY 16,·2001 Year One Years Two -Investment Propos::! City Benefit I" fees & Taxes Five Fees & Tue~ $132 ,863 .16 f 163,&~<i .44 ir. Year One Gari Cost to Gari less City redevelopment incentive: in fees & fees & ta xes to Rebate : Year One: taxes to the the City for $109,055 .72 $132,863 .16 less $109.055 .72 • $23 ,807.44 in City for Year Year Two-Five revenu e to City after rebate . One Year Two-Five Gari Rebat e: Year Two through Year Five: $96,125 .00 $163 ,899.44 less $96 ,125 .00 = $6 7,774.44 in revenue to City after rebate. 265 jobs 320 jobs by Company will rank lnil!al redevelopment of property into coroorate use Year Three eighth in Top Ten will increase number of office users in CityCenter S20 million in Englewood Employers area by 20 percent. annual Company in Year One . payroll plans Estimated annual average sales tax revenue increase aggressive Supports retention of of $36, 1 72 .00 to $43,680.00 as direct benefit of Gart $59,283 growth plan for Colorado-based Sports at 1050 W . Hampden Avenue. The annual average continued Company, avoidil"g average sales tax is estimated at $600,000 for the salary acquisition potential out state fifteen-year lease . Additional estimated $130,000.00 activity during relocation, consistent to $150,000.00 indirect revenue, a conservative the next five with state and number based on economic model provided by years . regional goals and Colorado Office of Economic Development, using Acquisitions objectives . influence of $20 million annual payroll in community. could increase number of The ratio of economic benefit gained vs . incentives employees to extended is 3: 1. 420 from Year Five to Ye ar Eight • • • GART SPORTS INVESTMENT PRO?OSAL -CITY OF ENGLEWOOD MAY 16, 2001 'I SUMMARY Item Year One Years Two -Investment Proposal City Benefit Summary Fees & Taxes Five Fees & TaxeJ TOTAL $132,863.16 $163,899.44 Year One Direct City Benefit Received: $109,055.72 Rebate $ 43,456 in Permits & Fees $ 21 ,8 75inAvg.UseTaxYearTwo-Five Year Two -Five $ 22,222 in Personal Property Tax over ten years $96, 125.00 Rebate ~ in Sales Tax Revenue for fifteen years $686,444 in Direct Benefit lo the City over 15 years $ 45,762 Annual Direct Benefit over 15 years Indirect Benefit Breakdown: 265 jobs in Year One 320 Jobs Year Two thru Five $3,400,000 in labor for all proposed construction plans $ 140.000 in indirect benefits $3,540,000 in Indirect Benefit lo the City overl 5 years. . $ 236 000 Annual Indirect Benefit over 15 years. • L,-A911ig~~~i;r---;:H~'3'=;~;::-::--e-r---:g11:thl:out111:~-i<:-;~:11:rc-:~:. ::7 • AIOUT US/HILP ARCHIYIS IUSINISS ·Accea M .. 11ln• ·AP MoneyWIN -Computing •Money'• Worth •Penonel Portfolio -~oot100 •Stock Quotu CLASSll'IIDS COMMUNITY DISCUSSION l!NTl!RTAINMINT UPISTYLU MARKl!:TPUCI NIWS OPINION PROMOTIONS S~ltTS WIATHIR DPO MAIN S!ARCH DPO: EmdUs DP(:) Th• Otnwr Ant Gart Sports to acquire Oshman's ly ICely ht ■ Denvar Pollt lualnN9 Wrthr Feb. 23, 2001 · Gart Sports Co . said Thursday It will buy Oshman's Sporting Goods Inc. of Houston in a cash and stock deal valued at about $82 million . If earnings trends from last year hold, the combined companies would become the most profitable sporting-goods retailer In the country, besting revenue leader The Sports Authority, sa id Gart chief executive Doug Morton . 'In real income we are absolutely going to b, more positive," Morton said . Gart and Oshman's together will blanket the West and overlap In only a few markets . While Gart's 120 stores are concentrated In the Rocky Mountain region, Oshman's 58 stores are spread across the Southwest. Combined they have 178 stores in 25 states, compared with rival Sports Authority's chain of 200 stores mostly east of the Mississippi River. 'If you look at the future demographic and economic studies, we will operate in states that are forecast to be very vibrant economically • California , Texas and Colorado ," Morton said . Both Gart and Oshman 's sell sports equipment and apparel in the mlddle·toupper·prlce ranges, with Gart's strength in ski and exercise equipment and outdoor qear. Oshman's sales are driven by footwear and clothing . "We will achieve better results than either could on a stand-alone basis and that's the reason for doing this," said Tom Hendrickson, Gart chief financial officer . Gart isn 't expected to cut any job 'lut Hendrlck.•on said about half of the 250 membL of Oshman's corporate staff wlll lose their jobs. Morton , who will http ://www.denverpost.com/business/biz0223b.htm Pl!ATURID ADVlfflHIIS 3/22/01 retain his position as Gart clilllrm11n, CEO 1111d l'.\nv. president, said he expects the deal to dose In June, • pending shareholder and other approvals. Company headquarters will stay In Denver and Gart 211YH will keep Its GRTS Nasdaq ticker. Osltman's chlllf executive, Alvin Lubetkln, and chairman Marilyn Oshman will take seats on the Gart board. Gart expects to report positive earnings per share In Its third and fourth quarters • excluding $4 million to $6 million In Integration costs -and possibly even positive earnings per share after figuring In those costs, Hendrickson said. Gart and Oshman's reported combined sales of $745 million and combined net Income of $15 .2 million for the first nine months of 2000, and expact to top $1 billion In sales for the year. Fourth-quarter and year- end results are due ot•t next month. 'I ' C • During the first nine months of 2000, Florida-based Sport Authority generated $ 1. 1 billion In sales and $12.5 million net Income. More consolld ■tlon forec■lt "(Gari Is) still not as large in terms of sales, but • profits Is a better way to keep score ,• said John Horan, publisher of S,.;ortlng Goods Intelligence of Glen MIiis, Pa. Horan forecasts more Industry consolidation during the next five years. "This is a little bit like the airlines . Somebo<ly does a deal and the other guys look around and say, 'Hey, we've got to do something,'· ' Horan said . Analyst Rick Nelson of Stephens Inc. also envisions fewer players down the road and said Gari is In an excellent position . Nelson doesn't have any concerns about the deal but said execution Is critical. "The opportunity to Improve gross margin Is substantial," Nelson said . "They have proven their ability to assimilate acquisitions with Sportmart, which was a lot bigger than Gart at the time. I think they've learned a lot." A healthier buy It took Gari about a year to digest Sportmart, which It • purchased three years ago . At1alysts say Oshman's Is a healthier buy because It carries little debt. The http://www.denverpost.com/business/biz0223b.htm 3/22/01 • Sportmart deal cost Gart $6 mll h 1n In Integration costs. "Both of the companies should have reasonably good fourth quarters and certainly much better fourth quarters than they've had In recent years because the outerwear business was very strong and they had help with the scooters," Horan said. Gart will pay ashman's shareholders $7 a share plus 0.55 shares of Gart's common stock for each share of ashman's common stock . The deal, announced after the market closed Thursday, Is valued Just under $13 a share based on Gart's Thursday closing price of $10.75, down 25 cents from Wednesday . ashman's stock closed at $9 .35 Wednesday and Jumped 10 percent to close at $10.25 on Thursday, the highest close in five ye~rs. Gart stock heading up Morton expects to save about $10 million annually by reducing administrative and corporate expen!;es and cutting advertising costs by $2 million. In markets where both companies operate, ashman's stores .,.,;;1 adopt the Gart or Sportmart names. Gart's stock has been on an upward trend since last summer after more than a year trading below $8. ashman's stock has steadily Increased from $2 a year ago to a high of $10 in November. It dipped briefly before rebounding to the $9 range recently. ashman's began In 1919 ashman's started In 1919 and focused on growth In Texas and surroundlny states . During the past 10 years, the company revamped its business, closing about 1SL1 stores, opening 43 new superstores and paying dcwn debt. Morton said he expects the comblnP.d company to open about a dozen stores In 2002 In existing markets. "Ne w stores In existing markets have generated far higher returns than going Into new markets and to pione er the brand," he said . "We have plenty of room to growth In the markets we are In." Copyright 2001 Th• D•nver '""· All rights ruerved. This matutal may not be publlahed, broadcast, rewrttte11 or r11dl1trlbuted . bttp://www.denvcrpost .com/busincss/biz0223b.btm 3/22101 jDPO ii6m A-Z I • lleblmtotop 1f http://www.denvcrpost.com/bu:riness/biz0223b.hlm 3122/01 .... ,~2 '. _,,,., ' Denwrl'olt.CQ!II Our ModelaAnt O,..@Uiiii$, 24 Houn A Day e come Home • A ■OUT UI/HUP ARCHIVU IUIINUI -AcauN.a1aaJn• •AP MoneyWI,. -COmputtn1 •Money'• Worth ·Penon■t l'ortfollo ·Poat 100 •Stock QuotH CLAUIPll!DS COMMUNITY DUCUSSION l!N'f i!RTAINMl!NT UPISTYL!S MARKnPLACI N!WS OPINION PROMOTIONS SPORTS Wl!ATHl!R OPOMAIN SEARCH DPO : limll u, IIPC:)- ThtOtnwrPost Gart s,,orts net income, st,ock leap ly Kelty Pate Denver Poat llu1lne111 Writer Mar. 7, 2001 -Gart Sports Co. said Tuesday that net Income more than quintupled to $9.6 million during the recent fiscal year, which helped drive the company's stock price up 18 percent. Gart chief executive Doug Morton said his ,-.ompany achieved the greatest Jump In sales and net Income for the recent quarter and year since the company went public In January 1998. "We think It's a result of finally getting the financial performance out of the combination of Gart and Sportmart, • Morton said . Gart acquired Sportmart In 1998. Excluding a tax benefit, net Income for the year Feb. 3 hit $9 .o million, or $1.30 per share, compared with $1.8 million, or 23 cents a share for the year ended In January 2000 . The Denver-based sporting goo~s retailer said net Income during the recent quarter, excluding the benefit, rose 66.7 percent from$:: million, or 51 cents a share, to $6 .5 million, or FL cents a share . The tax benefit puts real net Income at $11 .7 million for the quarter and $23.1 million for the 52 weeks that ended Feb. 3. News cf positive earnings came as no surprise to industry watchers, whose consensus estimates came In low at 70 cents per share for the quarter, and $1.01 for the year. Gart Sports reported sales rose 15 .2 percent to $231.6 million during the 14-week quarter ended Feb. 3 . That compares with ~ales of $201 million during the 13 -week quarter rnr'ed Jan. 29, 2000 . Gart ended Its fiscal year in Febr;,ary with a 10 .3 percent Increase In sales, from $681 million a year ago to $751.1 http://www.denverpostcom/businesslbi7.ll307j .htm l'IATUUD ADYHTIAIIS .-.a l'SgnatlDIIH lldlllalll.-.-. ,..,____ 3/22/01 DtiiiverPlacom -Busineu News mUlion, Gart produced 10.1 percent growth In c:omPlflble store sales during the fourth quarter, a key strength lndl~ or:.wau strHt. Comparable store 111ts measure growth In stores open longer than a year. The company's stock closed at $12 .38 on Tuesday, alter a few weeks trading below $11 . On Feb . 22, Gart announced plans to buy Oshman's SportlnQ Goods of Houston In a cash-andstock deal valued at about $85 million. eot,yright 2001 The Denver Poot, All righb reMrved, Tl'lll fflllterial may not be publllMd, broadcast., NWrittlln or redlmllNltN, I OPo 116m A-Z i Retum to tog btlp://www.denvapost.com/busimss/biz0307j.htm • GART SPORTS COMPANY• BUY r.i......,. n. 2001 I llilDLINZDTAJI.lNO NAIIDAQt GJlTS DoU1ltuA. Gon:lon (415) 913·6313: dpd,m"'1of.u«:U1fria.com M&A/Diffltitun Ari K. Sinfh f415J 913-3Jl3; tuin.,hebo(O#t&&rili.._com DJIA: 10627 S&PIICIO: 1253 PRJCE: $10.15 PYl!l/31 lMA 2000! 2001E 1:-MON'IH TAJtOBT PRICE: 11' IPS 52-WE!K. RANGE: ..... QlW'lll (lo.OIi $0.05A . ..... PULLY DlLtn'ED SHAW O'S: 7.IMN QO{JIJLI O.O'I 0.34A cw ldAIIKET CAl'lT WZAl'JON, IIUIOI Q3(0CT) CUI! 0.02A .... AVG. DAILYVOL.(aMOS.): S.798 QC(JAII} uo 0.10 0.79 SECUUR !PS GIIOWTlt .... 1l8CAL YR ..... $1.U: IUl rtlfflEUVKNUR l14L311M PIS ... , ... 1.2 llAIKf.T CAPJIIIVINUa, "" PIBIG ..... -"" lM>O TOTAL DDT: SUUMM CAIDIDAJlYR lDIUI LTLVI'OTALCAP.: ... " M UWOROAE: , .... PIBIG lO<IO SIWWIOLDl:ltS' IQ., l'!U.IOI ltwO BOOK VALUEISHABE: h.74 DMDE.'1llll'lELl> NONB • DMc of Amuica Securiua UC cmn11tb' maiD&l:im • a.ut Ul dua IICllritJ. Gart Spom utabllaha ltulf aa the Marbt Leader In the 5po,tlng Goods Industry after announcl111 an $14 million Acqulallhon of Oshman's. • After the marluit cloud, Gm 5pona annow,,ecl m $84 .;;;JJioQ a.quiailion of OlhmaD'1 SportiuJ Good! (OSH, U0.25, notrmd). The acquiaiQOll, which ii apedai to -be!oro the end of July, will significantly upand Gut Sporta' .,.-In Ibo Mid•WII& -1 Wtllem awb11 end solidify the company'a dominant poation wNt of the MiNillippi. Thia ICIIW,lit>.t:.\ i.s apected to be aecretive by the end orFY1J1, aclulMJ intqration coota, and aa:nitive alter!'' ll\OQW (July 2000 -July 2001), including intepa&ioa COlta. We ftew thia aoqaiaition to be • r -t ,,;:-.tive denlopment and are bvJJloh abovt U.. •--compuiy'1 pr,,_.. IJOlqt!wwuv. Deal Dotolll: ♦ Odunan'1 lhanholden will ncein '18.05 per lhan. Each Ot:u,w,'1 tharoholdc will receive $7 in cub and 0.65 aharu of Gart Sporta common stock.. valued ■L 16.06 per aban, (or a total or $13.06 . The total tnuaction ii valued at $84 million. There ii a breakup fee, but mmapment didn't ,padrr ~• amount on the conference eall. That Aid. w1 don't forelee any ot.her competitor 1tappin1 in witbiA the next few w11b to off'er a counm bid u ~91t othtr retailers appear C:Ontent to ju.t sit on the aidelin11 for the near future. • Wo ootimalo lhat Geri 9polw w111.,._ W I ,....,_.,_ CMINi'I t.111 ~ Daiiit t1io-r.i-coll,.......-mentnplainodthotthoynluod~o&ifF I ...... ~ DITDA. ThiJ is truo wbOA you comparo Entorprilo Valuo to tnilinJ Drn>A tir tba 1leoaa pariod eodin, in late October . Howtvtr, conlidtrin1 that the trm.Netion won't c1111e until JW,, W •ti mote tho multiple to bo approximataly 4. 7x buod on 111 atimatecl Ill-month EBITDA nwnbor 1pllllUDf from July 2000 -July 2001 . Our u1wnptinna 111d calculation1 are bolow: INTll,.151 VALUI 1•- ..... , + A"'I LT Debt • A"'9 COlh Iola.-- • --- '"""""" IY.nmlA- 2QOI .... , 10 0 , ... 1 ,. 4.7a We are comfortable with tbla va!Wlt!on. Gart Sparta is punhuinr a •trmr "'mpony with l')Od fundamentals at a seemincly ruaonable and !air price. Allo, u noted on tlMt call. Oahman'• rent anuctu.re ii biJhly competitive and ita tton locationa an biply dttirable. Finally, we believe that then an, tromond0111 1)111"'1)' opportuniti11 bore, which helpo juotify the above ind111t,y•••orer• EnlerpriN Value to EBITDA mu.t!plo o11'arod . ln short. we bell ... that tho laac-tmm boncita of this acquisition euily outweic,b the short•tmll coats . Flnandal lmpllcatlona: ♦ Co_.,y -.1oo OIUlaaliNd Joint synors!u • ~ SlO llllillloD. Wo tbiDk they can l,o hipor. Althouch •• won't place a total fJ'DtrC' tttimate on the pn:,poaed mr.pr until WI have mon time to dipst recent neW'I, we do believe that mana,ement ii beinc extremely cma..-..tiYe in their eltimaies. The $10 million in auuraed synarciu only coven operatiaJ cOlta and for"ION any iop-liue pita from the mffP<. We believe that opportwut;eo mt f'or Gar< Spono' to implomOAt som• of their new operatinf initiaim., auch u the bacutock to floomoclr. or the "opparel 2000" prosrams, to Oshman'• ttons to drive comp talea to av10 hicher le ,ell. It ,Jiould be noted that we estimated Oshman'• 3QOO sales por ,quan foot to bo OJJl'"'ximately S28 , ov •,r ~ lower thon Gart Sport■' $37 Q3 performance . Clearly, there II n,om for productivity impro,e,MDt bore. In adchtion, there is a m,mendous opportunity to esp and the auto-ropltnishmeat .,_ . .,. throuahout th• merpd entity to expand ,,_ margin, ovon further throup,oat FYOl and F\'l'l Wo ---al,oat lhe oppommiU• to pean srea&er etncienciN out of the =~"''9&-' ~• operatizis model. Nevertheleu. managemeof. i1 being circumspect and e,rpecta 1ynffli•• to ramp up to the 110 million mark over three years. We utimate t)'llieraiu will be $5 million in year 1. S8 million in year 2. and no million in ,--a. ♦ latop-ation c:ooto ohould l,o opprox!m ■tely S6 m.ill!oa uul will l,o ._...i evenly ovor Q3 and Q4. Manqement ettimatu that intqratioo costa wm be limilu' to thON incurnd Ul the Sportmart acquisition. Thi, amOUDt covers sennnce packapt, hudcou.nt redundancies, t.raininfr, and the cost of runninJ two headquanen at the aarne time. We bellfft that then ii a pod chance 2 Dou,ku .A. Gonion (41/I) 913-6/113 • __ :.!!lU{!L _n1 11,11 PAI Jouuun J. Ian ha! latato Dort .' Banc of An1t1rf~S.Curitl• that -will actually be bolow tlm tarf4t bocalllO .al tho cll&iins aatuno of Ille two 1r1111adlooa. Th• Sporlmart lnlWICtloo -tbo l!nt acquio!lion clone by tha ounmt Gart 8portl' -t team, .., tbon ..,, iMNm ID be loamod. Now !hat the -pany bu albuod that lnniins'aperience curve, we beliOYO tlw tlm lnmilion wt11 aot IA lltterod witb tho -_. of pl-aid -· Aleo. u 11181llionod OD the call, tbore an rawer pn>blema to -It Olbman't than there were at S~ AA a rnult, we btlinethore la a ltl'Ollf ~ 1111& lllttl in...,._llon coot& could came in undeJ t.be M millioD initial tarpt. ♦ Debt J...io will be inltiaDy hlper Illa orip,all;J proJeclocL B,,_,-' Illa LT Debt to DlTDAndG to decline rapicll,-lbe -of a JNr, Lt....,. will start o/Jbicb«r but tllould tall rapidly i! Oar\ Spoeta .-ill -and contiouee to imFV" ill opera&ia, model ovor tho -NV•ral yean. We apoct LT Dlbt ID be appr,,,drul,olJ ii'! t.bo mo alfr;u,,ilEllrrDA after tho deal d-iD July. 'l1ua ii !.'ll bipor dwi the ratio we proj..,_ r..Gor&.S,-u 1tandalone _Y, bat nilJ fllr bolow 111,e bipa acmrnd altor tho Spo,_ .,...._ How-. upect the two ratios toqaiddy cx,n-...,.t1,e...,.. of1yu:ul,Tdelo&ioflli4dlllll_.im, synapo en achiOYOd. We should "-' ID -tho ratio chop u law u U-2.lz ID two ,-n. The table bt1aw i1luotratu -c:alc:alallons: -(I~ _, -GIT1lTO... 121 112 OSHLTDll!it 0 0 lcilenceJCah,_.ToOSH~ ... .., llilllaasdhf •a:dl2al'91r ll ll Con!WMCI LT 0... 112 16' -(1-1 LTMGfflta'TOA •1 .. LTM OSH OfT0A 20 21 -g 5 Coo,b;M,IT-1!111DA " 71 ___ ....,._ .... 2.4a --•c.mtOldl 2.h 2.2,, 1'Dilfwence "'" "' S-W:C......,....-n,, ..... ..,___....11,----. Mdltlonal ""nll: ♦ Gut Sports' fDolpriDt jut pt a lot IJlaw. Mer the IIC'luilition clo,a, Gort Sporil will operate 178 -. in 25 ateta 1111d ban annaalizod reYllluoe in exi:aa of Sl billion. In addidoo. Gut Spana will now ban a siJnili,ant .,.._.. ID T-t2a llcn.J) and a llllAll p-in Louisiana (5), Arimna (2), Oklahoma (2), Kauu (1), llichipA (I), T-(1), South Canwna (1), and Florido (!). Beca1111 th1 amoWlt ol ....-lap bttwem Oshman', md Gart Sporte-. ii minimal end btca111t Oehman't bu al,udy cJONd many or lta W1dcpm'ormi11f lloru, we doni envilion a ,iini!iw,t numlJer or cloeure, tprobohly 111ywbaro bttwwn S-7 """•>. 1n addition, Out Spor11' pramce in mari:ete eornd bae just incrutad tnmendou&ly, end t0 bu ill in!IUIDOI --dt,n and vendon. Befi>re the pn,poeed acqultttion wu enoounced, we ettlmated a • ID 5 Gort Spona to competitor "°" ratio (ID othOT wordt. r... r,wry • Gert Sporll -. thore ,... 5 -....,.....da, mailen t11ch u The Spores Authority, Oelunan'1 , Oal,an't, etc.) in -Gort Spnrte' .......t. After today'1 announcemmt. we Htimatt that. NJDe ratio to be approximately 2 to 1 in Cavor of Gart DaQ61aa A. Gonl,,,a (4111) 91~13 H/131111 Pl! 11:H PAI HHIUll11 n Banc of America Securities !lpmo, wldch ii m ..,..,,,. .. chanp. ,,. W1I noted in our inili&cion pilco, tho 1portin1 soodl mailiDc lndUIIIY lo bip,1, trqmonted and nlionaliled. 'n,o compotiti•• bol1DOO pendulum bu IWUIII m Oct Sport,,' dinciioA u it ha, i.lun a •isnlf!cont .,_P in UNrtins itNIC u tho market 1-lor. The paphic bolow illwtntes how we envision the mmpotitive landscape to look altar tho Oabawi'■ acquiliDOD c!c.MI: u~ -;, ... r ,::;(:i_:'". ··•• ♦ Espeet the lloat lo inc:nue, which will belp liquidity, The lack ofliquidity hu been a tbon, in Gart Sports' aide. With a float of only 1.8 million, Gart Sports' tndin1 vnlume bu been atNlm~ly thin u of late, hoverinr around 7,000 ab.area par day . After the acqu isitiCln UI co:i1plete, Gut Sporta utimateo that 3.3 million shares will be inued to Oshman'■ shanlv'' .~. thereby douhlin1 the outatandinc" tloat to appraximately 3.6 million shares (55~ of the GR'l'3 ahUH ,iven to Oshman'• ■hareboldars will not be locked up .). ♦ Malllcain our Buy Radn1, Price ta■yet at •is, and EPS projectiOD:.. Wo won't upclal. our EPS foncuta or our price tarpt Ulltil we ,et a chance t.o review the upcamit1r SEC ~-However, we do baliffe tbat there ii a IOOO chance that we will be rai1ing our FY0'2 EPS atimata by a flW centa. A. we pnwiomly !loud, we believe that there are trnnendou.a l)'Dt?CY opporWa.itia for the newly formed eompeny. Nevmhtles■, tbeN pine will be ofr■et partially bY Goodwill -on (dependins on whether or not FABB docidu to chanp ita rule■).,,. a raul~ we will bold our EPS projtcticm1 coutant for the moment. and rffil:it our auumptiao, at the appropriate time . Althou,b we are •till comfortable with our Sl8 price targtt., we also plan to scrutinize that number ia tht DNT future. M we noted in our Dtcemher 11. 2000 first Call note , we were comfortable with a 5.8s ~ Value to EBITDA multiple for Gan Sporu. Accordinr to the Nntit:ivity UWJ'li1 balow, mainWDioe that multipla would place Gart Sport.I' fair value north of $21 per ah.uL In fart, l¥'ffl if; ,u apply the same multiple Gart Sporu ap9lied to Oshman',, you would end up with a fair nl• al equit.1 hich•r th.an the current 1toclr. price. AJain, we will reviait that number after buildinr Dot■IIM A. Gordon (416) 913-6313 • • • 8'tU/Ol Fil 11 :21 PAI SOHIUIII Gort hal htata O..t , Banc of An11rtca Securities a detailed pro form& 1tatem1n\. la. the meaatime, we an u:cited about Gan 8porta' ~ ~ 1111d nmain lnaW1h about tho ■cock. VAlUATION SINSITMTY ANAlYSIS 2Q02lLTM EIJT0,A 71 71 71 71 " v...,..._.....,. 4.h .... , ... '·"' .... _ .. '20 m "' m 391 .JQOlfT .... Dellt .,,, -1'6 . , .. ., .. ., .. ±Bllll-1:ai! 111 19 111 111 111 Eqi.litpVeh• 163 111 , .. 216 234 1/0 11 11 11 11 11 .... ,,.,,.,51,.,. 115 ... Ill .,, S2I s-,c.:~,_,,.,..,lolwatMWQs.oni.U.C..,.,_.. I I May looe value NOT FDIC-INSURED . . No bank guarantee Dou1ia. A. Gord,,n (415) 91/1-63111 5 ... gata ■l!lllpta cam [$3bancorp Piper Jaffray. Equity Research Notes Gart Sports Company (GRTS -10 3/4) February 23, 2001 Br,nt R. Rystrom. 6J].JOJ-JJ11 or bry11rom@pjc.com I R«d A. Anduson, 6/1-J03 -JJ07 or rt!MlnDn@p/c.Cffll Announces Acquisition Of Oahman's Sporting Goods, Providing Significant Boost To Sales And Estimating Accretion In First Year Of Opendlona; Raising EPS Estimates For 2001 To $1.32 From $1 .30, introducing 2002 EPS Estli.,ata Of $1.54; Maintalnln Stron Bu Ratln And $19 Ta et Price Rating: Strong Buy, Aggressive(#) Pri<o : SlOJ/-4 ,, ...... u.,.. S14. S4 3''-4 FYEnd : ,.....,., 12-Mtb Prial Tp (15 :i: :001 EPS) S19 -0.,,(MU.) 7.9 EPS• um llllD lllllC Mab<C.,(Mil.) Sil ""' (S0.01) 10.0lA S0.07 A'l,-DailyVoluma lJ2S Jul S0.07 S0.34A SOJI -v .. S9.61 °" (SIIJl) SO.OZA S0.01 DMdad NU 1 .. :l!IJl a2!lli .111.16 -•Cao 64% FY S0.23 SI.IDE IIJl 3-JYrEP'SGfOWdl; ll 'll,20% PIE 46.l x 9.k I.la 2000P/EToQIO'll1hRas, l6% R"'(MII) Jm ZIIIIE mm 2002EPS-S1.5' ..,, SUl.9 S16l.7A SJ67.4 Jul 11726 Sl17.6A sm.1 °" Sl5l.l S1116.IA SllOJ URPPinlltlsw· 1 .. uw ~ WU Q4EPS MarthlOOI FY $611.0 S749.9E S1 .0ll.O •£PS ~cct nonndmd tu rue ~on .. EPSCIUrrai.n do DOI reflect oa c:osu.. wbkb arc csrima&ed to total S6 million. KEY POlr<rS: Gan Spons )<Sterday IQllcunc,,d 1he acquili1ion ofOshnw,'s Spc,nb,1 Goods in a lrlllSaclion valued as ,ppn,,timasely SS4 million. This tnnSKtion maid be modestly atacti\'e in fual 2001 , furlbcrSO,idifics Gan Sportl ltldcrship u the ""1SOlidalor o(die ,poniq p,ocls iadumy, and should provide, c:aw)'S1 for sisn ificao1 sllare price appreciasion in 1l1e "'"""8 12 moatlls. We~ Iii.sin& our 2001 EPS cstimue to S1.32 frm1 SI .JO u a ~nection of the modescxx:rction weuped this )at frcm the acquisition . Gan Sports has identified SIO million in c:ostsavinp that is apec:tedtobe ralized Offl' die nezt II months, wh,ch will be the primarydriYer rxtbis acquirition. We liR also inrroducins a 2002 EPS c:stim.ltt of Sl.S4, wb.ch is S0.04 hiahcr than we would have estimated prior to the annwn«mau of this acquisition. acw.or•ot ... ....,.,...,_,Nllll't (#IU.S.---,,__.~lrc.---•--6111-~1---.(~~u.S...,_,,.,_....,'°'C._., ....,,or..__.,...,.,_...,._o1,-....,,,.fe,w""""'•""",_.·u.1...,_,....,J-.,-..-,......~or111 ....... ::--,..,.d•--•!r fltfP"IP'0,.,.,,.,9'.....,l!r..., AfalrfWan:;p:,ip...,._r I NolFOIC...... NDlllra~ LON ..... ___________________ ,. __ .,.. ___ __, __ ,__.=------.. --, _, _________ ..,_ ......... --. ......... ____ ...,.. __ .. ......, ____ .,..,.._, •• IC ,__., ...... _____ .,.. ____ "" __ ,...__,_... ....... _.,._ ... ,._...,_, .............. _.._ ... ...... u.a.._. ....... _..__..,..,__.._._,_,._.,_.....,..,_ .. ___ ......,. ___ .....,__ ....... _ .,. _____ 1o11 ,.L"-.......... ...,.., .. ..._._.. ... _,,, ...... .__ ...... ,~ .... ,........,_ ... ,.r-..., ~t'-"10,.,,tNll•_..., .. ,.,__ ..... Aa,_~.........,. .......... o.r~ ...... .-..--.._._.,,..., .._.,..___,._....,.wc.,......,...._,.....,,1u.a..._., 1..-1u.a..._. ............................................... l'IIZ'O • ·• • . H~UtOl FRI II : 21 Fil HHIUIU Gart ~1 Batate Dett. tm:Jbancorp Piper Jaffray. Cart Sporu Comp ■ny Ftbnw'y 2J, 2&01 -Paet l or 5 gDIDa...,..._ Equity Research Nobis I (I ~ Oshman's Spmting Goods brinp a strc:111 store hue. 1nnctive occupancy costs, and strong merdsandilia1 c:apabilitia tn the softlincs area. Oshman·, open.tes 58 stores in 14 stata. md there is DO meaningful"°" nYffllP with Gan Span,' loc::llions. impomntly, Qshm,n's real ostalo ii '""°I and-Clllll lff low, whidllrt koyflCIOrS in Gut Sports' acquisition. Oshman's i:s aJso a stronger pemxmcr iD ,of\lina., partjcularly womm's apparel , and integrating this with Gan ~~ports· traditional strength in hardlincs should mw: fCI' 1 lft'ODI oYfflll pcrfonnance for both chains. We m reitent.in& OW' Srron1 Buy rarina and S 19 tvpt price for Gan Sports. Gari Sportt has proven ccmidenble succas ia bod, suc:ceutWly opcnring its own stores md sianifk,alrCly improvins die operatioo, of acquir= scores (Spommrt, llllected Sporu 4 Recruticn locations}. Oahman's Sportiac Oooda thou.Id provide similar q,portunity, but WI bttffl thl risk is substantially lower beeawe Oshman 's bu been bcttff manqcd and financed than previ<NS KqUilitiona. Ma recult. we bctit\'t this acquisition provides substantial upside opporruniry DOI ref\cct:ed ia our model, and ye, risk rcrnaiN relatively IIUIQ'. OUR CONFIDENCE JS HIGH REGARDING THIS OPPORTUNITY : Gut Sports hu clearly demonstrated ID ability lo acquire IDd Ylltty improve opentiom lhrou&fi acquilitiom. lb mapr with Sportnwt sc\,:ral )ftn a,o is a textha uample of rnanacemeaL Gan Spans inte!P'IICd Spartmart's openrions, vudy enhlllC'ed ;,, • ...,.. mcrdwldise WOr1111C11ts. slwply lowmd apcnting apen,a, and ddi,ue<i ri.,,;fi,.,,. eaminp 1cwr1F-Gari Spc1t1' operuing margins have doubled in the put two )all, while EPS ofS0.0) in 1998 SR'W10 S0lJ in 1999 and.an estimated SJ .10 in 2000. Conversely, Oshman 's is a n:lanvely hc:ahhy company that will not nquire the lifesavinJ efforts expended oa Sportman. The chaiu r<p<ll1'd tdidly profitable cx,mps in ihe put.,_ as it rimiJarly rq,ositioned ....._ and it helped Gan Spons lad the """'" rffi:a111d i.n full-line spartinc goods retailing. This merger iJ mere foc:med on cost take.outs and lm 0111 twnlRIUDd, ud we find th&I a rem..vbbly simpler and less risk-; opportunity. TRANSACTION AND BALANCE SHEET OVERVIEW, Gut Sports has agreed to acquire Oshman's Spcxtma Goods in a tmmctioo with an implied vaJuc of SM million. Gart Spana is offeria1topoySl in cub and 0.55 sham of Gan Spcltl ""1IIDllll nock foreadl share of0shman'1 Spa1in1 Goods. This equaa 10 Sl2.9I ubare based on ,a1crday's cJMin1 price for Gut Spana. Tbc deal is eapectcd to close in June, and scvenl Owmn's shaR:boldcn collett!ivclyhol1inr-4S% of that companyhaYC qreed.10 voce their shares in fa\'Ot of the Q'anSICtion. In addition., an affiliate of Leonard Green & Puu:crs LP has aarecd to..,,. its 62% positim in Gart Sports in favor oftbc acquisitiaa. l.cvcng:c lcveb will remain relatively sin.!lar u a result of the tnnsaa:ion. Oshman's had b.lnkdcbt ofSl6 millicn at the end oftbe third quarter. and a strong fourth quart:tr (nol :,~ reported) would imply nodebtllt )UHnd. Oshman 's pnnted !:.BrTDAufS16.3 million over tbc trailini:: four quanen. Gut Sp<ru hu $95 million in debt prim-to this acquun:ioa. and tn.ilin1 four-~ EBITDA of 537 .2 million (providing :1 dcbt-to-EBrTDA mio of2.!15 :I). Assum.inc Oshman's debt is rcduccd to SO as..: =dine the S.8 million used to finl!.Dce t.hc: Offlffllffl's acquisition plus another Sl4 mm.an forerrimated deals cosu. we estinwe, will l'WC totai debt to SlSi 11.:llion . This c:ompa1 t., to combined EBITDA of S63 .5 allllion if ooc: incSudes the S\O million in cost savings a.petted Ii-om this fflCrlCr. Hence. the debt-to--EBTTDA ratio should remain similar at 2.48:l. Gan Sports will .tlso pic:i. up additional dcfern:d tax bencfiU 1otalin1 SI 5 million . So,,-ar .. 111"9...._..,_... _,,...-i;(#IU.S...,_,,,...,1....,111e,-•--lll,_0DffiCIM'l',..-.uillN.(-)"U.S.e.-,iP.•.....,koac.. . .... ar _ _,.. ... ..._.__, .. o,...,~,,.,..,._.,_.._,..._u.,s...,._.f'kler.l...,n;. _ _,........,._.., • ....,. 1:;--TIWl'.a(■-=~=_,.,,.,.,,.,:.:::...eee-t!!!fm!lie!I ... ~ I ______________ ....._ .... ___________ ,_._............ ...... __ _ .....,_"' ___ ._.,.....,. ..... ...,__, ... ________ ...,. ____ ......,.. __ _,_, .. ,.. -1'1 .................... .-........... ::S.~.,... .• ....,~ •• ~IM!'IUIN ....... ...._ ... _____ ..,. ....... u ................. _...._.,...,,......s...,...,.., ....... ., ........ ,..,_1111 _______________ _ ·------... -~ .. ._.._.., ............... __ .............. _,Q __ ,__ ..... ~ ... ~ ........,~o,.,, ... _..., .. ,..,,...,_ ....... ~~1.....-.0.1 ....... ,.... ..... _...., ...... ..... ,,_J..., .... H __ ---=-~""-·....,._,.,u.& ..... Ol,-lu.&..,_,.,-,......,r,c.lOO,...._fllll.._lOQ,----.,._N«lr.,aa,o Of/U/01 Pl! JI: 27 Fil IOHIUZH ~ Piper Jaffray. eans,..uc-r..,,,,..,, 13, ZOii -Pap J ol, i....nps • ....,.,., (Smmliliw) Ycar-ertd dct · w:umption Cash p·aid to Oshman 's lh.areholdcrs Estima~d deal c:om Tot•I combined debt Traili'II ~lllll'Cr EBITDh Assumed EBITDA due to COit 1avinp Adjusted EB!Tt)A D,t,1-10-EBITDA: Stand-aJcae componics Adjllltcd for acquisition STllONG G[OGVPIIIC FIT: lit>tialal S9).0 S37.2 2.ll:l $16.l Nm .-.--com Equity Research Notes ~ S9l.0 41.l IJJ! lliU S5l.l ~ w.~ Oobman'1 Sportin1 Coods provides Gin Spona -ilia for bom oalry i,,a, new mubts a,c1 de -inftll of-1 marulJ. Oshman'•-, total of 58 _, ill 14-, compaed a, Gin Spor1J' 120 st<nl ill 16 --IDcmltoly, -•fll1C1C nore, b,,e • marlcet .....tap with tbe -chain, ,nd c;_, Spans hu ;dauifted U\ly thr<e ...., tha1 may do,c li.-.ply dtie to ,mall liZ& (all of Oshman',-.,,.,. proftal>la~ Gart Spana will,.,., haw a '1ominarins p..,.... in,.,..., i-• ,....._ ioduding •o ...., in California (tbe Mtie11'1 ....... -by popubnoa), 21 stora in Te>u (lhird-lqest mn: by population), 111d IS...., in llliDois (tll'tl•ilrJat 11111 by populaaoo). __.u.a.---.,....,..,,..,,.,..._.,._..., .. -........,..._ ... ,_ • .,, ~ "per Jaffray. Equity Research No ,es Gut Spo,t110t11-•,s...-.-s-1-_, Illll -~ 2Daa:.I CaJiromia JO 10 (() Tew 0 21 21 Col0111.lo 23 0 23 Dlinois ll 0 ll Utah 12 I ll WuhlnB'OD 9 I 10 Idaho 7 0 7 Minnaoca l I 6 l.aairlana 0 ' l NewMaic:o 2 l l ~mi,,1 4 0 4 l 0 l l 0 ) ... v.1UUJI 2 0 l Arizma 0 2 2 Oklahoma 0 2 2 Wilcmsin 2 0 2 Nevada I 0 I Iowa I 0 I Indiana I 0 I Kausu 0 I I Miclupn 0 I I r ........ 0 I I Soud, C&rolioa 0 I I Florid.I g ! ! Taul m a m Gan Spon:, plas ID c.-w.t lhr. Qslumo 's ,..., 10 the Gin or 5-names in Califom11. Utall, Wuhill-IDd Miuaoca. In Othman'• "bamo" lmitay of Tow 111d L<>iil• the a-•, -will aniYL Tbis ..-..., the COii savmp planned llom!ld,ctisiol-'"-"'adp11Jp111S inltey-.,, lbCalir.nu,. Wuiiqloa, ~ ...iNcwMai<:owill be consoHdaled wilh the redundaat pn,pm eliminated. LEVERAGI OPPORTtJNTIUS: 01111 Sports !as identified two major opportunities fcr camiap lcvcnJf.: apen,c leYels ud merchandise ma.r;ins . Expense levels are c:Jarty die malt cuily identifiable, md we haw reflected cost \.WOQU that C'YClltUllly loCal S10 miUicft on an annualized basis . M"" orlllir .....,t-proboblynar 16 alilli-will beialuod lnm hada>uulmluclionl . p,nic:ularty II tho capcn!< lev,:1. llnolhcr $2 million is oxpcded ID n:suh 1n,m die climimlion of .,. • .app;n, advcnirin& (Ill ...., in ead> ffllltc" will opctllO wider ooe name, diminatin& du: rad for diffucm ldvcrrisanatts}. r anaJly, S2 millton in buyin1 COSI 1 is expeaed to be ra.lmd pnmari ly frcwn rltionalizina the mhmdant buyiaJ teams . ._ ...... __....._.,_,..-.:CIIIU.I.IMc.n,._.-.,-.,_._..., ... _.;'8.......,l.,,_,U..S.-..V,.,_.-.,IPlc.odlow, ....... -....,._ •• _ __,.._., .. ___,,~ .. ,.-,....u.a.....,,_.....,-._..,..... ....... ., .. ,,,. ... ~=--"':!!"' .. -::;-=---·~ . lia ___ Ji@;:=--• • . .:...'!=---..-•= !-i:+ •• -............. 1 ..., ... ., ___ .................... ._ .............. _... ............. ___ .,_....., ... . ,_.., ......... -............. .....,_,,..,,...., __ .... ....,_. ........... ----·--... --.1.1& _____ ,....,_ ....................................... _______ __, ___ .... __ ....... _... ............ __. ....... ._. ............. _., ___________ ...,..ttptr1-=-:...---....... ..._. .................. 0.-.. , ....... ., .. ~-------------.....-.Qlllr~---...... ------u.s. .._,.,..._._...,. • ..:;_,.,.._._,......,.,.u---., ll)lll)tu.&~.-..,...., ................................... ~ --- cm!bancorp Piper Jaffray. Cart Sporu Campny ftl,rur, 23, llOI , Pa .. 5 ol 5 Equity Researc Notes I Harder to quantify but possibly of equal or crater imponan~ could be the mm:handisc marain opportunities multin& fium tilU: tcqu.i,ition . Qan Spof1s realiad over 200 bui, points of impn:,ved poss profit fflll1l"I since the Spannml miqa-. u a f'IIWt of impr<Md buyin&, peatu ~ .. pow,,. ,nd ocher r-Similar oppo1111nitiOI abould ..m. pncularly si-the ..... ,i, in ,oft.lines lhat Oman's brinp to this comb in ed company. As a malll:r of refer. nee, the combined company i1 cxpecrcd to hlva annuaJ sales ofSl .2 billion, so rr.slizin1 just 100 basis points 6t,m merchandise margins implies another S10 million or men in oppommity, RAISl:'-;ESllMATES: We are , .. iin& our EPS esrimues to reflce1 the acaerioo ,e:nmtcd from the expenw savinp rrom this ;u:quisitic.1 . Our 2001 EPS estimate is incrcued to Sl .32 &om Sl .30, and we are inrroducinsaSl.54 estimate ror 2002. Our2001 quarterly dwtp arc u follows : fint quarter, no cbaop; s«-1 quarter, dcaased ro SIi .Ji ftom S0.39 ; lhird quamr, dccteued ftom SIi.OJ to SIJ.01; rourth quarter, incrc:ast:d &om.S0 .8110 S0.86 . The weipiting of these c:hanp simply reflects the timing and levmp: ofthcu.~ riducticm. Our model does noc rdJect in1qntion CCllS related to the meraer, whii:b wee,.irnlte will total S6 million. nae aptnse:s arc one-time in oaturc aod u such are nol included in estimatts. They inc lude it :ms like ~cc. re-tid.etm.1, office moc:iti on. and dur,licari\'C c:csts ISSOClllcd w-th temporarily opcnrin1 two ~e lie',. OVERVIEW OP OSHMA.~•s SPORTING GOODS: Osbrnan's Sporrin1 Goods operuos 51 spomng goods specialty stores , including 43 SuperSporu USA sum and 15 smaller traditional stxes. The SupaSports USA ston:s are located primarily in medium to fuse mem,politan uus acro,,s lhe Uni!ed S11111. Oshman 's Si&perSports USA ston::s aR well-known fee their inlemrive merchandising: stores include lCSt-play m:as, inchadall bul;etball c:ouns. batting Cll'S, a<>lf si mulaoon, and tennis ccuns. The Comp:iny hu spenl !he lut ICl1 yrus ~osinl 110 small- forr.w nores lllld refucu.ting efforts on WFf su.pcnr.om. In recen t periods this was swtin1 to prove a siptlfi.:anlly more profitable bus iness model . Osha,an 's ocaipaac:yccatsare imprr:ssivdy low, about 20% lea onaverqc compared toO111 Spons. Despite lhis , Oshmm'srcal esu.tc is genmUy of excellent loatioa and quality. ThlS ,ns an important catal~ for thil a~isition. for other ~tiaa Clp')OrtUDities provide similar footprints but widl dramatically lusher occupancy c.osts. AJ ; 1:ompany punuing I producriw n=aJ CIIIIC JtNCtUrt, Oshman', fflnS pnmde ~dmblc ad .... -.. to Gari Spans . COMPANY DESCRIPTION': Gut Spans is lhe SO<XJOCl-w,at publicly l70dod lull-lino apo,ti.oa goods mailer ;,, the Uniiel States, and is die.:.....,. pomcipu,t in key mmets including me ~ oclcy Mountain rqic,n. Cllical', and Calir ... iL The Company offcn hip-quality bnsided metthandisc in both twdlincs md aoftlinea ca&epies, and manaaement bu eucutcd a powertbJ ccmolidltion and amiap story in l't'C'C1lt )Un-Gut Sports operates 120 stoles in 16 stalts under the Gall Sports: and Sponm,rt names. -----------···--·-_______ _........ ·----........ ....,. ........ _._.. ............. ~·----•-----·--.. -------.--l•-• ._.._., ......................... ~., ...... ,__._.,_... ... .,._..., ............................ ... ...... u.._. ... .._ ........ ...-.,._._,._.,_....._.., __ ...._ ...... .,._. --••----- ..... ,....---.. ... 1.1■-1....,•-1--,,-r.,......,. • .,... ... ..,_ .... ..,......,..,.,...,Mlt., .. -......._,,.,_ __ ~,....._.10,,.,.,,_1•_,..,.,.,.._,.__,__.,._.....,._,~o,w111,,_ ...... ,..,...,...._..._._.u.a. ._."-.....,-.......,.:wc•NT9L-..■......,,,u.a...._. ft)M'IY.a.._,......, ...... ,,.... ............................ .:cn • lt?t1101 PII 11: H PAI 30HIUIII<' [!E!bancorp Piper Jaffray. Equity ReHareh Notes Gsrt Sports Company (GRTS -12.38) March 1, 2001 a,,.., R. Rystro.,, 611-10,-5512 or bry,trtmr@pjc.com/ R,etl A Altdmos. 612-J0J-5507 or ~jc.com Reports Exceptionally Strong Fourth Quarter; Outlook Remains Favorable; Believe Valuation Is Compelling; Raising 2001 Estimate To $1.40 From $1.32; Reiterate StMng Buy Rating -------------------' Rating: Strong Buy, Aggressive (#) Pnco: Sl2.l8 !2,Weeklt,nf' Sl ◄-14 3/4 FYW 1 .. ..,,, 12-Mdl Prico Tit (ll~, 1001 !!PS) $19 Sllol,sOul(MII.) 1,9 us• ll!li[ ~ DnB -Cap (Mil,) 191 ,.,,, SO.OS S0.07 A'I-Dmly Volumo U,690 Jul SO.l4 $OJI ... v ..... Sll.25 S0.02 SO.OJ -.NU 1 .. Wl .llW si:ii DcWTOla!C,p 52" FY Sl.24 Sl.40 l-5 Yr EPS Gn,wth ll%-20% PIE 10.0. I.Ix , ... ZOOI PIE To Growth k&lt -.... (MIi) l'at nun Dml ,.,,, $16!.7 1167.4 Jul SJl/.6 1"7.1 0a Sl•i6.I S250.l UPS11t111Rduasu Ju, p,;J.§ ill§.Q QI EPS M,y200J FY 5'151.1 SJ,OJU Sl.017 ., -USrdleanmllllizidmrue~ •-vs cstinwes da net re.Ilea 011 cmts.. which areesaimau:d lo tdll $6 million. Kn'POll'ITS: Gan Sports reported txcqmonally stronl results far its fowth quarter. Earning per sbart were SO.Bl. which cc,rnpam to oor estimate olS0.70 and the S0.5! earned in the yar-eartier period. Solid sales powth and cantinucd marJin expansion c:onttibuted faYOnbly 10111it ouq,erform,nco aod should politian the Company for -her....,, iar in 2001. .....,_,...sales""" 10.1%,jusl aheldofour.-t,widlsolidnsults aauss all mo,d,andiJt~, Wewon:putic:ululy imprestcd widl f'oocwar, which postcd cornpo in the mid-lo biJllt-tin&lo-disil 1111111' (+l,H%). Clearly the Compony's merdiaadisins elrorts i, fcotwar 1ia .. been hiah!Y etr,a;.,. since 1llit hu been a weak catep,ry fer mast cornpetiton. Man:ova-, while the fcxcwcv rna-pn r11e wu down for the )Ur, 0'Y'U'l1.I gross margin dollar, were higher. Apparel was another good atcgory fcw 0:-t Sports in ihe fourth quartet and. comps ~.-e up in the midteens. In bardlincs. co:nps iocrcued u a high-tingle-digit rale for the q~•'Wf. s.-................. 111,, ...... ., ... a..c..,,...,111:. .......... _......._....,.~u.s.---,--...., ... aa.,_ .......... ...,.. •• ...,....,--•,......,_c~-. .. ,..._,._,u.5.....,.Alia',..... ... _ _..........., ... .,... :;---u,-ot,...,.~•-~=•-d•--~---~ '-------=-*=-~; ... :.~==-----= 4-9+-__________ ) .-, ..... .-...................... .._... ...... , ... _...--................ __.._., ____ , __ , ,_., ......... _ .............................................. ,.._ . ....,.. .. _._ ............. ___ .-.11.& ..... ••---~-................... , .. _,,, ... .....,.__ ......... _ • .,..,__ ...... ___ ............ -..... ~ ...................... , ... _____ .,. ___ ..,.., _______ MIii-~ ______ oa,,_ .. _________ ,. ________ ......... a..,-,. ............. ..,,.._ ......... u.&. ...... ,.,.,..__,_.,ue_,..,._.._,......,.,u.a.-.. _u.a...._. ..... ...., ............................ ..._~ - [!Ljbancorp Piper Jaffray, Gar1Spor11C-•y Maru7,lOII-Pqt2ol2 Equity Researct Notes The c.....,r·• """'I -.hamlising cu!IIIIO and disciplined apenling llrUclUn: camm,,d 10 dell ... -dial impn,vm,mtS in pn>fitability. The puss pn>fit marp (GPM) fer the quaner rooe ilObuiJ poinll 10 27 .5%, impacm! lavonbly by impn,voma,U in buyin1, pattr mcn:budise •~. and Jlotbe< -oJ oomputmzed -fo, aJJoc:.iioo and replc~'m,ent ><rivities. The SG.tA expense ratio UIIJX'M(I by 40 basis pomlS OY<r lUt -IO 21 .6% of sales, which we ataibute prinu.rily to the solid comp increase ci: well u to the added wm of sales due to the retail calendar. The operarina profit margin ft r the quarter was I SO buis pQinu hlJher than lur )'Car 11 5.8% of sales. The balance steer mMins solid and continues to benefit from the cmgoing growth in profiu . Debt wu downS J0 million O\lff last )Ur, 1ojUS1 undcrS96 million , as EBtTDA o(S41 .S million for the year-a SO% i.naeue owr IS'~~'ld ample cash flow Shrioldm' equity tolalcd approximately $19 million. which equates to S 11.25 per shl.tr. lr.vrntt:ry Stl,. ii S230.8 minion, which u also down approximately S10 million versus lut ycir and represents a decllne ofl n , .t ,t•c. r,a pcrsquan. (UIJI basis . The enhancemcnu: to mm:handisc flow have clarty had I favcnblc impact on 1nve-ntory 1. ,.,l-. na: •. w• believe Ulia sbouJd cx:,nfioue to be the .::a,c fix several )'m1S: we opca stwc ICYCI in\--mtories to decline by another 2o/,. , ,., ,,.. :Alt . • The outlook continues tobc hishlY fawnblc. in cu view, with comp1cxpectrd 10 remain in the )%-4% nose Uuvusftout 2001 , and magm lncls tm1din1 hiabcr. We expect expansion will be driven byorpnic powth of1r~ le'\"tl'I stores , we estimalc:, u well die r=aidy anoou.nced acquisition o(Ostwnan 's. which shou&d elose in the middle oftne second ft"uarta' and add approximaly 58 stores. Canbincd, wt are projccrina sales will inaease ~matety3,.f. in 2001 . This should ll'INl11.e into EPS ofSl .40 in 2001 , we cstiwte, which represents an incnue orso.oa from our previo.zs c:stimuc. Al re'"..cnt prices , shms ofGRTS are 1Bmn1 ii wllllwi:vicw u a cxmpellina; valuation r,,;just 1.8 times our revised estimate fur 2001. GiVffl the steady pwth in a.ks and eaminp u well as die impn:nivc execution, we continue to t:.licYe this stock ofTen SJp.ifiant opponunity for appreciation in 2001 . The nodc.'s liquidity sbould improwc with the clasin1 oftbe Oshman's lnnsaction in the second quarter ln addition, we fee! that d,e Ccmpany's incrcascd SQlc: (projCQCd SllCI over Sl.0 billion in 2001) is SWt: to attract more attention. Our 12-mooth prict: target ofSl9 remains 1.111chan,cd and UJWneS a modest low-teens multiple on tutrent•)UI' eamings , which is a discount t • the growth r1i1c. COMPANY DESCRIPTION : Gart Sports is tbe sea,nd-luge,1 publicly ttw.d full-line sparring goods mailer in the United States, and is the dorcinan1 parti cipant in key markets u,cluding the Rocky Mountain region, Chicaco, and CaJifom ia. The Compauy off en hip-quality branded rnm.:handise in born hudlines and softllnes catepies. and management hu executed I powerful consolidation and mmtnp slory in rtt:tnl years . Gut Sports opmtcs 120 uorcs in 16 states under the Gan Spans and Spcrnnan names . S....crallallfi.._._._,,.,_,(llll'llil!::{ftt.l.l.~,.._~lrc..--•,_._lil ..,._._.,.__.._,,-)i'U.S.""'-11.....,.......,-.._., ..., __ .. ...,,..._ • .....,....,.._a,,.~.,e,w .............. .,....u.s.--...,-J--,-.---.___..,.,..._. e:--:-of•":rtic•,.::"9"'•ne«1e•'""'::.:tC...,.,,,!1Prr!8!•...,~9:u. I r.--•-··--------~·-------·-----...... ........::---... -.. -... _,,_., ___________ ~_....,_,, . ...., ..... __.. _ _,.. ___________ . ., __ ..... ,_____,.,. ......... _.. ........... _.,..,._.,_,_, . .,_.. ....... ~ ... ..---. ............... ____ __ ......_ua ..... w ■ .... ----.w,_.....,.....,. • .....,..,._.,...,...._,..,_..,_...,__.,._... .... ._ ___ ..... ,.. ______ ......,_'-',_,.., ___________ .............. -1 ... ., .. ,,.,,.,...,.__._..,..... ,...._..(l--..o--1•i-......,.., .. ,.__,..,__,..~~._....,o..,.n.~ ..... --..._ .... u .....,,_~-.---fllWCIJlllflf'l'Sl.~1.........,fllU.l...,_, _,..u.a....._,...,,.,...,~.-..... -............ -.-IS-IOI.Jam • • ~The Motley Fool ~. Fool.com. ,. I l,C(,IJTl(',lrrwl ' • !,1n'1,1 ·k·n:,i-Jurtlr,,; , .. ,, hr -ciun/i CHOOSE A BROKER BECOMI! A FOOL More Info: Simple I Detailed I H~:f:1 i News I ~:t I Estimate■ I Chart I Sl!qiahot I Flnancla Note: Help, what's happening to my portfollo71 A lot of Pool1 are Hklng. The quotH reported m■y be Incorrect. We are wor1t1n1 with our quote provtder to get the error1 fixed H 900ft H poellble, Thanka for your patience, · ! GAi'<T .:'PORTS (NASDAQ : GRTS J Price : 10 11/11 Chg: 0 0% [4/4/011 :28 PM EDT] JI-Foolish Take on GRTS : Fool Network News a Latest F<Y.Jl l~c'\YS Discussion Board Back to HHdllne■ Gart Sports Signs Definitive Agreement to Acquire Oshman'• Sporting Goods Gart WIii Operate 178 Stores In 25 States; Annual Revenue to Exceed $1 E.llllon PR Newswire DENVER, Feb 22, 2001 /PRNewswlre via COMTEX/ •• Gari Sports Company (Nasdaq: GRTS) announced today It has entered Into a definitive agreement to acquire ashman's Sporting Goods, ,nc, (Am~ c uSH), Pursuant to the terms of the agreement, Oshman's shareholders wl1I r~celve $7,00 cash and 0 ,55 shares of Gari Sports common stock for each share of Oshman's common stock. Based on yesterday 's closing price of Gari Sports c,.mmon stock, the t-.nsactlon will be valued at approxlmate!y $84 million . Upon completion L: the acquisition of the 58 Oshman's stores, Gari Sport s will operate 178 stores In 25 states. The combined company will operate from Gari Sports' corporate headquarters In Denver, Colorado , Collectively, Gari Sportr and Oshman's generated revenue of approximately $L1 bllllon during the four fiscal quarters ended October 28, 2000. Following the clos ,ng of the acquisition, the combined company's common stock will be traded on the Nasdaq National Market under Gari Sports' cunrent symbol, "GRTS , • Gari Sports management anticipates the acquisition will be accretlve to earnings per share during fiscal 2001, excluding one·tlme Integration costs . •we are delighted to have entered into this strategically Important agreement, which represents an extraord inary opportunity for both Gari Sports and ashman's,• said Doug Morton, Chairman, President and Chief Executive Officer of Gari Sports, "Both companies bring outstanding name recognition, extensive industry experience and valuable assets to the combined company. Additionally, we will possess the mo!it experienced executive management team In the retail sport In~ goods industry. Both Gari Sports' and Oshman's customers, employees and shareholders stand to benefit slgnltl.antty from this acqulsltton . http://quote.fool .com/ncws/symbolnews,asp?symbolrGRTS&cWT'.ickeraGRTS&format=fractiq 4/4/01 "The Gert Sports and Oshman's store locattons are highly complementary ~nd the IT combined company will have an outstanding geographic pres~nce In the Midwest, Southwest and Western regions of the United States,• said Mr. Morton. "While Gart Sports and Oshman's currently operate In several of the same markets, we anticipate very few store closings from this transaction." Mr. Morton continued, "In 1998, Gart Sports merged with Sportmart In a transaction that positioned us as the second largest, publlcly traded, full-line sporting goods retailer In the United States. We Intend to capltlllze on the experience we gained from that transaction durtng the lntcqratlon of Oshman's with Gart Sports.' Gart management anticipates there will be In excess of $10 milllon in annualized cost savings and merchandise buying synergies that will result from the acquisition. In addition to reductions In corporate and administrative redundancies, the combined company should experience significant savings In advertising costs In markets where both Gart Sports and Oshman's currently operate Independent marke .. 1g programs. Upon completion of the acquisition, Gart Sports' Board of Directors wW be expanded from six members to eight members and will be joined by ~ .,rtlyn Oshman, Chairman of Oshman's, and Alvin Lubetkln, Oshman's v 1~e Chairman, :esldent and Chief Executive Officer. Oshman's ente red Into the definitive agreement following the unanlmou~ recommendation of Oshman's Board of Directors. Completion of the transaction Is subject to customary conditions, including the approval of the Oshman's shareholders and the effectiveness of a registration statement for the Gart shares to be Issued. Mr. Alvin Lubetkln, Ms. Marilyn Oshman and other Oshman's shareholders who collectively beneficially own approx imately 45% of the outstanding common stock of Oshman's, have agreed to vote their shares in favor of the transaction. The acquisition Is also subject to approval of the Issuance of Gart common stock to Oshman's shareholders In conjunction with the transaction. Green Equity Investors, L.P., an affiliate of Leonard Green & Partners, L.P., which beneficially owns approximately 62% of the outstanding common stock of Gart Sports, has agreed to vote its shares In favor of the Issuance of common stock to Oshman's shareholders In the transaction. The acquisition Is anticipated to be completed prior to th e close of Gart Sports' second fiscal quarter, which ends August 4, 2001. Oshman's and Gart Spo , shareholder approvals will each be solicited by means of a proxy statement for each company. The appropriate proxy statement will be malled to Oshman's and Gart Sports shareholders upon the completion of the required Securities and Exchange Commission filing and review processes. In conjunction with the acquisition, Gart Sports has received a commitment from its lender, The CIT Group/Business Credit, Inc., to increase Gart's revolving line of credit from $175 million to $300 million. CITs retail experience and working knowledge of both companies has brought added value to this transaction. Gart Sports Is being advised on this transaction by Stephens Inc., a full-service Investment bank based in Little Rock, Arkansas, as well as Los hnp://quote.fool.com/news/symbolnews.a.sp?symbolszGRTS&currticker-GRTS&fonnat-fractlo 4/4/01 • AngelP.s-based Leonard Green & Partners, L.P. Oshman's is being advised by New York City-based Finance, Inc. Conference Call and Simulcast Scheduled to Discuss Acquisition Management of Gart Sports will conduct a conference call to discuss this acquisition. The call will be held today at 5 p.m. Eastern and will be simulcast on the web at http://www.prnewswlre.com. To access the simulcast, go to the PR Newswire site and locate "Multimedia" In the left-hand menu bar·· then click "Conference Calls." From the pull-down menu In the center of the page, select "Events by Company" (last on 11st). Cilek on the letter "G, • and scroll down to Gart Sports Company. To listen to the live call, please gu to the web site 15 minutes early to register and downlo~d any necessary audio software , Replays will be avallaJle on the site shortly after the call is complete. Please contact Alir.la Alexander (303-393-7044) of Pfeiffer Public Relations, Inc. with ou~stlons. Gart Sports Is the second largest, publicly traded, full-line sporting goods retailer In the United States and the leading full-line sporting goods retailer In the Rocky Mountain region. The Company offers a comprehensive high-quality assortment of brand name sporting apparel and equipment at competitive prices, and currently operates 120 stores In 16 states under the Gart Sports and Sportmart names. ashman's currently operates 58 sporting goods specialty stores, Including 43 SuperSports USA stores and 15 traditional stores. The Company's SuperSports USA stores are located primarily In medium to large metropolitan areas across the United States, offering high-quality name brand and private label equipment and sportswear. ashman's SuperSports USA stores utilize lnteractlonal merchandising by offering sports test-play areas, Including basketball courts, batting cages, golf simulators and tennis ~ourts . The foregoing communication Is being flied pursuant to Rule 425 under the Securities Act of 1933 and Is being deemed flied pursuant to Rule 14a-12 under the Securities Exchange Act of 1934. This communication does not constitute an 0Ifer to sell or the solicltatlon of an offer to buy securities. Gart Sports Company ("Gart") plans to file a Registration Statement on Form 5-4 under the Securities Act of 1933 In .onnectlon with the merger, and each of Gart and ashman's Sporting Goods, Inc. ("ashman's") expects to mall a Joint Proxy Statement/Prospectus to its respective stockholders containing Information about the merger. Investors and security holders are urged to read the Registration Statement and the Joint Proxy Statement/Prospectus carP.fully when they are available. The Registration Statement ar.d the Joint Proxy Statement/Prospectus will contain Important Information about Gart, ashman's, the merger and related matters. Investors and security holders will be able to obtain free copies of these documents t hrough the web site maintained by the U.S. Securities and Exchange Commission ("SEC") at http//www.sec.gov. In addition to the Registration Statement and the Joint Proxy Statement/Prospectus, Gart and ashman's file annual, quarterly and special reports, proxy statements and other Information with the SEC . You may read and copy any reports, statements and other Information flied by Gart or ashman's at the SEC public reference rooms at 450 Fifth Street, N.W., Washington, D.C, 20549 or at the SEC's other public reference rooms In New York, New York and Chicago, Jr ADYE rGo ·, '!;,( Geteb, Disc01 http://quote.fool.com/news/symbolnews.asp?symbols-GRTS&cuntickcr-ORTS&fomw-fiactio, 4/4/01 Tho Motley Fool Symbol Specific News Page Back to HMdffnea Fonn~t page tor prlnllng Quoin doloyod 15 "'"""" fo<No-. 20 -fofll-olor.b. (4/4/2001 2:00 :19 PM) >I' ) Enter tlr.kor(a), get newa Enter• ctmpany name to gel i:, \leker: !GRTS O TodlyO<iy ■ o ~-OTw•- 0 Put Monnt O ThtN mon1hl Please send your questions, comments , and notes of gushing praise to the Quotes and Data di5<-~1"!ion board The Motley Fool PorlfoHoa Rule Breaker Port I '""°"' I Rule Maker Port I repo,11 I Drip Port I ,.,.,.I -,, ......... , .. ,. Tlw Molloy Fool ls -by~. Ale you? Th& trading HMCN that you may acceu through the ... on tNa page Ill ..... of the 11111d lndtpendenl broke,age ~. not Thi MolJey Fool. To UHthoH urvtc:.t, you1 need to MVI Ill lc.coL.l'llwilh I ~~«ycN.11 need to Mt OM up . The Fool provkSes aatomized ha lo Mlecied broker.ge companiel for y,cu-00fMnilnce triy. 'Nit.,. not 1 ,...._., brok.-.., and do nol tndorM or rlCllfflMlncl the MMCN or any brok_.. comp..-iy. Thi brokeraoe eompany y«, MIid II ICIMJly rnponltit for Ill ~ to you, thl .....,, Tht ...,. Fool WI not be llablt fOf any damagn « cosll of any type ariu,g out of or.,.,,. way comeded wtlh your UM of I brakerage company's HMCfl. We do our bttt to get you timely, aca.irate Information, but we ...,.,. the rtghl to be •· wrong, It~. or twn fooilh. Uae thll data for your own lrdonnallon. not for trading. The Fool and ill dall or conllnl proyldin (suctl • S&P Comlkd, BlgChlrtl. MX, or Cantu) won, be liable for any delllVt or trTOl'1, In the data, or for any loUeS you suffer blcaUM you rllad upon i0isclMnel' 312 ms USVAWebOII http://qU1J!e .fool.com/news/symbolnews.asp?symbols-ORTS&cunticket-ORTS&:formal'"fractio 414101 • • I Log In I Subocribo I AdverllN I About Hoovet'o I Holp j 1111 Mop The List Of Lists A-Z Index Set Default Private Public IPOs Subsidiary Non-US Business Boneyard Company Oiredory Industries Bus iness Links Small Bus:ness c;0 beslo ....,_crllers ;;;© buule<• st.i,scrl>ero Sector. Specialty Retail > 1ndusir, Specialty Retail • Sporting Goods Retailing Gart Sports Company C0n'l)llly~e NHdaq: GR'TS (fu ll quote) Flacal Year-End January Flff Financial lnfonnatlon AnllUll Fln1ncWI I Oulr1tf1y Flnandlll I ReaMlme Flllogs CLWT9Rt Quote t Ct-11 lnvNtar RNowces Financial lnfonnatlon for Subacrtbara c;0 Mlrut D1t1 I Comparison 011:1 I Oetailed AMue1 Anandlll I Detailed OuartlHfy FnanciilS Hllloricll FtnancWI & Employ ... Available only to Hoover's Onlinllt.OSCnbeB. SeeSamples Quarterly Financials Income Statement Andoll1r1mot.ralnmilllon ex01p1 per share amounts. Revenue Cost of Goods Sold Gross Profit Gross Profit Margin SG&A Expense Operating Income Quartllf Quarter 0uar1ltr Qual'tllf 0mtltr Endln 1 Ending Ending Ending Ending Jan 01 (Protlm I Oct 00 ..,, 00 Ap< 00 .,_, 00 231 .6 166.1 187.6 165.7 201 .0 -124 .9 140.4 126.t. 148.2 -------·41·.2 41.2 39~3~ -24 .8% 25 .2% 23 . 7% 26 .3'1<- 38 .4 2.8 40 .2 36 .2 44 .2 7.0 3.1 8.6 -------·-----Operating Margin Total Net Income Net Profit Margin Dil~ted EPS ($) Balance ShHI Cash Net Receivables Inventories 1.7% 11 .7 0.2 5.1% 0.1% 3.7% 10.8 5.8% 0.4 3.9 0.2% 1.9% 1.48 0.03 ~0.05 O.:i1 Jan 01 (Prellm.) Oct 00 Jul 00 /,.fw 00 Jan 00 9.5 7.9 8.3 7.8 7.~ -283 .0 259 .1 257 .5 240 .9 http ://www.hoovers .co m/quarterlies/9/0,2 167,54759,00.btml ,I' 414/01 ""' Total Curm,t Assets -304.7 285 .S-2'1.II "4.0 TotalAaets -384.3 366 .4 aeo.e 344.2 Short-Term Debt 0.5 o.lt o ..• 0.4 ~--·--Total Current Liabilities -165.5 151 .7 148.1 159.2 Long-Tenn Debt -135.7 132.3 135.0 113.5 Total Liabilities -307.8 290.2 294 .5 278.3 Total Equity 765 76.2 66 .2 65 9 Shan!s Outstar.;!ir,g (mil .) 7.3 7.3 7.3 7.5 7.5 Some ftglftl may not add up due 10 ~--~ .,.,,. __ Uon_oy-.__,,ne .. Rlcl'mand,Vqlrio F-Jl.oglnJSul>lalboJ_l_,JHllplSlll"-l_l_,_ Homoi~•-11o1oney1c-__ 1_,c.m.r1euu-r.-1Pun:1111o1ngc... Copyrighl O 2001 , 1-toowr'I , Inc. -•Hlltng _,HOOV =...~ bttp://www.boovers .com/qumterlies/9/0,2167,54759,00.btml 4/4/01 • • • • ~ Spons : The Archives l.!lae 1,of2 The Archives The Gart Sports Story For close to seventy years. the Gart name has been synonymous with the top tier of sporti1111 goods retailers in the United State s. The Gart tradition began in 1928 when The Denver Post newspaper carri c •. Nathan Gart, started the company with $50 in fishing rod samples . Bringing the :· , and excitement of sports to the communities we serve, our customers have recognized Gart Spons Company as a leader in providing wide as.-cl'tlllents of the best brand name products a,·silable. In 1971, Gart Spons Company opened it's first "Superstore" with the opening of the world famous Sportscastle ® Store in Denver . The decade of the "80's" proved to be an exciting time for us as a company . During this period we grew through acquisition. In late 1986 , we merged with Thrifty Corporation , a well known California corporation , to help provide the capital for our growth . As the decade proceeded, we acquired established names in the indu.,· y such as Hagan 's Sports Ltd. (1987), Stevens Brown of Salt Lake City ( 1987), and long time Denver area competitor Dave Cooks ( 1988). In the fall of 1992 Leonard Greer. lie Partners acquired Thrifty. and in earl y 1994, ,·,bile acquiring Payle ss Drug Stores , Leonaru urcen & Associates spw1 Gart Spons Company away from the Thrifty umbrella. Also in \971, at the same time Gan Sports opened the Sponscastle®, Sponmart opened its first Mart in Niles , IL and grew the company to where it was at the time of the Gan merger to 60 stores in 9 states. Initially , Sponmart faced the challenge of competing with specialty stores for dominance in the marketplace. With the combination of strong merchandise selection and value, Sponmart quickly emerged as a leader, in its own right, in the Sporting Goo'.is industry by offering to customers everything the sponing enthusiast could want. The combined Gart Spons anc ~;"'nmart stores will continue to offer high levels of customer service and strive to exc eed CU5tomer expectations lxih in merchandi se and serv ice . ~----- GART '>po rt::.~ ----c::::::::J._ --------. "--.- • ,. • ,. I Re sponding to the changing shopping patterns of our customers, Gart Sports Company succ essfully operates mall stores, free standing stores and superstores that carry a broad merchandise as :onment. and reson stores located in nationall y recognized reson areas . ··Sniagra b®" is a registered trademark of Gart Spons "Sportscastle®" is a registered tradem 1rk of Gait Sports http://www.gartsports .com/archivcs'index.hun 414101 ?<J ,irb A ~rf Honv, I Slore Locatlanl, Phone Numbel a and Hours I Cwwr Oppor1Unll!9 Lllil<:ount Ult Tlck811lQ!ln·1tions RequHII I Sllper Services I N,wa I The Archlvn I 'M1at's Up Special Events Page I Contact I ► Call Gart Sporll at (800) 666-8143 for l'nOIII lnforma11on. ► Send maft to : webmasterOgartsporll.com for problems ot commenll abOUt thil web site. ► For an lnvnto, relations packe~ please e-mail invntorrelatlons@gartsports .com --·~ ....... -C<>!Jytlghl02001Gan-~ Lutrnodffled:Mltd'l21 ,2001 http://www.g,Jrtsports .com/arcbives/index.htm 414101 • • Companlee S11n:h jS,fe Search fJ for I The List Of lists S.arctl Help A-2 Index s.tO.lau• Private Public IPOs c;© be!lc ....,._ • .;;/) -- -Specialty Retail > 1ndu11,v: Spetialty Retail • Sporting Goods Retalllng Subsidiary Gart Sports Company No11-US con.,,ny tapsule (I~ Proril!'g;j"'' Ai.leis "' "News & Bus iness Boneyard Company Dlreclory Industries Cusiness Links Sm•/1 Business c;® AVll&abNI only lo Hoover's Online aubscribffl. SNSanplet. 1000 Broadway P.lone : 303-881+1122 Denver. CO 80203 (Map) Fu: 303-329-1511 Dtnvef CMy Guide Toll Free : 800-228-4754 http ://www.g1rtapor11 .com &aidllry Locations Catch . Throw . Shoot. Buy. As the #2 full~ine sporting goods chain in the US , behind The Sports Authority , Gart Sports Company encourages these activities . The company has over 125 stores In 16 states in the West and Midwest. Its Gart Srorts and Sportmart stores sell sporting goods , footwear, and apparel and olferewl~ment repa irs . True to its Rocky Mountain roots . the company also ::arries wi nter sports apparel and gear. Gart Sports' lar Je-marl<et. freestanding .,tores average 40,000 s 1. It.: other stores are a, small us 9,000 sq . It The cor;;,,,ny doubled its roster of stores when ii bought Sportmart in 1998. Leonard Green & Partners owns 63% of Gart Sports. The company is buying the Oshman's Sporting Goods chain . Top Competitors Big 5 I REI I Sports Authortty Mere Competitors Exciusive information tor subscrtbers c;© Competitive Landscape Exclusive information for business subscrtbers ,-0 Products & Operations By Segment Exciusive information for subscribers c;0 http ://www.hoovers.com/co/capsule/9/0,2163,54759,00.html Buy Related R~ Reports $7 trades Ii: ,_ Key Numbers NHdaq: ORTS (M qUOla) Stock CMrt Fiscal Year-End: January 2001 Sales (mil .): $75'..1 1-Yr. Sales Growth: 10.3% 2001 Net Inc. (mil.): $23 .1 1-Yr. Net Inc. Growth : 1,183 .3% 2000 Employee•: 4,900 1-Yr. Employee Growth: (10 .9%) In-depth Financial• c;0 Sample Financials Key People 4/4/01 Download Capsules Down load Hoover's Company Ca psules covering thousand s of US comp anies . Create mai li ng lists . merge letters , or iriiport dat a into software program s. Learn mare about C'lmpanies I. __ • Nted more Information about Girt Sporta? Subscribe now and accen Hoovef1 Company Proftles for an OYe!Ylew, hlltory, fuU 11111 of competitora and offlcera, llnanciu, and more . Show me Sample Proftln . News & Commentary Hoover'• NIWII Current Stories Mentioning Gari Sports (pOwen,d by lnlwnen} Publlcatlo• --1 Journal Search Search tht. ;s of sources Gi\11 (Ex.CAJstve inf ormation fOf' bu11nt11 .,..crilffll Search the Dow Jones Publications L . a:y Company Press Releases Federal Litigation Search federal court cases involving Gari Sports Company (Provid«J by CourtlinlC) Find Related Companies ~ Hoovefs Online subscribers can ftnd more companies in this region . hnp://,vww.hoo vers.com/co/capsulc/9/0,2163,54759,00.html 1'1!112'6f3 Ch1l,-,~MC1 CEO r I John Ociuglal Morton EVP ,CFO,IIIIIT- Thomaa T. Hendric:bon &VP, Store OperalloM Greg Waters SVP, MerchanC:!slng Arthur S. 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March 6 /PRNewswir.,/ --Gan Sports Company (Nasdaq: GRTS) today announced record resttlts for its fourth quarter and fiscal year ended February 3, 2001. Total sales for the 14 weeks et~d• l February J , 200 I increased 15.2% lo $231.6 million from $201 .0 million for the 13 weeh • ·.ded January 29, 2000. Comparable store sales for the Company increased l0.1 % fo, tile comparable 13 week period . Net income for the fourth quarter, excluding the effect of recorded tax benefits, increased to $6.5 million, or $0.82 per diluted share , compared tc net income of$3.9 million, or $0.51 per diluted share, in the prior year's fourth qr'lrter, an improvement of $0.J 1 per share. Actual net income fo_ ·'.e period, including the effect of recorded tax benefits , was $11. 7 million , or $1.48 per diluted share. Operating income during the quarter increased 57.0% to $13.5 million versus operating '.ncome of $8.6 million in the prior year's fourth quarter. Earnings before interest, taxes , ~~pn-ciation and amortization (EBlTDA) incrP.ased 33.9% for the fourth quarter to $17.0 m;::ion versus $12 . 7 million in the prior year's fourth quarter. Total sales for the 53 weeks ended February 3, 2001 increased I 0.3% to $751.1 million compared to $681.0 million for the 52 weeks ended January 29, 2000 . Comparable store sales during the fiscal year increased 6.4% for the comparable 52 week period . Net income for the fiscal year ended February 3, 2001, excluding the effect of r-1:orded tax benefits , increased to $9.6 million, or S 1.24 per diluted share, compared to ae'. income of $1.8 million, or S0.23 per diluted share, in the prior year, an improvement of S 1.0 I per share . Actual net income for fiscal 2000, including the effect of recorded tax benefits , recorded in the second and fourth quarters, was $23.1 million, or $2.99 per diluted share. The tax benefits reflect the reversal of valuation allowances, which had cffset pre·:iousl y generated net operating losse ,1, the majority of which were acquired in the purchase of 1,portman during January 1998. Operating income for the yea., ;ncreased 11 0.3% to $26 .5 mill:on versus S 12.6 million in the prior year. EBITDA for the yr.ru increased 50.4% to $41 .5 million vers us $27 .6 million in the prior year. Doug Morton, Chairman , President and Chief Executive Officer ofGa<t Sports stated, "We are extremely pleased to have achieved record fourth quarter and full year eammgs in fiscal 2000 . These res ults were driven by solid comparable swre sales performances in all merchandise categori es, with particu larly str0,1g results ir, hard-goods and apparel. We also delivered another strong gross margin rate improvement during the year. which is attributable to the ong oing progress of refining our buying disciplines, more consi sten cy in our prcd~cl o eri ng ru.1d increasing the utilization of our automated allocation and rt·rlenishmcm systems to more precisely drive product assortments in our sto res ." Morton added "Year-end i,wentory levels are down 4% on a per square foot basis versus last w Yo Fo sit Yo No St w SU un co lis tar an lo Ho Ne w do G [ Ch or Sp http://www.hoovershbn.hoovers.com/bin/story?Storyld=CoQrU01>WbtefuvtaZn&Print=l&SlP 4/4/01 • • •• • Pap2of4 year's levels , and l011g-tenn debt was also reduced by $10 million at year-end . !n summary, sales and gross margins have realized strong year-over-year increases, expenses have been well leveraged and finally , inventories and debt have decreased." On February 22 , 2001 , Gan Sports announced it had signed a definitive agreement to sequin: Oshman's Sporting Goods, Inc. (Amex : OSH ). Since that announcement, Gan Sports bas secured addit~mal commitments from certllin shareholders of Oshman's common stock t,> vote their share s in favor of the proposed merger, bringing the total beneficial owners voting in favor of the proposed merger to approximately 50.1%. Upon completion of the acquisition of the 58 Oshman's st01 es , Gart will operate 178 stores in 25 states. On a combined basi s, Gert Sports and Oshman 's generated revenue of approximately S 1.1 billion during the four fiscal quarters ended October 28 . 2000. Gart Sports is the second largest publicly traded full-line sporting goods retailer in the United States and the leading full-line sporting goods retailer in the Rocky Mountain region. The Company offers a comprehensi ve high-quality assortment of brand name sporting apparel and equipment at competitive price~, and operates 120 stores in 16 states under the Gart Sports and Sportmnrt nam es. (table s to follow) Except for historical infonnation contained herein, the statements in this release are forward- looking and ma de pursuant to the safe harbor provisi ons of the Private Securities Litigation Reform Act of 1995 . Forward-looking statem ents involve known and unknown risks and uncertainties, which may cause Gart's and Oshman's actual results in future periods to differ materially from forecasted results . Those risks include, among other things . th•: inherent uncertainties associated with acquisitions of companies , the competitive environment in the sporting goods industry in general and in th~ ::,ecific market area of Gan and Oshman's, intlation, changes in costs of goods and servic~, and economic conditions in general and in Gart's and Oshman's specific market area . Those and other risk s are more full y described in the Gan's and Oshmllll's filings with the Securities and Exchange Commission . Ga r t Sport s Company Co ndensed Co n solida t ed Sta t ements of Ope r at ions ( Dollars in thous a nds , exce pt s ha r e and per share data) 14 Weeks 13 Weeks 53 Weeks 52 We ek"' Ended Ended Ended Ended reb!"uary 3, January 29 , February 3 , Janua r y 2 9, 21 01 2000 2001 2000 i~et sales $231 ,647 $201 ,005 s1,1, 1,4 $680,995 Co<i t r:[ 1oods sold, buyi,:.g, a nd occupancy 168,038 148 ,171 559,708 5 11,405 Gr oss pr,fit 63 ,609 52 ,83 4 191 , 146 163 ,590 0~1era ting e xpen ses : Sel ti ng , general and adm inis trat ive expenses so . 141 44,21 6 164 . 8 30 1 50 ,985 Ope :at.!.ng .:..ncome 13 ,468 8 ,616 26, 516 12 ,605 Non-operating income ( e::pense ) : In t e r est , net (2,145) (2,666) I 11 ,01 1 I (10,615) Other lncome (expe nse ) I 12 LI 212 2 46 77 9 Income before i ncome ca xes 10 ,602 6,224 15 ,691 2. 7 6 9 0 Ra Su Ev bu mo ow for tho Ce http ://www.hoovershbn.hoovers.com/bin/story?StoryldcCoQrUObWb::efuw,7..n&:J>rint-I&SD-4/4/01 '- C• Income tax benefit (expense ) l, 087 Net income Sll, 689 In c ome per share: Basic $1.59 Diluted $1.48 Basic weighted average shares outstanding 7,349,288 Diluted weighted average shares outstanding 7,915,888 Pro-forma FY 2000 results excluding the eff~ct of the significant tax benefit and utilizing statutory tax rates: Income before income taxes 10,602 Income tax expense (4,135) Net income S6,467 Earnlngs per share: Basic $0. 88 Diluted $0.82 Basic weighted average shares outstanding 1,349,288 Diluted weighted average shares ()Utstanding 1,915,888 :.,:.,: (2,343} $3,881 10, 51 o. 51 7,571,227 7,630 , 702 7; 405 $23,096 $3.13 $2 . 99 7, 3B U, 529 7 ,729,601 15,691 (6,119) $9,572 $1. 30 Sl.24 7 ,380,529 7,729 ,601 Gart Sports Company Condensed Consolidated Balance Shee:.s (Dollars in thousands ) ASSETS Current assets: Cash and cash equivalents Merchdndise inventorie >ther current asse t J Total current assets Property anC: equipment, OP': Other long·-term assets Total assets LIABILITIES AND STOCKHOLDERS' Current liabilities: Accounts pa yable Other current liabili t ies Total curront liabilities Long-term debt Other long-term liabilities Total liabilities EQUITY February 3, 2001 $8 1 1 J/ 230, BOO 15,961 254,868 59,298 20 , 962 $335,128 $105,395 36 , 149 141,544 95,900 8,798 246,242 (996) $1,p3 $0. 23 $0.23 7,632,696 7,701,427 January 29, 200 ~ $7,843 240,891 15,291 264,025 59,694 20,529 $344,248 $127,4 10 31, 762 159,172 105,900 13,287. 278,354 http://www.boovershlm.hoovcn.com/bin/story?StoryldaCoQrUObWbtefuvtaZn&:Print=l&SD= 4/4/01 • Total stockho lders' equity ,, 88,886 Total liabiliti es and stockholders' equity $335,128 SOUR'0E Gart Sports Company 65,994 $344,248 /CONT ACT : Thomas T. Hendrickson, Executive Vice President, Chief Financial Officer of Gart Sports Company, 303-863-2204; or investors/press relations, Geoff High of Pfeiffer Hi&b Public Relations, Inc ., 303-393-7044, for Gart Sports Company/ (C ,RTSOSH) IIEI.AnDQUOTU ORTS OSH ♦ 0.10 101&1'115 12.30 bil bJtp://www.boovershlm.boovers.comlbinistor)'?Storyld-coQ,UObWbtd'uVUWl&Print-=l&SO-4/4/01 CUck on printer icon on your browser to print story Oshman's Delivers Record Profits for Fiscal Year 2000 Business Wire -Monday , March 19 , 2001 HOUSTON--(BUSINESS WIRE)--March 19, 2001--Osbman's Sporting Goods Inc . (AMEX:OSH), reported today its results for the fourth quarter and fiscal year ended Feb . 3, 2001. The company had a net income of$7.3 million , or $1 .17 per share on a diluted share basis , in the fourth quarter of fiscal 2000, compared to net income of $1 .5 td llion, or $.2 5 per share , in the same quarter last year. Net sales for the quarter increased to $105.4 million from $93.7 million in 19~9. a 12.5 % increase , while comparable store sales increased 6.2% on . , equivalent 14-w•:ek basis . In fiscal 2000 , the company had net income ofS21 0 million, or $3.46 per share~" diluted share basis. This includes gains of approximately $6.8 million from the sale of owned r,1 operty in Los Angeles during the first quarter and $700,000 from the sale of a leaseholr in the third quarter, partially offset by a loss of$500,000 on the write-off of other fixed assets during the year. AdditionaUy , the company recorded a $972,000 gain related to a change in accounting me thod in the first quarter and income taxes were a benefit of $795,000 due to the elimination of t~e valuation aliowance on the company 's deferred tax asset offset by current year taxes. After income taxes , results for fisc al 1999 were a net loss of $3 .6 million, or $.62 per share . Net sales for fiscal 2000 increased 7.8% to $330.5 million from $306.5 in 1999. Comparable store sales increased 7.4% on an equivalent 53-week basis. Alvin N. Lubetkin, Chief Executive Officer, stated, "This marks the end of a historic year for Oshman's , one of turnaround and transfonnation . Despite a very difficult operating environment in the fourth quarter, Osbman's recorded the highest level of net earnings in our history , and the highest le vel of operating profit since 1984 . Early in the , ear we told you that the elements were in place for a dramatic improvement in our operating results , and I am pleased to say that we were able to live up to this assessment. "Our comparab l : store sales increase of 6.2% for the quarter was a so lid achievement in the face of slowing retail sale s nationwide . This increase was not achieved by forgetting pricing disciplines in order to clear goods. In fact our gross profit percentage actually improved to 33 .8% from 32 .3% in the prior year's quarter. Sales gains were less driven by hot items, such as scooters , than in the third quarter. In stead they reflected strong results in most categories, especially hard -line s and shoes. These sales gains and margin improvements , coupled with our continuing expense disciplines , produced the profit increase. '"The dramatic improvement in nur results for the full year wus based on the same factors. The comparJble store sales gain of7.4% was consistent throughout I.he year as we had increases of between 5.1 % and I 1.0% in each quarter. Shoes , aided by our new Higb-lmpact format, and most hard-lines areas were strong through out the year. "Even while we were generating sales gains , we were improving our gross profit http://www.hoovcrshbnJioovcrs.com/bin/story?StoryidzCoRwsubKbytaZmdi&Print-l&SO- Wha1Can • You? r--ur:: quick stt~ ~F.ers, t • Researc • Explore , M~ster !n 1' You Have Now Get Story 'Mtha busin subscription unlimited ac compeutive lists of office target<!d adv and much m to subscribe Hoover's News We scour th don 't have t • Business • TopCom • IPO New • E•Comm • CareerH • Travel He Get Stock c=:: Check you or set one u __ ,,, • I 414101 percentage to 34.7% from 34.2% in the prior year. We achieved this despite oµr successful efforts to reduce inventory and with some substantial increases in freight .1 cos-.s. At year-end our inventory was $12 .7 million, or 13.5% lower than at the end of 1999. We also feel that our inventory is fresher and better positioned than it was last year and should be an ass t in our con!inued efforts at margin management "Perhaps the biggest driver of impro·:ed performance in .000 was expense control. We took a planned and disciplined approach to reducing our expenses, especially at the store level. As a result. selling and administrative expenses dropped from 34.3% to 30.4% of sales. We have considerably reduced our breakeven level and have positioned outselves well to operate in difficult economic conditions , like those that are expected in 200 l . "All of these changes produced a very rewarding 2000 and have built a strong base for the future. For example, our stockholders' equity has increased by $21.2 million, or 58.4%, from the end of 1999, from $36.4 million to $57.6 million. We were not using our revolving credit line at the end of 2000, while we had over $37 million in debt at the end of 199;1. The potential exists for greater things in the future. "We believe that the merger agreement with Gart Sports Company that was announced on February 22 is the best way for our shareholders to participate in ;,is P"tential. Gart is a company with similar and complementary strengths, and the combined en~ty will benefit from the synergies that neither company could realize on its own . "This remarkable transformation and recovery that we have achieved leaves us with a great feeling of accomplishment. It took IO years and required the strongest effort from the Oshman team and fantastic cooperation from all our industry suppliers as well as many real estate developers. I thank all of you for your contribution and our sharehol~ers for their patience. "We were faced with many decisions , obstacles z~d turns in the road . We made many choices. l believe we made a lot of good ones." At year-end , Oshman's currently operated 58 sporting goods specialty stores including 43 SuperSports USA stores and 15 traditional stores. The company's SuperSports USA store are located primarily in medium to large metropolitan areas across the United States, offering high quality name brand and private label equipment and sportswear. Oshman's SupcrSports USA stores utilize interactional merchandising by offering sports test-play areas including basketball courts , baning cages , golf simulators and tennis courts. The information discu.;5ed herein includes "forward-looking statements" within the meaning of the federal securities laws. typically indentified by using words and phrases such as "expect." "plan," "forecast," "anticipate." "should approximate" "believe," "intend" or similar expressions. Althoug.~ the company believes th. the ~-xpectations re'.lected in such forward-looking statements are reasonable , the compMy's actual results could differ mater ·•., as a result of certain factors, including , the com ~any's ability to manage its expan•. , efforts in existing and new markets , availabil iry 01 sui.~ble new stnr• locations acceptable terms , levels of discretionary consumer spending, av::ulability of m~rr.handise to meet fluctuating consumer ,r Onll114ftla RIMan:n . .,,.... ..... Cldtheteto Su·vey your EvQluate yo business ide moro by con own market for Just $450 the Online M Center to le http://www.hoovcrshhn.hoovers.com/bin/swry?Storyld-CoRwsubKbytaZmdi&Print=l&SlF 4/4101 demands, customer response to the company's men:handise' offerihgs, fluctuating sales mai'gim, increasing competition in sportin11 goods and apparel retailing , the results of financing efforts and financial market conditions, as well' as other factors described frc", time to time in the company's periodic reports filed with the Securities and Exchange Commission . --Table ~ to Follow -- CONSOLIDATED STATEMENTS Of OPERATIONS FOR THE THREE AND TWELVE MONTHS ENDED FEa. 3, 2001 AND JAN. 29, 2000 (UNAUDITED) {i n thousands except for per sha=e amounts) Net sales Income (loss) before income taxes and cumulative eL.ect of change in accounting method for invent ory Income tax benefit Net income (loss) before cumulative effect of change in accounting method for inventory Cumulative effect of change in accounting method for inventory Net earnings (loss) Ea rt·ings (los s) per share before cumulative effect of c hange in accoum .. ing method for inventory Basic earnings (loss) per share Di luted earnings (loss) per share Cumulative effect of change i n a ccounting method for Inventory Basic e arn ings per share Diluted ea rnings per share Net earnings (loss ) per share Basic earn.:.ngs (loss) THREZ MONTHS ENDED TWELVE MONTHS ENDED .·ooo 1999 2000 1999 $105,394 $93,707 $330,470 $306,492 5,838 (1,499) 7, :;37 $1. 27 $1. 17 $ -- $ -- 1,4 21 (66) $1,487 S. 26 S. 25 $ -- $ -- 19,236 (795) ?.0,031 972 $21,003 $3 . 47 $3. 30 s.1 ·, S. 16 (3,631) (1) (3,630) $ (3,630) S I . 62) SI. 62 ) $ -- $ -- h,tle 3 ors ' I bttp://www.booversbbn.boovers.com/bin/story?Storyld--CoRwsubKbytt.Zmdi&Print-l&SO-4/4/01 • ... pe,: share $1.27 $. 26 ra1uted earnings (loss) per share Sl. I 7 s. 25 We ighted average shares 5, 771 5,830 Dil utive effect of stock options 509 100 Diluted weighted 21.verage shares o utstanding 6,280 5,930 Same store sales increase 6. 2\ 1.7% Number of store::.: at end of period: SuperSports USA 43 42 Tradit ional 15 15 58 57 OSHMAN' S SPORfING GOODS, l~C. CONSOLIDATED BALANCE SHEETS FEB. 3, 2001 AND JAN. 29, 2000 BALANCE SH~ET HtGHLIGHTS I IN THOUSANDS) ASSETS Current Assets Cash and cash equivalents Accounts receivat le, less allowance of see Feb Ul and Jan 00 Merchandise inventories E'repaid expenses and other TOTAL CURRENT ASSETS Net property, plant 30(~ equipmen': Other assets LIABILITIES AND STOCKHOLDEkS' EQUITY Current Liabilities Current maturities of long-term obligations Trade accounts payable A•.crued liabilities Store closing reserve Tt'TI\L CURRENT LIABILITILS Long-,. ~:m obligations Othe r 1.<.1n :urrent liabilities FEB. 3, 2001 ------------ (UNAUDITED) 356 l,072 81,412 1,819 ------------ 86,659 32, 764 20 ------------· 119,443 ------------ 461 32 ,277 19 ,974 97 52 ,809 557 8,476 $3. 64 $3. 46 5,770 293 6,063 7. 4% JAN. $ (. 62) S (. 62) 5,830 5,830 . 9\ 29, 2000 ------------ 321 l, 750 94, 157 466 ------------ 96,694 35,963 8 ------------ 132,665 ------------ 58 30,094 20,998 1,044 ----------··- 52. 194 37,463 b, 64 3 http://www.hoovershbn.hoovm.com/bin/s-.ory?Story!d-CoRw .lubKbytaZmdictl'riin-I &SO-414/01 STOCKHOLDERS' EQUITY 57,601 119,443 CONTACT: Oshman's Sporting Gc ods Inc., Houston Alvin N. Lubetkin, 713/967-8200 President, Chii,f Executive Officer Web site: www.oshm.ans.ccm MLATIDQUOlU GRn 1015118 OSH • o.oa 12.2a ~·~ lk11n2 ■1lllle 36,365 132, 6G~ rt hllp://www.boovenhbaJmoyers.~in/stmy?:;10ryldi-CoR~~P,ri/ll"'l&j~ • • • 4/4/01 COUNCIL COMMUNICATION Date I Awmdaltem Sublect May H . 2001 I 11 cl Business Redev elopment Incentives Gart Soorts Office Headauarters INITIATED BY STAFF SOURCE Community Development Jan Johnson, Business & Redevelopment COUNCIL GOAL AND PREVIOUS COUNCIL ACTION City Council has established goals regarding economic developm ent and improvement of the quality of life in Englewood, including business , industrial renovation, and growth strategies. RECOMMENDED ACTION Staff :ecommends approval of the resolution for economic incentives to assist with the redevelopment of the former Home Base property into the Gart Sports Corporate Headquarters at 1050 W. Hampden Avenue in Englewood. BACKGROUND, ANALYSIS, AND ALTERNATIVES IDENTIFIED Community Development staff has participated in redevelopmeo , discussions with Gart Sports since April 12, 2001. The company has indicated that Englewood is one of three locations under considerati o n for the relocation and consolidation of their headquarters, slated for completion by mid-November, 2001. This new corporate headquarters will unite the company's current offices at 1000 Broadway and nearby leased space in Denver, as well as consolidate the recently acquired Oshman 's Sporting Goods based in Houston. On a combined basis, the headquarters will house executive, professional and administrative staff that oversees a total of 178 retail stores in 25 states. Gart Sports, a Colorado-based retail giant since 1928, would convert an empty retail/warehouse spa ce to corporate office headquarters with a fifteen-year lease . Gart brings initially 265 jobs, an expansion to 320 jobs within three years, and potential to 420 Jobs within five years. The annual payroll is estimated at S20 million and the average salary at this site is $59,283 . Colorado's 1999 annual average wage rate is $34,189. The number of jobs would initially position Gart Sports as the 8" largest employer in Engl ewood. Th e comp any anticipates fifty new hires with 35 being offered the chance to transfer from Houston and the remaining positions would be hired locally. In addition, the company plans expan sion in Year Two through Five that includes S3 million In construction, S 1 million to $1.5 million in new equipment and increasing the number of employees to 420 total. The economic benefits of the redevelopment and relocation to 1050 W. Hampden include: • Increasing the total number of office users in the CityCenter area by over 20 percent initially. • Increasing awareness and positive perception of business opportunities in Englewood. • Creati"" of higher image and profile to attract other office users to redevelopment of GIW, Elati, Acoma and other sites . • Incr ea sing the pot~ntlal for auxilia ry office and supp ort users that will want to locate • ne ar Cart Sp 0rt s and tityCenter (I.e. restaurants, office supply. hotel, other retail, accountants, attorneys). • Increasing average annual sales tax revenue to $39,926.00. • Generation of 47 indirect jobs and increase of $110,466 In earnings potential to the City via spin off of $18 million In annu al payroll added to the community. • Addition of estimated 125 short-te rm construction jobs created for 6 months of redevelopment. The expansion wou ld employee 75 short-term construction jobs in Year Two thru Five . • Redevelopment of 92 ,000-s/f retail/industrial buildin g, including covenant influence on the redevelopment of the north portion of the property. (Owner of the property is negotiating a fifteen -yea r lease of property. If this negotiation fails , alternatives for this building include existing industrial or warehouse in accordance with permitted zoning). FINANCIAL IMPACT The resolution establishes the following economic incentives: Item Yea r 1 Cart Rebate Year 2 -5 Cart Rebate Cost Cost Buildin• Permit 14,42 8.75 NIA 11 ,908.75 NIA Plan Review Fee 9 378.69 N/A 7,7 40 .69 N/A Use Tax -const. 66 ,500.00 66 500.00 52,500.00 26 230.00 Use Tax-eauio. 35000.00 35000.00 43,750.00 21 675 .00 Personal Property Tax 7,555.72. 7,555.72 48,000 .00 48,000 .00 (•Upto maximum $10,000 based on actual values) Tot.al $132,863.16 $109,055.72 $163,899.44 $96, 12s.oo• *Proje~t Total 11101 to be considered annual rebate). Cart Cost after Reb ate $23,807.44 $67 774.44 Percent Rebate to Total Cost Year 1: >82% Year 2 thru 5: >58% All proposed ircen tives are rebates . TI1e company would be required to pay the actual taxes on the actual amounts of expenditures for construction materials and new equir '!lent. In addition, the company wo uld be required to pay the annual personal property tax k r the five-year period covered by this incentive propose ,. Once remitted, the company would be responsible for requesting the rebate from the City of Englewood. • The rebate would be mon ey that would not have otherwise been available to the City without the • significant redevelopment ,f th e Horne Base property by Cart Sports Office Headquarters. TI,i; rebate may be consid•· ed as a community investment through a public/private partnership . Englewood currently enjoys a similar ,orogram of community investment the Cat.alyst P,ogra"1 that ~upports public/private redevelopment of business along commercial corridors. The exlsdng program has resulted In sales tax Increases and we see this Investment proposal as comparable to this program . No funds would oe directly allocated to this project The budget process would notate d •e rebate eligibility of the r Jmpany and would adjust estimated annual rev enues accordingly. The impar of the rebate c ' these taxes is offset by the economic benefit to be derived from ,,1e project LIST OF ATTACHMENTS Resolution Gart Sp orts Investment Proposal ArtJdes on Gart Sp orts :