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A Sporting Gesture to a Pair of Execs

June 29, 2005|James F. Peltz | Times Staff Writer

Talk about a succession plan.

Sporting goods retailer Sport Chalet Inc. proposed Tuesday a recapitalization plan that would shift most of founder Norbert Olberz's 65% stake to the company's top two officers -- for free.

Based on Tuesday's closing price, the value of the shares given to Chairman and Chief Executive Craig Levra and Chief Financial Officer Howard Kaminsky would be more than $60 million.

"It was my idea. Nobody talked me into it," Olberz said. "I want to have Sport Chalet exist in good hands, since I'm 80 years old and not active [in the company] anymore."

For The Record
Los Angeles Times Thursday June 30, 2005 Home Edition Main News Part A Page 2 National Desk 2 inches; 80 words Type of Material: Correction
Sport Chalet -- An article in Wednesday's Business section said a recapitalization plan proposed for Sport Chalet Inc. would transfer stock valued at more than $60 million from founder Norbert Olberz to Chief Executive Craig Levra and Chief Financial Officer Howard Kaminsky, with Olberz retaining an $8-million stake. In fact, the company estimates that the value of the transferred stock would be about $8 million after the recapitalization, and that the value of Olberz's remaining stake would be about $969,000.

Olberz has been the chain's majority stockholder since starting Sport Chalet when he bought a small La Canada Flintridge ski shop in 1959. He's still the company's chairman emeritus, and he and his son, Eric, would remain directors after the complex recapitalization.

In a statement, Sport Chalet said the stock transfer also "eliminates uncertainty regarding a management succession plan" because the two executives would own a combined 45% of the company, which has annual sales of nearly $310 million.

"Norbert has come to the realization he's not going to be here forever ... and wants us to continue doing the things we're doing," Levra said. "He really provided the impetus for us to go work and figure something out."

James Ragan, an analyst with Crowell, Weedon & Co. in Los Angeles, said Olberz's offer "is a testament to his character and his trust in the management team there."

In 1998, Olberz gave $1.5 million in stock to 109 employees who had been with the company for at least 10 years.

The recapitalization plan also would create two classes of stock and increase the number of total shares outstanding, which Sport Chalet hopes will drive up investor interest in the company. It also would result in a charge against earnings later this year of about 54 cents a share, based on the newly increased number of outstanding shares.

Sport Chalet went public at $9.25 a share in 1992, but the stock languished over the next several years as the chain battled uneven results and changes in the executive suite.

But over the last two years, the stock has more than doubled in price in response to the company's earnings growth.

The La Canada Flintridge-based company, which operates 34 stores in California and two in Nevada, said Tuesday that its fiscal fourth-quarter profit more than doubled from a year earlier on a 14% gain in sales, thanks in part to strong sales of winter-related merchandise.

Net income in the quarter ended March 31 climbed to $721,726, or 10 cents a share, from $330,142, or 5 cents, a year earlier. Sales rose to $79.2 million from $69.4 million.

The earnings report and recapitalization announcement came after the markets closed. Earlier, Sport Chalet's stock rose 20 cents to a record high of $16.50 a share.

Sport Chalet currently has about 6.69 million common shares outstanding. Under the recapitalization, the company first would do a 4-for-1 reverse split -- leaving 1.67 million post-split shares -- and those shares would become Class B shares.

Olberz's stake of 4.36 million shares would be converted to about 1.09 million Class B shares, and he plans to transfer 973,000 of those to Levra and Kaminsky, leaving him with about 117,500. His remaining stake would be worth nearly $8 million based on Tuesday's closing price.

Then Sport Chalet would pay a one-time dividend of seven new Class A shares for every Class B share outstanding. That would create 11.7 million new Class A shares, each of which would have only 1/20th of a vote, while the Class B shares would continue having one full vote per share.

Both classes of stock would trade on Nasdaq, where Sport Chalet is now listed.

The plan requires shareholder approval, which is probable given Olberz's majority stake.

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