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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2004 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934. For the transition period from ______ to _______.
Commission File No. 0-15767
THE SPORTSMAN'S GUIDE, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1293081
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
411 FARWELL AVE., SO. ST. PAUL, MINNESOTA 55075
(Address of principal executive offices)
(651) 451-3030
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No x
------ -------
As of May 10, 2004, there were 4,707,555 shares of the registrant's Common Stock
outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE SPORTSMAN'S GUIDE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands, except share data)
March 31, December 31,
2004 2003
---- ----
ASSETS
CURRENT ASSETS
Cash and cash equivalents $16,694 $32,054
Accounts receivable -- net 2,147 3,034
Inventory 23,032 18,874
Promotional material 3,622 2,565
Prepaid expenses and other 2,489 1,871
Income taxes receivable 655 --
Deferred income taxes 2,220 3,176
------- -------
Total current assets 50,859 61,574
PROPERTY AND EQUIPMENT -- NET 1,947 2,248
------- -------
Total assets $52,806 $63,822
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $16,024 $18,950
Accrued expenses 3,294 5,891
Income taxes payable -- 3,107
Deferred revenue 4,783 4,623
Returns reserve 1,805 2,240
Customer deposits and other liabilities 2,465 2,016
------- -------
Total current liabilities 28,371 36,827
LONG-TERM LIABILITIES 173 187
------- -------
Total liabilities 28,544 37,014
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY
Common stock-$.01 par value; 36,800,000
shares authorized; 4,694,889 shares
issued and outstanding at March 31, 2004
and 4,826,321 shares issued and
outstanding at December 31, 2003 47 48
Additional paid-in capital 7,904 11,616
Retained earnings 16,311 15,144
------- -------
Total shareholders' equity 24,262 26,808
------- -------
Total liabilities and shareholders' equity $52,806 $63,822
======= =======
See accompanying condensed notes to consolidated financial statements.
2
THE SPORTSMAN'S GUIDE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
For the Three Months Ended
March 31, 2004 and 2003
(In thousands, except per share data)
2004 2003
---- ----
Sales $44,594 $43,749
Cost of sales 30,466 29,552
------- -------
Gross profit 14,128 14,197
Selling, general and administrative expenses 12,346 12,730
------- -------
Earnings from operations 1,782 1,467
Miscellaneous income, net 42 29
------- -------
Earnings before income taxes 1,824 1,496
Income tax expense 657 539
------- -------
Net earnings $ 1,167 $ 957
======= =======
Net earnings per share:
Basic $ .25 $ .20
======= =======
Diluted $ .22 $ .19
======= =======
Weighted average common and common equivalent shares outstanding:
Basic 4,753 4,757
======= =======
Diluted 5,368 5,119
======= =======
See accompanying condensed notes to consolidated financial statements.
3
THE SPORTSMAN'S GUIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
March 31, 2004 and 2003
(In thousands)
2004 2003
------------- ---------------
Cash flows from operating activities:
Net earnings $ 1,167 $ 957
Adjustments to reconcile net earnings to cash used in operating activities:
Depreciation and amortization 333 332
Deferred income taxes 956 725
Tax benefit related to exercise of stock options 649 --
Gain on disposal of property and equipment -- (2)
Changes in assets and liabilities:
Accounts receivable 887 1,064
Inventory (4,158) (1,935)
Promotional material (1,057) (1,153)
Prepaid expenses and other (618) (673)
Income taxes receivable (655) --
Income taxes payable (3,107) (1,851)
Accounts payable (2,926) (2,499)
Accrued expenses (2,597) (1,434)
Customer deposits and other liabilities 160 371
-------- --------
Cash flows used in operating activities (10,966) (6,098)
Cash flows from investing activities:
Purchases of property and equipment (32) (195)
Other -- 6
-------- --------
Cash flows used in investing activities (32) (189)
Cash flows from financing activities:
Proceeds from exercise of stock options 786 15
Repurchase of common stock (5,148) --
-------- --------
Cash flows provided by (used in) financing activities (4,362) 15
-------- --------
Decrease in cash and cash equivalents (15,360) (6,272)
Cash and cash equivalents at beginning of the quarter 32,054 17,152
-------- --------
Cash and cash equivalents at end of the quarter $ 16,694 $ 10,880
======== ========
Supplemental disclosure of cash flow information
Cash paid during the quarter for:
Income taxes $ 2,810 $ 1,780
See accompanying condensed notes to consolidated financial statements.
4
THE SPORTSMAN'S GUIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying consolidated financial statements are unaudited and
reflect all adjustments which are normal and recurring in nature, and
which, in the opinion of management, are necessary for a fair
presentation thereof. Reclassifications have been made to prior year
financial information wherever necessary to conform to the current year
presentation. Results of operations for the interim periods are not
necessarily indicative of full-year results.
In preparing the Company's consolidated financial statements,
management is required to make estimates and assumptions that affect
reported amounts of assets and liabilities and related revenues and
expenses. Actual results could differ from the estimates used by
management.
The accompanying consolidated financial statements include the accounts
of the company and its wholly-owned subsidiary. All significant
intercompany balances and transactions have been eliminated in
consolidation.
The Company's fiscal quarter ends on the Sunday nearest March 31 for
2004 and 2003, but for clarity of presentation, all periods are
described as if the quarter end is March 31. Fiscal first quarter 2004
and 2003 each consisted of 13 weeks.
Amounts billed to customers for shipping and handling are recorded in
sales at the time of shipment. Sales include shipping and handling
revenues of $5.7 million and $5.8 million for the quarters ended March
31, 2004 and 2003.
Note 2: Stock Options
Stock options issued to employees are accounted for under the intrinsic
value method. No stock-based compensation cost is reflected in net
earnings, as all options granted had an exercise price equal to the
market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net earnings and earnings per
share as if the Company had applied the fair value method of accounting
for stock options (in thousands, except per share data):
Quarters Ended March 31,
------------------------
2004 2003
---- ----
Net earnings as reported ......................... $ 1,167 $ 957
Deduct: Total stock-based employee compensation
expense under the fair value method for all awards,
net of related tax effects ..................... (232) (117)
-------- ------
Pro-forma net earnings ........................... $ 935 $ 840
======== ======
Earnings per share:
Basic -- as reported ........................ $ .25 $ .20
Basic -- pro-forma .......................... .20 .19
Diluted -- as reported ...................... $ .22 $ .19
Diluted -- pro-forma ........................ .18 .17
Note 3: Net Earnings Per Share
The Company's basic net earnings per share amounts have been computed
by dividing net earnings by the weighted average number of outstanding
common shares. Diluted net earnings per share amounts have been
computed by dividing net earnings by the weighted average number of
outstanding common shares and common share equivalents relating to
stock options and warrants, when dilutive.
For the quarters ended March 31, 2004 and 2003, 614,771 and 361,683
common share equivalents were included in the computation of diluted
net earnings per share.
All outstanding options during the quarter ended March 31, 2004 were
included in the computation of diluted net earnings per share because
the average market price of the common shares during the period
exceeded the exercise price of the options.
5
Options to purchase 14,950 shares of common stock with a weighted
average exercise price of $8.70 were outstanding during the quarter
ended March 31, 2003, but were not included in the computation of
diluted net earnings per share because the exercise price exceeded the
average market price of the common shares during the period.
Note 4: Legal Proceedings
In March 2003, the Company was notified by the Bureau of Industry,
United States Department of Commerce (BIS) that BIS has reason to
believe the Company violated Export Administration Regulations by
exporting optical sighting devices for firearms and associated parts to
Canada and other destinations without obtaining required authorization
from BIS. BIS asserts the Company committed 61 separate violations for
shipments from October 1999 to March 2002. The potential maximum civil
penalty is up to $11,000 for each violation. The Company is currently
in discussions with BIS to settle the matter prior to the issuance of a
charging letter. The BIS has initially offered to settle the matter for
a penalty of $207,500, representing 32 violations at $1,500 per
violation and 29 violations at $5,500 per violation. The Company
believes the settlement offer is excessive based on civil penalties
imposed in similar cases and intends to continue negotiations with BIS.
While the Company cannot predict the outcome of this matter at this
time, management believes the matter will not have a material adverse
impact on the Company.
Note 5: Repurchase of Common Stock
On May 5, 2003, the Company announced that its board of directors
authorized a plan to repurchase up to ten percent of its outstanding
common stock in the open market or in privately negotiated transactions
over the next twelve months. Under this plan 259,644 shares of common
stock at a total cost of $5,148,000 were repurchased during the three
months ended March 31, 2004.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a leading marketer of value priced outdoor gear and general merchandise,
with a special emphasis on outdoor clothing, equipment and footwear. We market
and sell our merchandise through main, specialty and Buyer's Club catalogs and
two e-commerce Web sites. Our catalogs as well as our Web sites offer high
quality products at low prices. Our catalogs are advertised as The "Fun-to-Read"
Catalog(R) and our primary Web site is advertised as the "Fun-to-Browse"
Website(R). Our Web sites include www.sportsmansguide.com, our online retail
store modeled on our print catalogs and www.bargainoutfitters.com, our online
liquidation outlet.
Our business was started in 1970 by Gary Olen, our Chairman. Over time, our
product offerings and marketing efforts have broadened from the deer hunter to
include those interested in pursuing and living the outdoor lifestyle in general
and the value-oriented outdoorsman in particular. In 1992, we began our value
pricing strategy of offering outdoor equipment and supplies at discount prices,
later adding government surplus, manufacturers' close-outs and other merchandise
lines. In 1994, we began to publish specialty catalogs which allowed us to
utilize a customized marketing plan to individual customer groups.
Sales generated through the Internet have grown rapidly over the last several
years. We launched our online retail store in April 1998 and began posting our
catalogs and full product offerings on the site in February 1999. Our e-commerce
offerings generated over $69.0 million in sales in 2003 compared to $1.3 million
in 1998. Product sales on the sites accounted for approximately 40% of our
catalog and Internet sales in the first quarter of 2004 compared to less than 1%
for all of 1998.
In the fall of 2000, we began to aggressively promote and sell the Buyer's Club
membership program. In addition, unique catalogs (Buyer's Club Advantage(TM))
were developed and promoted to members only, allowing us to maximize sales and
profitability from our best customers.
We believe that our value pricing, specialty catalog titles, the Internet, and
Buyer's Club memberships have been important to our sales and profitability
growth. Our sales have increased from $43 million in 1992 to approximately $195
million in 2003.
FISCAL YEAR
Our fiscal quarter ends on the Sunday nearest March 31 for 2004 and 2003, but
for the clarity of presentation, all periods are described as if the quarter end
is March 31. Fiscal first quarter 2004 and 2003 each consisted of 13 weeks.
CRITICAL ACCOUNTING POLICIES
Sales are recorded at the time of shipment along with a provision for
anticipated merchandise returns, net of exchanges, which is recorded based upon
historical experience and current expectations. Amounts billed to customers for
shipping and handling are recorded in sales at the time of shipment.
Customers can purchase one year memberships in our Buyer's Club for a $29.99
annual fee. We also offer two year memberships for $59.97. Club members receive
merchandise discounts of 10% on regularly priced items and 5% on ammunition.
Membership fees are deferred and recognized as sales as the individual members
place orders and receive discounts. Any remaining deferred membership fees are
recognized as sales after the expiration of the membership.
The cost of producing and mailing catalogs is deferred and expensed over the
estimated useful lives of the catalogs. Catalog production and mailing costs are
amortized over periods ranging from four to six months from the in-home date of
the catalog with the majority of the costs amortized within the first month. We
estimate the in-home date to be one week from the known mailing date of the
catalog. The ongoing cost of developing and maintaining the customer list is
charged to operations as incurred. All other advertising costs are expensed as
incurred.
Stock options issued to employees are accounted for under the intrinsic value
method. Pro-forma disclosures as if the fair value method were used are included
in Note 2 to the Consolidated Financial Statements.
7
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information from our
Consolidated Statements of Earnings expressed as a percentage of sales:
Quarters Ended March 31,
------------------------
2004 2003
---- ----
Sales ................................................... 100.0% 100.0%
Cost of sales ........................................... 68.3 67.5
----- -----
Gross profit ........................................ 31.7 32.5
Selling, general and administrative expenses ............ 27.7 29.1
----- -----
Earnings from operations ............................ 4.0 3.4
Miscellaneous income, net ............................... -- --
----- -----
Earnings before income taxes ........................ 4.0 3.4
Income tax expense ...................................... 1.4 1.2
----- -----
Net earnings ........................................ 2.6% 2.2%
===== =====
Quarter ended March 31, 2004 compared to quarter ended March 31, 2003
- ---------------------------------------------------------------------
SALES. Sales for the quarter ended March 31, 2004 of $44.6 million were $0.9
million or approximately 2% higher than sales of $43.7 million during the same
period last year. The increase in sales, quarter over quarter, was primarily due
to higher sales generated from unique product offerings on the Internet.
Internet related sales continue to grow, period over period, as we continue to
make enhancements to our Web sites and implement and improve upon various
marketing and merchandising programs. For the first quarter of 2004, sales
generated through the catalogs decreased from the prior year's sales level
primarily as a result of lower than anticipated customer response rates and a
reduction in our catalog circulation. As of the end of the first quarter 2004,
the Buyer's Club membership had increased to approximately 358,000, up 2% over
the 351,000 reported at December 31, 2003 and up approximately 9% over the
membership count one year ago.
Sales generated through the Internet for the quarter ended March 31, 2004 were
approximately 40% of total catalog and Internet sales compared to approximately
34% of total catalog and Internet sales during the same period last year. Sales
generated through the Internet are defined as sales that are derived from our
Web sites, catalog orders processed online and online offers placed by
telephone.
Gross returns and allowances for the quarter ended March 31, 2004 were $3.1
million or 6.5% of gross sales compared to $3.3 million or 7.0% of gross sales
during the same period last year. The decrease in gross returns and allowances,
as a percentage of sales, was primarily due to favorable trends in actual
customer return activity.
GROSS PROFIT. Gross profit for the quarter ended March 31, 2004 was $14.1
million or 31.7% of sales compared to $14.2 million or 32.5% of sales during the
same period last year. The decrease in gross profit, as a percentage of sales,
was primarily from a decrease in product margins due to promotional pricing, a
shift of sales to lower product margin categories and a higher percentage of
sales in lower margin, factory direct merchandise items. We continue to employ
promotional pricing techniques to maintain our competitive position.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the quarter ended March 31, 2004 were $12.3 million
or 27.7% of sales compared to $12.7 million or 29.1% of sales for the same
period last year. Selling, general and administrative expenses, as a percentage
of sales, were lower compared to the same quarter a year ago with the higher
Internet sales having a favorable impact on the overall advertising ratio to
total sales and lower order processing costs, which were again directly related
to the increase in sales generated through the Internet. The decrease in dollars
in selling, general and administrative expenses was primarily due to lower
advertising spending from the reduction in catalog circulation and lower order
processing and order fulfillment costs.
Total catalog circulation during the first quarter of 2004 was 11.0 million
catalogs compared to 11.3 million catalogs during the first quarter of 2003. We
mailed nine catalog editions consisting of three main catalogs, three Buyer's
Club Advantage(TM) catalogs and three specialty catalogs during the quarters
ended March 31, 2004 and 2003. Advertising expense for the quarter ended March
31, 2004 was $6.6 million or 14.8% of sales compared to $6.9 million or 15.8% of
sales for the same period last year. The decrease in advertising expense, as a
percentage of sales, compared to the same period last year was primarily due to
the increase in sales generated through the Internet. Advertising expense, in
dollars, for the first quarter of 2004 was lower compared to the same period
last year primarily as a result of the reduction in catalog circulation somewhat
offset by an increase in commissions to Internet affiliate partners.
8
EARNINGS FROM OPERATIONS. Earnings from operations for the quarter ended March
31, 2004 were $1.8 million compared to $1.5 million for the quarter ended March
31, 2003.
INTEREST EXPENSE. During the quarters ended March 31, 2004 and 2003, we did not
borrow under the revolving line of credit.
INCOME TAX. Income tax expense for the quarter ended March 31, 2004 was $0.66
million compared to $0.54 million for the quarter ended March 31, 2003. The
income tax expense for the quarters ended March 31, 2004 and 2003 reflects the
Company's anticipated effective tax rates for the year.
NET EARNINGS. As a result of the above factors, net earnings increased by $0.24
million, or 22% to $1.2 million for the quarter ended March 31, 2004 from $0.96
million for the same period last year.
SEASONALITY AND QUARTERLY RESULTS
The majority of our sales historically occur during the second half of the year.
The seasonal nature of our business is due to our focus on outdoor merchandise
and related accessories for the fall, as well as winter apparel and gifts for
the holiday season. We expect this seasonality will continue in the future. In
anticipation of increased sales activity during the third and fourth quarters,
we incur significant additional expenses for hiring employees and building
inventory levels.
The following table sets forth certain unaudited financial information for each
of the quarters shown (in thousands, except per share data):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------------------------------------------------------------
2004
Sales $ 44,594
Gross profit 14,128
Earnings from operations 1,782
Net earnings 1,167
Net earnings per share:
Basic .25
Diluted .22
2003
Sales $ 43,749 $ 38,041 $ 41,213 $ 71,700
Gross profit 14,197 11,944 12,541 25,382
Earnings from operations 1,467 1,042 1,117 5,971
Net earnings 957 646 710 3,845
Net earnings per share:
Basic .20 .14 .15 .80
Diluted .19 .12 .13 .71
LIQUIDITY AND CAPITAL RESOURCES
We meet our operating cash requirements through funds generated from operations
and borrowings under our revolving line of credit.
WORKING CAPITAL. We had working capital of $22.5 million as of March 31, 2004
compared to $24.7 million as of December 31, 2003, with current ratios of 1.8 to
1 and 1.7 to 1, respectively. We purchase large quantities of manufacturers'
close-outs and direct imports, particularly in footwear and apparel merchandise
categories. The seasonal nature of the merchandise may require that it be held
for several months before being offered in a catalog. This can result in
increased inventory levels and lower inventory turnover, thereby increasing our
working capital requirements and related carrying costs.
We offer our Buyer's Club members an installment credit plan with no finance
fees, known as the "Buyer's Club 4-Pay Plan". Each of the four consecutive
monthly installments is billed directly to customers' credit cards. We had
installment receivables of $1.4 million at March 31, 2004 compared to $2.4
million at December 31, 2003. The installment plan will continue to require the
allocation of working capital which we expect to fund from operations and
availability under our revolving credit facility.
9
We have a Credit Agreement with Wells Fargo Bank, National Association,
providing a revolving line of credit up to $15.0 million, subject to an adequate
borrowing base for borrowings greater than $10.0 million, expiring September 30,
2005. The revolving line of credit is for working capital and letters of credit.
Letters of credit may not exceed $10.0 million at any one time. Funding under
the credit facility if borrowings exceed $10.0 million is limited to a
collateral base of 50% of eligible inventory plus 75% of eligible trade accounts
receivable. Borrowings bear interest at the bank's prime rate less 0.5% or, at
the Company's option, fixed over short term periods, LIBOR plus 2.15 percentage
points, provided certain financial ratios are met. The revolving credit line is
collateralized by substantially all of our assets.
All borrowings are subject to various covenants which include year-to-date
earnings, current ratio, tangible net worth and total liabilities divided by
tangible net worth. The agreement also prohibits the payment of dividends to
shareholders without the consent of the bank. As of March 31, 2004, we were in
compliance with all applicable covenants under the revolving line of credit
agreement. We had no borrowings against the revolving credit line as of March
31, 2004 and December 31, 2003. Outstanding letters of credit were $1.2 million
at March 31, 2004 compared to $2.5 million at December 31, 2003.
OPERATING ACTIVITIES. Cash flows used in operating activities for the quarter
ended March 31, 2004 were $11.0 million compared to $6.1 million for the same
period last year. The increase in cash flows used in operating activities, for
the first quarter, was primarily the result of an increase in inventory,
increased payments to vendors and the increase in cash payment of income taxes.
INVESTING ACTIVITIES. Cash flows used in investing activities during the quarter
ended March 31, 2004 were $32,000 compared to $189,000 during the same period
last year.
FINANCING ACTIVITIES. Cash flows used in financing activities during the quarter
ended March 31, 2004 were $4.4 million compared to cash flows provided by
financing activities of $15,000 during the same period last year. The cash flows
used in financing activities during the first quarter of 2004 were primarily
comprised of payments to repurchase the Company's common stock. On May 5, 2003,
the Company announced that its board of directors authorized a plan to
repurchase up to ten percent of its outstanding common stock in the open market
or in privately negotiated transactions over the next 12 months. Under this
plan, 259,644 shares of common stock at a total cost of approximately $5.1
million were repurchased during the first quarter ended March 31, 2004. During
the first quarter of 2004 and 2003, we did not borrow under the revolving line
of credit.
We believe that cash flows from operations and borrowing capacity under our
revolving credit facility will be sufficient to fund our operations for the next
12 months.
FORWARD-LOOKING STATEMENTS
This report may contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. We use words such as "may," "believe," "estimate," "plan," "expect,"
"intend," "anticipate" and similar expressions to identify forward-looking
statements. These forward-looking statements involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements due to a number of factors, including general
economic conditions, a changing market environment for our products and the
market acceptance of our product offerings as well as the factors set forth in
Exhibit 99 "Risk Factors" to our Annual Report on Form 10-K for the year ended
December 31, 2003 filed with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company does not have any material, near-term, market rate risk.
ITEM 4. CONTROLS AND PROCEDURES
The Company's management evaluated, with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, the effectiveness of the
Company's disclosure controls and procedures as of the end of the period covered
by this report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Securities and
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's rules and
forms.
There were no changes in the Company's internal control over financial reporting
that occurred during the Company's last fiscal quarter that have materially
affected, or are reasonably likely to materially affect the Company's internal
control over financial reporting.
10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 2003, the Company was notified by the Bureau of Industry, United States
Department of Commerce (BIS) that BIS has reason to believe the Company violated
Export Administration Regulations by exporting optical sighting devices for
firearms and associated parts to Canada and other destinations without obtaining
required authorization from BIS. BIS asserts the Company committed 61 separate
violations for shipments from October 1999 to March 2002. The potential maximum
civil penalty is up to $11,000 for each violation. The Company is currently in
discussions with BIS to settle the matter prior to the issuance of a charging
letter. The BIS has initially offered to settle the matter for a penalty of
$207,500, representing 32 violations at $1,500 per violation and 29 violations
at $5,500 per violation. The Company believes the settlement offer is excessive
based on civil penalties imposed in similar cases and intends to continue
negotiations with BIS. While the Company cannot predict the outcome of this
matter at this time, management believes the matter will not have a material
adverse impact on the Company.
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER REPURCHASES OF EQUITY
SECURITIES
Issuer Repurchases of Equity Securities
Total Number of Maximum Number
Shares Repurchased Of Share that May
Total Number as Part of Publicly Yet be Purchased
of Shares Average Price Announced Plans Under the Plans
Period Purchased Paid per Share or Programs (1) or Programs (1)
- ------ --------- -------------- --------------- ---------------
January 1 -- 31, 2004 190,694 19.78 190,694 186,470
February 1 -- 29, 2004 68,950 19.95 68,950 117,520
March 1 -- 31, 2004 -- -- -- 117,520
-------- ----- ------- -------
Total 259,644 19.83 259,644 117,520
======= ===== ======= =======
(1) On May 5, 2003, the Company announced that its Board of Directors authorized
a plan to repurchase up to ten percent of the Company's outstanding common stock
in the open market or in privately negotiated transactions over the next 12
months.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
(b) Reports on Form 8-K
On January 15, 2004, the Company filed a Form 8-K under Item 12
reporting in a press release expected sales and earnings per share
for the three months and year ended December 31, 2003.
On February 13, 2004, the Company filed a Form 8-K under Item 12
reporting in a press release its financial results for the three
months and year ended December 31, 2003.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SPORTSMAN'S GUIDE, INC.
Date: May 10, 2004 /s/ Charles B. Lingen
------------------------------------
Charles B. Lingen
Executive Vice President Finance and
Administration/CFO
12