##### 









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K/A


(Mark One)


|  |                                                                                          
|- | -----------------------------------------------------------------------------------------
|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2004


or




|  |                                                                                              
|- | ---------------------------------------------------------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.








THE SPORTSMANS GUIDE, INC.




|                                                                            |  |                                               
|--------------------------------------------------------------------------- |  | ----------------------------------------------
|Minnesota(State or other jurisdiction of
    incorporation or organization) |  | 41-1293081(I.R.S. Employer Identification No.)

411 Farwell Avenue, South St. Paul, Minnesota 55075




(651) 451-3030







None




Common Stock, par value $.01 per share




x o


x


x o






Documents Incorporated by Reference





Available Information













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##### 



PART I


Item 1. Business






Industry Overview


Outdoor Sports and Sporting Goods.




Golf equipment.


Catalog Sales.


Online Shopping.


Growth Strategy






| |   |                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Capitalize on Complementary Business Opportunities. We
    actively seek and evaluate opportunities to develop or acquire
    businesses within attractive outdoor product categories or with
    a similar

2



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | customer base. We believe that our experience in the catalog
    business can create strong synergies with pure-play ecommerce
    companies that do not fully utilize the catalog channel.
    Additionally, we intend to leverage our operating expertise,
    vendor relationships and balance sheet to create value through
    acquisition opportunities. In June of 2004, we acquired TGW,
    through which we have been able to apply our catalog expertise
    and scales of economy to their existing channel. By acquiring
    TGW, we have also received greater exposure to the online
    marketplace.                                                                                                                                                                                                                                                                       
|
| |  | Expand Product Offerings and Merchandise Categories.We
    have selectively expanded our merchandise categories and
    anticipate further expansion in the future. We continue to focus
    on consumers who regularly shop online and through catalogs for
    outdoor gear and golf merchandise. Our recent category
    expansions include all-terrain vehicles and truck accessories
    and footwear at TSG and casual apparel at TGW. In addition, we
    emphasize offering high quality, value-priced merchandise with a
    convenient and easy shopping experience.                                                                                                                                                                                                                                                                                                             
|
| |  | Increase Our Percentage of Online Business. We are
    working to expand our online sales, as conducting business
    through our websites instead of through the catalog and phone
    order systems provides a benefit to our customers of greater
    merchandise selection, while simultaneously lowering our
    operating costs. Over the past three years our business mix has
    shifted from approximately 21.8% of our orders online in 2001 to
    approximately 44.9% of our orders in 2004. We seek to grow our
    online business by focusing on the most efficient methods to
    acquire new customers and to increase conversions of existing
    catalog customers and online visitors. We plan to continue to
    use targeted email marketing, affiliate marketing programs and
    sponsored listings through partner websites to drive traffic to
    our websites.
|
| |  | Broaden Our Factory Direct Vendor Relationships. As our
    percentage of business conducted online has increased, we have
    increased our use of factory direct relationships. Through these
    relationships, we are able to expand our product offerings
    significantly without increasing our capital investment
    requirements or exposure to inventory risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Increase TSG Buyers Club Memberships. One of our
    most successful marketing programs for TSG has been the
    Buyers Club, where members pay an annual fee to receive
    discounts on all regular priced merchandise, special edition
    catalogs and other members only promotions. The purchase
    activity, on average, of our Buyers Club customer is two
    to three times greater than that of a non-club member.
    Consequently, we are continually developing new marketing
    promotions to increase the number of new club members and retain
    our current membership base. At the end of 2004, we had
    approximately 382,000 members in our Buyers Club, an 8.8%
    increase compared to the end of 2003.                                                                                                                                                 

Our Catalogs




| |                      
| | ---------------------
| | The Sportsmans Guide



Format. ®


Types and Purposes.


3



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tm tm


Creative.




| |                   
| | ------------------
| | The Golf Warehouse





Our Websites




| |                      
| | ---------------------
| | The Sportsmans Guide



sportsmansguide.com.




4



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##### 



®




bargainoutfitters.com.




| |                   
| | ------------------
| | The Golf Warehouse

TGW.com.




5



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##### 



Merchandising




| |                      
| | ---------------------
| | The Sportsmans Guide

Products.


|                                 |  |            |       | 
|-------------------------------- |  | ---------- | ----- | 
|Product Category                 |  | % of Sales |      
|                                 | 
|Hunting and Shooting Accessories |  |            | 16.5% | 
|Footwear                         |  |            | 15.8  | 
|Clothing and Accessories         |  |            | 12.7  | 
|Domestics and Furniture          |  |            | 9.2   | 
|Optics                           |  |            | 8.3   | 
|Government Surplus               |  |            | 7.1   | 
|Tools and Truck/SUV Accessories  |  |            | 6.8   | 
|Camping and Outdoor Recreation   |  |            | 5.1   | 
|Lawn and Garden                  |  |            | 3.3   | 
|Gifts                            |  |            | 3.1   | 
|Electronics                      |  |            | 2.5   | 
|Other                            |  |            | 9.6   | 

Merchandise Mix. Guide
Gear




Sourcing.




6



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##### 



Selection.


Inventory Management.






| |                   
| | ------------------
| | The Golf Warehouse

Products. ® ® ® ® ® ® ® ® ® ® ®




|                 |  |            |      |  
|---------------- |  | ---------- | ---- | -
|Product Category |  | % of Sales |     
|                 | 
|Clubs            |  |            | 48.0 | %
|Apparel          |  |            | 18.1 |  
|Footwear         |  |            | 8.9  |  
|Balls            |  |            | 8.1  |  
|Bags             |  |            | 5.4  |  
|Accessories      |  |            | 11.5 |  

® ® ®




Marketing




| |                      
| | ---------------------
| | The Sportsmans Guide

Customer Database.


Customer Selection.


7



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##### 



List Development.




Marketing Programs and Promotional Formats.








Customer Service.




| |                   
| | ------------------
| | The Golf Warehouse

Customer Database.


8



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##### 





Marketing and Promotional Programs.




Customer Service.


Online Marketing Efforts


The Sportsmans Guide and The Golf Warehouse




Search.


Comparison Shopping Engines.


Affiliate Program.


Opt-in Email Campaigns.


Shopping and Auction Portals.


9



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##### 



Operations and Fulfillment




| |                      
| | ---------------------
| | The Sportsmans Guide

Inbound Calls.






Order Entry.


Fulfillment.




Returns.




| |                   
| | ------------------
| | The Golf Warehouse



Call Center.


Fulfillment.


10



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##### 





Information Systems and Technology




| |                      
| | ---------------------
| | The Sportsmans Guide











| |                   
| | ------------------
| | The Golf Warehouse







Competition




| |                      
| | ---------------------
| | The Sportsmans Guide





| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | other outdoor/hunting mail order catalogs, including Bass Pro
    Shops Inc. and Cabelas Inc.;
|
| |  | large format sporting goods stores and chains, such as
    Dicks Sporting Goods, Inc.;        

11



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##### 





| |   |                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | mass merchandisers, warehouse clubs, discount stores and
    department stores, such as Wal-Mart Stores, Inc., Target
    Corporation and Amazon.com; and
|
| |  | online retailers of footwear, clothing and outdoor gear such as
    Overstock.com and Sierra Trading Post, Inc.                                          





| |                   
| | ------------------
| | The Golf Warehouse





Government Regulation










Service Marks






Employees




12



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##### 





Financial Information About Segments






|        |           
|------- | ----------
|Item 2. | Properties







|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



| |               
| | --------------
| | NCR Proceeding





| |                  
| | -----------------
| | Other Proceedings







|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



13



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##### 



Executive Officers of the Registrant




|                    |  |     |    |  |          |                                                                                                                      
|------------------- |  | --- | -- |  | -------- | ---------------------------------------------------------------------------------------------------------------------
|Name                |  | Age |    |  | Position
|                    |  |     |    |  |         
|Executive Officers: |  |     |    |  |          |                                                                                                                      
|Gregory R. Binkley  |  |     | 56 |  |          | President, Chief Executive Officer and Director                                                                      
|Charles B. Lingen   |  |     | 60 |  |          | Executive Vice President of Finance and Administration, Chief
    Financial Officer, Secretary/Treasurer and Director
|John M. Casler      |  |     | 54 |  |          | Executive Vice President of Merchandising, Marketing and
    Creative Services                                       
|Key Employees:      |  |     |    |  |          |                                                                                                                      
|Dale D. Monson      |  |     | 40 |  |          | Vice President of Information Systems and Technology and Chief
    Information Officer                               
|Douglas E. Johnson  |  |     | 48 |  |          | Vice President of Marketing                                                                                          
|Mark S. Marney      |  |     | 50 |  |          | Chief Executive Officer of The Golf Warehouse, Inc.                                                                  
|R. Michael Marney   |  |     | 52 |  |          | President of The Golf Warehouse, Inc.                                                                                

Gregory R. Binkley


Charles B. Lingen


John M. Casler


Dale D. Monson


Douglas E. Johnson


14



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##### 



Mark S. Marney


R. Michael Marney


15



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##### 



PART II




|        |                                                                                                                 
|------- | ----------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities





|               |  |      |       |  |     |   |       | 
|-------------- |  | ---- | ----- |  | --- | - | ----- | 
|               |  | High |       |  | Low |  
|               |  |      |       |  |     |  
|2003           |  |      |       |  |     |   |       | 
|First Quarter  |  | $    | 5.74  |  |     | $ | 4.33  | 
|Second Quarter |  |      | 7.75  |  |     |   | 5.31  | 
|Third Quarter  |  |      | 9.05  |  |     |   | 7.37  | 
|Fourth Quarter |  |      | 13.77 |  |     |   | 8.67  | 
|2004           |  |      |       |  |     |   |       | 
|First Quarter  |  | $    | 14.98 |  |     | $ | 10.88 | 
|Second Quarter |  |      | 15.49 |  |     |   | 10.93 | 
|Third Quarter  |  |      | 15.83 |  |     |   | 13.03 | 
|Fourth Quarter |  |      | 16.79 |  |     |   | 13.41 | 

Holders




Dividends




Stock Repurchase Program








16



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##### 





|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |        |  
|----------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------------- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ | -
|                                                                              |                                     | Years Ended December 31,(1)              |        
|                                                                              |                                     |                                          |        
|                                                                              |                                     | 2004(2)                                  |         |        | 2003 |   |         | 2002   |  |   | 2001    |        |  | 2000 |        
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                                              |                                     | (In thousands, except per share amounts) |        
|Consolidated Statement of Operations Data:                                    |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |       
|Net sales                                                                     |                                     | $                                        | 232,462 |        |      | $ | 194,703 |        |  | $ | 179,315 |        |  | $    | 168,769 |        |  | $ | 154,647 |       
|Cost of sales                                                                 |                                     |                                          | 158,081 |        |      |   | 130,639 |        |  |   | 120,707 |        |  |      | 113,086 |        |  |   | 103,471 |       
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                                              | Gross profit                        |                                          |         | 74,381 |      |   |         | 64,064 |  |   |         | 58,608 |  |      |         | 55,683 |  |   |         | 51,176 |  
|Selling, general and administrative expenses                                  |                                     |                                          | 62,122  |        |      |   | 54,467  |        |  |   | 51,983  |        |  |      | 51,344  |        |  |   | 53,574  |       
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                                              | Earnings (loss) from operations     |                                          |         | 12,259 |      |   |         | 9,597  |  |   |         | 6,625  |  |      |         | 4,339  |  |   |         | (2,398 | )
|Interest expense                                                              |                                     |                                          | (361    | )      |      |   |        |        |  |   | (1      | )      |  |      | (237    | )      |  |   | (1,432  | )     
|Miscellaneous income (expense), net                                           |                                     |                                          | (2      | )      |      |   | 24      |        |  |   | (297    | )      |  |      | (349    | )      |  |   | (294    | )     
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                                              | Earnings (loss) before income taxes |                                          |         | 11,896 |      |   |         | 9,621  |  |   |         | 6,327  |  |      |         | 3,753  |  |   |         | (4,124 | )
|Income tax expense (benefit)                                                  |                                     |                                          | 4,305   |        |      |   | 3,463   |        |  |   | 2,310   |        |  |      | 1,000   |        |  |   | (935    | )     
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                                              | Net earnings (loss)                 |                                          | $       | 7,591  |      |   | $       | 6,158  |  |   | $       | 4,017  |  |      | $       | 2,753  |  |   | $       | (3,189 | )
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|Net earnings (loss) per share(3):                                             |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |       
|                                                                              | Basic                               |                                          | $       | 1.07   |      |   | $       | .86    |  |   | $       | .56    |  |      | $       | .39    |  |   | $       | (.45   | )
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                                              | Diluted                             |                                          | $       | .95    |      |   | $       | .78    |  |   | $       | .54    |  |      | $       | .39    |  |   | $       | (.45   | )
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|Weighted average shares outstanding(3):                                       |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |       
|                                                                              | Basic                               |                                          |         | 7,078  |      |   |         | 7,178  |  |   |         | 7,129  |  |      |         | 7,123  |  |   |         | 7,123  |  
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|                                                                              | Diluted                             |                                          |         | 7,985  |      |   |         | 7,935  |  |   |         | 7,501  |  |      |         | 7,138  |  |   |         | 7,123  |  
|                                                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |        
|Selected Operating Data:                                                      |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |       
|Gross profit as a percentage of net sales                                     |                                     |                                          | 32.0    | %      |      |   | 32.9    | %      |  |   | 32.7    | %      |  |      | 33.0    | %      |  |   | 33.1    | %     
|Selling, general and administrative expenses as a percentage of
    net sales |                                     |                                          | 26.7    | %      |      |   | 28.0    | %      |  |   | 29.0    | %      |  |      | 30.4    | %      |  |   | 34.6    | %     
|Total catalogs mailed(4)                                                      |                                     |                                          | 50,482  |        |      |   | 46,359  |        |  |   | 45,762  |        |  |      | 47,989  |        |  |   | 62,498  |       
|Total active customers(5)                                                     |                                     |                                          | 1,255   |        |      |   | 1,005   |        |  |   | 977     |        |  |      | 1,039   |        |  |   | 1,045   |       
|Consolidated Balance Sheet Data:                                              |                                     |                                          |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |       
|Cash and cash equivalents                                                     |                                     | $                                        | 8,616   |        |      | $ | 32,054  |        |  | $ | 17,152  |        |  | $    | 8,592   |        |  | $ | 1,344   |       
|Working capital                                                               |                                     |                                          | 5,723   |        |      |   | 24,747  |        |  |   | 18,068  |        |  |      | 12,952  |        |  |   | 8,526   |       
|Total assets                                                                  |                                     |                                          | 80,269  |        |      |   | 63,822  |        |  |   | 49,513  |        |  |      | 42,088  |        |  |   | 38,860  |       
|Note payable-bank                                                             |                                     |                                          | 5,000   |        |      |   |        |        |  |   |        |        |  |      |        |        |  |   | 5,225   |       
|Shareholders equity                                                          |                                     |                                          | 31,062  |        |      |   | 26,808  |        |  |   | 20,621  |        |  |      | 16,343  |        |  |   | 13,590  |       






|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our fiscal year ends on the Sunday nearest December 31, but
    for clarity of presentation, we describe all periods as if the
    year end is December 31. Fiscal year 2004 consisted of
    53 weeks and fiscal years 2003, 2002, 2001 and 2000 each
    consisted of 52 weeks.
|   
|(2) | On June 29, 2004, we acquired The Golf Warehouse, L.L.C.
    The third quarter of 2004 was the first quarter for inclusion of
    The Golf Warehouses net sales, operations and earnings.                                                                                       

17



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|    |                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | See Note A-12 in the notes to consolidated financial
    statements. Per share amounts and shares outstanding have been
    adjusted to give effect to a 3-for-2 stock split of our common
    stock paid on April 15, 2005 to shareholders of record as
    of March 25, 2005.                   
|   
|(4) | Total catalogs mailed reflects the total number of catalogs
    expensed during the applicable period.                                                                                                                                                                                            
|   
|(5) | An active customer is defined as a customer who has
    purchased merchandise from us within 12 months preceding
    the end of the period indicated. Specific individuals with
    multiple contact names or multiple contact addresses may be
    considered as more than one active customer.

Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations


Overview




tm




Fiscal Year




Critical Accounting Policies and Use of Estimates




18



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| |                    
| | -------------------
| | Revenue Recognition









| |                                            
| | -------------------------------------------
| | Promotional Materials and Advertising Costs





19



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| |              
| | -------------
| | Stock Options

Accounting for Stock Issued to
Employees


Results of Operations




|                                             |                              |                          |       |      |      |  |       |      |   |  |       |      |  
|-------------------------------------------- | ---------------------------- | ------------------------ | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                                             |                              | Years Ended December 31, |      
|                                             |                              |                          |      
|                                             |                              | 2004                     |       |      | 2003 |  |       | 2002 |  
|                                             |                              |                          |       |      |      |  |       |      |  
|Net sales                                    |                              |                          | 100.0 | %    |      |  | 100.0 | %    |   |  | 100.0 | %   
|Cost of sales                                |                              |                          | 68.0  |      |      |  | 67.1  |      |   |  | 67.3  |     
|                                             |                              |                          |       |      |      |  |       |      |  
|                                             | Gross profit                 |                          |       | 32.0 |      |  |       | 32.9 |   |  |       | 32.7 |  
|Selling, general and administrative expenses |                              |                          | 26.7  |      |      |  | 28.0  |      |   |  | 29.0  |     
|                                             |                              |                          |       |      |      |  |       |      |  
|                                             | Earnings from operations     |                          |       | 5.3  |      |  |       | 4.9  |   |  |       | 3.7  |  
|Interest and miscellaneous expense, net      |                              |                          | 0.1   |      |      |  |      |      |   |  | 0.2   |     
|                                             |                              |                          |       |      |      |  |       |      |  
|                                             | Earnings before income taxes |                          |       | 5.2  |      |  |       | 4.9  |   |  |       | 3.5  |  
|Income tax expense                           |                              |                          | 1.9   |      |      |  | 1.8   |      |   |  | 1.3   |     
|                                             |                              |                          |       |      |      |  |       |      |  
|                                             | Net earnings                 |                          |       | 3.3  | %    |  |       | 3.1  | % |  |       | 2.2  | %
|                                             |                              |                          |       |      |      |  |       |      |  

Comparison of Years Ended December 31, 2004 and 2003


|                         |  |                       |         |          |           |   |              |      |  |   |        |  |      |   |   |      |  |   |         |  |  |   |         | 
|------------------------ |  | --------------------- | ------- | -------- | --------- | - | ------------ | ---- |  | - | ------ |  | ---- | - | - | ---- |  | - | ------- |  |  | - | ------- | 
|                         |  |                       |         | The Golf |           |  
|                         |  | The Sportsmans Guide |         |          | Warehouse |   | Consolidated |     
|                         |  |                       |         |          |           |   |              |     
|                         |  | 2004                  |         |          | 2003      |   |              | 2004 |  |   | 2003   |  | 2004 |   |   | 2003 | 
|                         |  |                       |         |          |           |   |              |      |  |   |        |  |      |   |   |      | 
|Net sales                |  | $                     | 207,221 |          |           | $ | 194,703      |      |  | $ | 25,241 |  |      | $ |  |      |  | $ | 232,462 |  |  | $ | 194,703 | 
|Earnings from operations |  | $                     | 10,692  |          |           | $ | 9,597        |      |  | $ | 1,567  |  |      | $ |  |      |  | $ | 12,259  |  |  | $ | 9,597   | 

Net Sales.


20



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##### 









Gross Profit.


Selling, General and Administrative Expenses.






tm tm




21



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##### 







Earnings from Operations.


Interest Expense.


Income Taxes.


Net Earnings.


Comparison of Years Ended December 31, 2003 and 2002


Net Sales.








Gross Profit.


Selling, General and Administrative Expenses.




22



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##### 



tm tm




Earnings from Operations.


Interest Expense.


Income Taxes.


Net Earnings.


Seasonality and Quarterly Results






23



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##### 





|                         |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |     | 
|------------------------ | ------- | ------------------------------------- | ------ | --- | -------------- | - | ------ | ------------- |  | - | -------------- | --- |  | - | ------ | --- | 
|                         |         | First Quarter                         |        |     | Second Quarter |   |        | Third Quarter |  |   | Fourth Quarter |    
|                         |         |                                       |        |     |                |   |        |               |  |   |                |    
|                         |         | (In thousands, except per share data) |       
|2004                     |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |    
|Net sales                |         | $                                     | 44,594 |     |                | $ | 38,861 |               |  | $ | 56,554         |     |  | $ | 92,453 |    
|Gross profit             |         |                                       | 14,128 |     |                |   | 12,137 |               |  |   | 16,415         |     |  |   | 31,701 |    
|Earnings from operations |         |                                       | 1,782  |     |                |   | 1,208  |               |  |   | 1,851          |     |  |   | 7,418  |    
|Net earnings             |         |                                       | 1,167  |     |                |   | 797    |               |  |   | 1,069          |     |  |   | 4,558  |    
|Net earnings per share:  |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |    
|                         | Basic   |                                       |        | .16 |                |   |        | .11           |  |   |                | .15 |  |   |        | .65 | 
|                         | Diluted |                                       |        | .15 |                |   |        | .10           |  |   |                | .13 |  |   |        | .57 | 
|2003                     |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |    
|Net 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   |                                       |        | .13 |                |   |        | .09           |  |   |                | .10 |  |   |        | .53 | 
|                         | Diluted |                                       |        | .12 |                |   |        | .08           |  |   |                | .09 |  |   |        | .47 | 





|      |                                                                                                                                                                                                  
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: | The acquisition of The Golf Warehouse, L.L.C. was effective
    June 29, 2004. The third quarter of 2004 was the first
    quarter for inclusion of TGWs net sales, operations and
    earnings.

Liquidity and Capital Resources


Working Capital.








24



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##### 







|                              |  |                       |        |     |       |   |        |       |  |           |         |  |  |   |   | 
|----------------------------- |  | --------------------- | ------ | --- | ----- | - | ------ | ----- |  | --------- | ------- |  |  | - | - | 
|                              |  | Payment due by period
|                              |  |                      
|                              |  |                       |        | 1-3 |       |   | 3-5    |       |  | More than
|Contractual Obligations       |  | Total                 |        |     | years |   |        | years |  |           | 5 years
|                              |  |                       |        |     |       |   |        |       |  |           |        
|Long-Term Debt Obligations(1) |  | $                     | 5,000  |     |       | $ | 5,000  |       |  | $         |        |  |  | $ |  | 
|Operating Lease Obligations   |  |                       | 8,964  |     |       |   | 6,701  |       |  |           | 2,263   |  |  |   |  | 
|Purchase Obligations          |  |                       | 3,200  |     |       |   | 3,200  |       |  |           |        |  |  |   |  | 
|                              |  |                       |        |     |       |   |        |       |  |           |         | 
|Total                         |  | $                     | 17,164 |     |       | $ | 14,901 |       |  | $         | 2,263   |  |  | $ |  | 
|                              |  |                       |        |     |       |   |        |       |  |           |         | 






|    |                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The interest rates for our long-term debt obligations are
    variable based on the banks prime rate or LIBOR, and,
    therefore, we have not included an estimate of future interest
    payments in the table of contractual obligations.

Operating Activities.




Investing Activities.




Financing Activities.


25



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##### 









New Accounting Pronouncements


Accounting for Stock Based Compensation. Accounting for Stock Issued to Employees,


Forward-Looking Statements






|         |                                                          
|-------- | ---------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure About Market Risk



26



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##### 





|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data



|                              |                                                                                                                         |      |  |    | 
|----------------------------- | ----------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|                              |                                                                                                                         | Page | 
|                              |                                                                                                                         |      | 
|Financial Statements:         |                                                                                                                         |      |  |   
|                              | Reports of Independent Registered Public
    Accounting Firm                                                            |      |  | 28 | 
|                              | Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                                        |      |  | 30 | 
|                              | Consolidated Statements of Earnings for the
    years ended December 31, 2004, 2003 and 2002                            |      |  | 31 | 
|                              | Consolidated Statements of Changes in
    Shareholders Equity for the years ended December 31,
    2004, 2003 and 2002 |      |  | 32 | 
|                              | Consolidated Statements of Cash Flows for
    the years ended December 31, 2004, 2003 and 2002                          |      |  | 33 | 
|                              | Notes to Consolidated Financial
    Statements                                                                          |      |  | 34 | 
|Financial Statement Schedule: |                                                                                                                         |      |  |   
|                              | Schedule II  Valuation and
    Qualifying Accounts for the years ended December 31, 2004,
    2003 and 2002            |      |  | 48 | 

27



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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














Internal Control 
Integrated Framework




| |                       
| | ----------------------
| | /s/ GRANT THORNTON LLP





28



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##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Internal Control 
Integrated Framework








Internal
Control  Integrated Framework Internal Control  Integrated Framework






| |                       
| | ----------------------
| | /s/ GRANT THORNTON LLP





29



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The Sportsmans Guide, Inc. and Subsidiaries


CONSOLIDATED BALANCE SHEETS


|                                     |                                                                                                                                                              |                                            |       |        |              |  |       |        |        | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----- | ------ | ------------ |  | ----- | ------ | ------ | 
|                                     |                                                                                                                                                              | December 31,                               |       |        | December 31, | 
|                                     |                                                                                                                                                              | 2004                                       |       |        | 2003         | 
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | (In thousands, except share                |      
|                                     |                                                                                                                                                              | amounts)                                   |      
|ASSETS                               |                                                                                                                                                              |                                            |       |        |              |  |       |       
|Current Assets                       |                                                                                                                                                              |                                            |       |        |              |  |       |       
|                                     | Cash and cash equivalents                                                                                                                                    |                                            | $     | 8,616  |              |  | $     | 32,054 |       
|                                     | Accounts receivable  net                                                                                                                                    |                                            |       | 3,955  |              |  |       | 3,034  |       
|                                     | Inventory                                                                                                                                                    |                                            |       | 29,148 |              |  |       | 18,874 |       
|                                     | Promotional material                                                                                                                                         |                                            |       | 3,578  |              |  |       | 2,565  |       
|                                     | Prepaid expenses and other                                                                                                                                   |                                            |       | 3,123  |              |  |       | 1,871  |       
|                                     | Deferred income taxes                                                                                                                                        |                                            |       | 1,122  |              |  |       | 3,176  |       
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total current assets                       |       |        | 49,542       |  |       |        | 61,574 | 
|Property and Equipment  Net         |                                                                                                                                                              |                                            | 2,693 |        |              |  | 2,248 |       
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|Other Assets                         |                                                                                                                                                              |                                            |       |        |              |  |       |       
|                                     | Goodwill                                                                                                                                                     |                                            |       | 17,176 |              |  |       |       |       
|                                     | Trade and domain name                                                                                                                                        |                                            |       | 10,200 |              |  |       |       |       
|                                     | Other intangibles                                                                                                                                            |                                            |       | 658    |              |  |       |       |       
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total other assets                         |       |        | 28,034       |  |       |        |       | 
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total assets                               |       | $      | 80,269       |  |       | $      | 63,822 | 
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                                                                              |                                            |       |        |              |  |       |       
|Current Liabilities                  |                                                                                                                                                              |                                            |       |        |              |  |       |       
|                                     | Accounts payable                                                                                                                                             |                                            | $     | 23,832 |              |  | $     | 18,950 |       
|                                     | Accrued expenses                                                                                                                                             |                                            |       | 7,146  |              |  |       | 5,891  |       
|                                     | Income taxes payable                                                                                                                                         |                                            |       | 1,982  |              |  |       | 3,107  |       
|                                     | Deferred revenue                                                                                                                                             |                                            |       | 5,520  |              |  |       | 4,623  |       
|                                     | Returns reserve                                                                                                                                              |                                            |       | 2,318  |              |  |       | 2,240  |       
|                                     | Customer deposits and other liabilities                                                                                                                      |                                            |       | 3,021  |              |  |       | 2,016  |       
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total current liabilities                  |       |        | 43,819       |  |       |        | 36,827 | 
|Long-Term Liabilities                |                                                                                                                                                              |                                            |       |        |              |  |       |       
|                                     | Note payable  bank                                                                                                                                          |                                            |       | 5,000  |              |  |       |       |       
|                                     | Deferred income taxes                                                                                                                                        |                                            |       | 305    |              |  |       | 54     |       
|                                     | Other                                                                                                                                                        |                                            |       | 83     |              |  |       | 133    |       
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total long-term liabilities                |       |        | 5,388        |  |       |        | 187    | 
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total liabilities                          |       |        | 49,207       |  |       |        | 37,014 | 
|Commitments and Contingencies        |                                                                                                                                                              |                                            |      |        |              |  |      |       
|Shareholders Equity                 |                                                                                                                                                              |                                            |       |        |              |  |       |       
|                                     | Common Stock  $.01 par value;
    36,800,000 shares authorized; 7,097,746 and
    7,239,481 shares issued and outstanding at
    December 31, 2004 and 2003 |                                            |       | 71     |              |  |       | 72     |       
|                                     | Additional paid-in capital                                                                                                                                   |                                            |       | 8,024  |              |  |       | 11,592 |       
|                                     | Accumulated other comprehensive income                                                                                                                       |                                            |       | 232    |              |  |       |       |       
|                                     | Retained earnings                                                                                                                                            |                                            |       | 22,735 |              |  |       | 15,144 |       
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total shareholders equity                 |       |        | 31,062       |  |       |        | 26,808 | 
|                                     |                                                                                                                                                              |                                            |       |        |              | 
|                                     |                                                                                                                                                              | Total liabilities and shareholders equity |       | $      | 80,269       |  |       | $      | 63,822 | 
|                                     |                                                                                                                                                              |                                            |       |        |              | 



30



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The Sportsmans Guide, Inc. and Subsidiaries


CONSOLIDATED STATEMENTS OF EARNINGS


|                                                                  |         |                                       |         |       |        |   |         |       |        |   |         |       |        | 
|----------------------------------------------------------------- | ------- | ------------------------------------- | ------- | ----- | ------ | - | ------- | ----- | ------ | - | ------- | ----- | ------ | 
|                                                                  |         | Years ended December 31,              |        
|                                                                  |         |                                       |        
|                                                                  |         | 2004                                  |         |       | 2003   |   |         | 2002  |       
|                                                                  |         |                                       |         |       |        |   |         |       |       
|                                                                  |         | (In thousands, except per share data) |        
|Net sales                                                         |         | $                                     | 232,462 |       |        | $ | 194,703 |       |        | $ | 179,315 |      
|Cost of sales                                                     |         |                                       | 158,081 |       |        |   | 130,639 |       |        |   | 120,707 |      
|                                                                  |         |                                       |         |       |        |   |         |       |       
|                                                                  |         | Gross profit                          |         |       | 74,381 |   |         |       | 64,064 |   |         |       | 58,608 | 
|Selling, general and administrative expenses                      |         |                                       | 62,122  |       |        |   | 54,467  |       |        |   | 51,983  |      
|                                                                  |         |                                       |         |       |        |   |         |       |       
|                                                                  |         | Earnings from operations              |         |       | 12,259 |   |         |       | 9,597  |   |         |       | 6,625  | 
|Interest expense                                                  |         |                                       | (361    | )     |        |   |        |       |        |   | (1      | )    
|Miscellaneous income (expense), net                               |         |                                       | (2      | )     |        |   | 24      |       |        |   | (297    | )    
|                                                                  |         |                                       |         |       |        |   |         |       |       
|                                                                  |         | Earnings before income taxes          |         |       | 11,896 |   |         |       | 9,621  |   |         |       | 6,327  | 
|Income tax expense                                                |         |                                       | 4,305   |       |        |   | 3,463   |       |        |   | 2,310   |      
|                                                                  |         |                                       |         |       |        |   |         |       |       
|                                                                  |         | Net earnings                          |         | $     | 7,591  |   |         | $     | 6,158  |   |         | $     | 4,017  | 
|                                                                  |         |                                       |         |       |        |   |         |       |       
|Net earnings per share:                                           |         |                                       |         |       |        |   |         |       |        |   |         |      
|                                                                  | Basic   |                                       | $       | 1.07  |        |   | $       | .86   |        |   | $       | .56   |       
|                                                                  |         |                                       |         |       |        |   |         |       |       
|                                                                  | Diluted |                                       | $       | .95   |        |   | $       | .78   |        |   | $       | .54   |       
|                                                                  |         |                                       |         |       |        |   |         |       |       
|Weighted average common and common equivalent shares outstanding: |         |                                       |         |       |        |   |         |       |        |   |         |      
|                                                                  | Basic   |                                       |         | 7,078 |        |   |         | 7,178 |        |   |         | 7,129 |       
|                                                                  |         |                                       |         |       |        |   |         |       |       
|                                                                  | Diluted |                                       |         | 7,985 |        |   |         | 7,935 |        |   |         | 7,501 |       
|                                                                  |         |                                       |         |       |        |   |         |       |       



31



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The Sportsmans Guide, Inc. and Subsidiaries


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY


|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |       |  |   |        |        |   |   |       |       | 
|----------------------------- | -------------------------------------------------- | -------------- | ----- | ---- | ---------- | - | -- | ------------ | - | - | ------------- | ------ | - | -------- | ---- | ----- | ------------- | - | --- | ------------- |  | - | ------ | ----- |  | - | ------ | ------ | - | - | ----- | ----- | 
|                              |                                                    |                |       |      |            |   |    | Accumulated  |   |   |               |        |   |          |     
|                              |                                                    | Common Stock   |       |      | Additional |   |    | Stock        |   |   | Other         |        |   |          |      | Total |               |   |    
|                              |                                                    |                |       |      | Paid-In    |   |    | Subscription |   |   | Comprehensive |        |   | Retained |      |       | Shareholders |   |     | Comprehensive | 
|                              |                                                    | Shares         |       |      | Amount     |   |    | Capital      |   |   | Receivable    |        |   | Income   |      |       | Earnings      |   |     | Equity        |  |   | Income |      
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      
|                              |                                                    | (In thousands) |      
|Balances at December 31, 2001 |                                                    |                | 7,123 |      |            | $ | 71 |              |   | $ | 11,541        |        |   | $        | (238 | )     |               |   |    |               |  | $ | 4,969  |       |  | $ | 16,343 |        |   |   |       |      
|                              | Exercise of stock options                          |                |       | 8    |            |   |    |             |   |   |               | 23     |   |          |      |      |               |   |     |              |  |   |        |      |  |   |        | 23     |   |   |       |       | 
|                              | Payment of stock subscription receivable           |                |       |     |            |   |    |             |   |   |               |       |   |          |      | 238   |               |   |     |              |  |   |        |      |  |   |        | 238    |   |   |       |       | 
|                              | Net earnings                                       |                |       |     |            |   |    |             |   |   |               |       |   |          |      |      |               |   |     |              |  |   |        | 4,017 |  |   |        | 4,017  |   |   | $     | 4,017 | 
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      
|Total comprehensive income    |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |       |  |   |        |        |   | $ | 4,017 |      
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      
|Balances at December 31, 2002 |                                                    |                | 7,131 |      |            |   | 71 |              |   |   | 11,564        |        |   |          |     |       |               |   |    |               |  |   | 8,986  |       |  |   | 20,621 |        |   |   |       |      
|                              | Exercise of stock options                          |                |       | 256  |            |   |    | 3            |   |   |               | 650    |   |          |      |      |               |   |     |              |  |   |        |      |  |   |        | 653    |   |   |       |       | 
|                              | Tax benefit related to exercise of stock options   |                |       |     |            |   |    |             |   |   |               | 554    |   |          |      |      |               |   |     |              |  |   |        |      |  |   |        | 554    |   |   |       |       | 
|                              | Repurchase of common stock                         |                |       | (148 | )          |   |    | (2           | ) |   |               | (1,176 | ) |          |      |      |               |   |     |              |  |   |        |      |  |   |        | (1,178 | ) |   |       |       | 
|                              | Net earnings                                       |                |       |     |            |   |    |             |   |   |               |       |   |          |      |      |               |   |     |              |  |   |        | 6,158 |  |   |        | 6,158  |   |   | $     | 6,158 | 
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      
|Total comprehensive income    |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |       |  |   |        |        |   | $ | 6,158 |      
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      
|Balances at December 31, 2003 |                                                    |                | 7,239 |      |            |   | 72 |              |   |   | 11,592        |        |   |          |     |       |               |   |    |               |  |   | 15,144 |       |  |   | 26,808 |        |   |   |       |      
|                              | Exercise of stock options                          |                |       | 291  |            |   |    | 3            |   |   |               | 1,088  |   |          |      |      |               |   |     |              |  |   |        |      |  |   |        | 1,091  |   |   |       |       | 
|                              | Tax benefit related to exercise of stock options   |                |       |     |            |   |    |             |   |   |               | 1,070  |   |          |      |      |               |   |     |              |  |   |        |      |  |   |        | 1,070  |   |   |       |       | 
|                              | Repurchase of common stock                         |                |       | (432 | )          |   |    | (4           | ) |   |               | (5,726 | ) |          |      |      |               |   |     |              |  |   |        |      |  |   |        | (5,730 | ) |   |       |       | 
|                              | Net earnings                                       |                |       |     |            |   |    |             |   |   |               |       |   |          |      |      |               |   |     |              |  |   |        | 7,591 |  |   |        | 7,591  |   |   | $     | 7,591 | 
|                              | Other comprehensive income  marketable securities |                |       |     |            |   |    |             |   |   |               |       |   |          |      |      |               |   |     | 232           |  |   |        |      |  |   |        | 232    |   |   |       | 232   | 
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      
|Total comprehensive income    |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |       |  |   |        |        |   | $ | 7,823 |      
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      
|Balances at December 31, 2004 |                                                    |                | 7,098 |      |            | $ | 71 |              |   | $ | 8,024         |        |   | $        |     |       |               | $ | 232 |               |  | $ | 22,735 |       |  | $ | 31,062 |        |   |   |       |      
|                              |                                                    |                |       |      |            |   |    |              |   |   |               |        |   |          |      |       |               |   |     |               |  |   |        |      



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The Sportsmans Guide, Inc. and Subsidiaries


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |       |       |        |       |        |       |       |  
|-------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------ | --------------------------------------- | ----------------------------------------------------- | ----- | ------ | ------- | ------ | ----- | ----- | ------ | ----- | ------ | ----- | ----- | -
|                                                   |                                                                                           | Years ended December 31,                               |                                        
|                                                   |                                                                                           |                                                        |                                        
|                                                   |                                                                                           | 2004                                                   |                                         |                                                       | 2003  |        |         | 2002   |      
|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |      
|                                                   |                                                                                           | (In thousands)                                         |                                        
|Cash flows from operating activities:              |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |       |       |        |      
|                                                   | Net earnings                                                                              |                                                        | $                                       | 7,591                                                 |       |        | $       | 6,158  |       |       | $      | 4,017 |       
|                                                   | Adjustments to reconcile net earnings to cash flows provided by
    operating activities: |                                                        |                                         |                                                       |       |        |         |        |       |       |        |       |       
|                                                   |                                                                                           | Depreciation and amortization                          |                                         |                                                       | 1,431 |        |         |        | 1,322 |       |        |       | 1,579  |      
|                                                   |                                                                                           | Deferred income taxes                                  |                                         |                                                       | 2,305 |        |         |        | (832  | )     |        |       | (1,049 | )    
|                                                   |                                                                                           | Tax benefit related to exercise of stock options       |                                         |                                                       | 1,070 |        |         |        | 554   |       |        |       |       |      
|                                                   |                                                                                           | Change in deferred compensation                        |                                         |                                                       | 232   |        |         |        |      |       |        |       |       |      
|                                                   |                                                                                           | Loss on disposal of property and equipment             |                                         |                                                       |      |        |         |        | 9     |       |        |       | 310    |      
|                                                   |                                                                                           | Other                                                  |                                         |                                                       | 9     |        |         |        | 6     |       |        |       | 13     |      
|                                                   |                                                                                           | Changes in assets and liabilities, net of acquisition: |                                         |                                                       |       |        |         |        |       |       |        |       |        |      
|                                                   |                                                                                           |                                                        | Accounts receivable                     |                                                       |       | (842   | )       |        |       | (20   | )      |       |        | (255  | )    
|                                                   |                                                                                           |                                                        | Inventory                               |                                                       |       | (4,009 | )       |        |       | 1,719 |        |       |        | 483   |      
|                                                   |                                                                                           |                                                        | Promotional material                    |                                                       |       | (842   | )       |        |       | (25   | )      |       |        | 1,074 |      
|                                                   |                                                                                           |                                                        | Prepaid expenses and other              |                                                       |       | (1,091 | )       |        |       | (743  | )      |       |        | (200  | )    
|                                                   |                                                                                           |                                                        | Income taxes payable                    |                                                       |       | (1,125 | )       |        |       | 1,225 |        |       |        | (302  | )    
|                                                   |                                                                                           |                                                        | Accounts payable                        |                                                       |       | 259    |         |        |       | 2,720 |        |       |        | 1,029 |      
|                                                   |                                                                                           |                                                        | Accrued expenses                        |                                                       |       | 964    |         |        |       | 1,995 |        |       |        | 1,114 |      
|                                                   |                                                                                           |                                                        | Customer deposits and other liabilities |                                                       |       | 1,463  |         |        |       | 2,266 |        |       |        | 1,414 |      
|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |      
|                                                   |                                                                                           |                                                        |                                         | Cash flows provided by operating activities           |       |        | 7,415   |        |       |       | 16,354 |       |        |       | 9,227 |  
|Cash flows from investing activities:              |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |       |       |        |      
|                                                   | Purchases of property and equipment                                                       |                                                        |                                         | (772                                                  | )     |        |         | (941   | )     |       |        | (928  | )     
|                                                   | Business acquisition                                                                      |                                                        |                                         | (30,442                                               | )     |        |         |       |       |       |        |      |       
|                                                   | Other                                                                                     |                                                        |                                         |                                                      |       |        |         | 14     |       |       |        |      |       
|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |      
|                                                   |                                                                                           |                                                        |                                         | Cash flows used in investing activities               |       |        | (31,214 | )      |       |       | (927   | )     |        |       | (928  | )
|Cash flows from financing activities:              |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |       |       |        |      
|                                                   | Proceeds from note payable to bank                                                        |                                                        |                                         | 12,500                                                |       |        |         |       |       |       |        |      |       
|                                                   | Principal payments on note payable to bank                                                |                                                        |                                         | (7,500                                                | )     |        |         |       |       |       |        |      |       
|                                                   | Proceeds from exercise of stock options                                                   |                                                        |                                         | 1,091                                                 |       |        |         | 652    |       |       |        | 23    |       
|                                                   | Repurchase of common stock                                                                |                                                        |                                         | (5,730                                                | )     |        |         | (1,177 | )     |       |        |      |       
|                                                   | Proceeds from payment of stock subscription receivable                                    |                                                        |                                         |                                                      |       |        |         |       |       |       |        | 238   |       
|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |      
|                                                   |                                                                                           |                                                        |                                         | Cash flows provided by (used in) financing activities |       |        | 361     |        |       |       | (525   | )     |        |       | 261   |  
|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |      
|Increase (decrease) in cash and cash equivalents   |                                                                                           |                                                        | (23,438                                 | )                                                     |       |        | 14,902  |        |       |       | 8,560  |      
|Cash and cash equivalents at beginning of the year |                                                                                           |                                                        | 32,054                                  |                                                       |       |        | 17,152  |        |       |       | 8,592  |      
|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |      
|Cash and cash equivalents at end of the year       |                                                                                           | $                                                      | 8,616                                   |                                                       |       | $      | 32,054  |        |       | $     | 17,152 |      
|                                                   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |      
|Supplemental disclosure of cash flow information   |                                                                                           |                                                        |                                         |                                                       |       |        |         |        |       |       |        |      
|                                                   | Cash paid during the year for:                                                            |                                                        |                                         |                                                       |       |        |         |        |       |       |        |       |       
|                                                   |                                                                                           | Interest                                               |                                         | $                                                     | 360   |        |         | $      |      |       |        | $     | 1      |      
|                                                   |                                                                                           | Income taxes                                           |                                         |                                                       | 3,560 |        |         |        | 2,567 |       |        |       | 3,661  |      
|                                                   | Cash received during the year for:                                                        |                                                        |                                         |                                                       |       |        |         |        |       |       |        |       |       
|                                                   |                                                                                           | Income tax refund                                      |                                         | $                                                     | 1,505 |        |         | $      |      |       |        | $     |       |      



33



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES


1. Description of Business










2. Consolidation




3. Revenue Recognition








34



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)




4. Cost of Sales and Selling, General and Administrative
Expenses






5. Cash and Cash Equivalents




6. Accounts Receivable




7. Inventory




8. Promotional Material and Advertising Costs




35



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)






9. Property and Equipment




10. Goodwill, Intangible and Other Long-Lived Assets










11. Stock Options


Accounting for Stock
Issued to Employees,


36



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)


share as if the Company had applied the fair value method of
accounting for stock options (in thousands, except per share
data):


|                                                                                                                                   |                       |                          |       |      |      |   |       |      |  |   |       |     | 
|---------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------------ | ----- | ---- | ---- | - | ----- | ---- |  | - | ----- | --- | 
|                                                                                                                                   |                       | Years ended December 31, |      
|                                                                                                                                   |                       |                          |      
|                                                                                                                                   |                       | 2004                     |       |      | 2003 |   |       | 2002 | 
|                                                                                                                                   |                       |                          |       |      |      |   |       |      | 
|Net earnings as reported                                                                                                           |                       | $                        | 7,591 |      |      | $ | 6,158 |      |  | $ | 4,017 |    
|Deduct: Total stock-based employee compensation expense under
    the fair value method for all awards, net of related tax effects |                       |                          | (934  | )    |      |   | (452  | )    |  |   | (180  | )  
|                                                                                                                                   |                       |                          |       |      |      |   |       |      | 
|Pro-forma net earnings                                                                                                             |                       | $                        | 6,657 |      |      | $ | 5,706 |      |  | $ | 3,837 |    
|                                                                                                                                   |                       |                          |       |      |      |   |       |      | 
|Earnings per share:                                                                                                                |                       |                          |       |      |      |   |       |      |  |   |       |    
|                                                                                                                                   | Basic  as reported   |                          | $     | 1.07 |      |   | $     | .86  |  |   | $     | .56 | 
|                                                                                                                                   | Basic  pro-forma     |                          |       | .94  |      |   |       | .79  |  |   |       | .54 | 
|                                                                                                                                   | Diluted  as reported |                          | $     | .95  |      |   | $     | .78  |  |   | $     | .54 | 
|                                                                                                                                   | Diluted  pro-forma   |                          |       | .86  |      |   |       | .73  |  |   |       | .52 | 



12. Net Earnings Per Share










13. Fiscal Year




37



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)


14. Fair Values of Financial Instruments




15. Use of Estimates in Preparing Financial
Statements




NOTE B  PROPERTY AND EQUIPMENT




|                                               |  |              |        |  |              |   |        |              |  |  |            | 
|---------------------------------------------- |  | ------------ | ------ |  | ------------ | - | ------ | ------------ |  |  | ---------- | 
|                                               |  | December 31, |        |  | December 31, |   |        | Estimated    | 
|                                               |  | 2004         |        |  | 2003         |   |        | useful lives | 
|                                               |  |              |        |  |              |   |        |              | 
|Machinery, equipment and furniture             |  | $            | 6,044  |  |              | $ | 5,553  |              |  |  | 3-7 years  | 
|Leasehold improvements                         |  |              | 2,557  |  |              |   | 1,968  |              |  |  | Lease term | 
|Computer equipment and accessories             |  |              | 3,466  |  |              |   | 2,985  |              |  |  | 3-5 years  | 
|Computer software                              |  |              | 4,476  |  |              |   | 4,271  |              |  |  | 3-5 years  | 
|                                               |  |              |        |  |              |   |        |              | 
|                                               |  |              | 16,543 |  |              |   | 14,777 |              |  |  |            | 
|Less accumulated depreciation and amortization |  |              | 13,850 |  |              |   | 12,529 |              |  |  |            | 
|                                               |  |              |        |  |              |   |        |              | 
|                                               |  | $            | 2,693  |  |              | $ | 2,248  |              |  |  |            | 
|                                               |  |              |        |  |              |   |        |              | 

NOTE C  CREDIT FACILITY






38



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE C  CREDIT FACILITY (Continued)






|                                               |  |                          |        |   |      |   |       |      |  |   |       |  
|---------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                               |  | Years ended December 31, |       
|                                               |  |                          |       
|                                               |  | 2004                     |        |   | 2003 |   |       | 2002 | 
|                                               |  |                          |        |   |      |   |       |      | 
|Borrowings at end of year                      |  | $                        | 5,000  |   |      | $ |      |      |  | $ |      |  
|Interest rate at end of year                   |  |                          | 4.82   | % |      |   | 3.50  | %    |  |   | 4.25  | %
|Maximum month-end borrowing during the year    |  | $                        | 18,485 |   |      | $ |      |      |  | $ |      |  
|Average daily borrowing during the year        |  | $                        | 7,873  |   |      | $ |      |      |  | $ |      |  
|Weighted average interest rate during the year |  |                          | 4.35   | % |      |   | N/A   |      |  |   | N/A   |  
|Outstanding letters of credit at end of year   |  | $                        | 1,876  |   |      | $ | 2,483 |      |  | $ | 2,619 |  

NOTE D  ACQUISITION






|                                |                                           |                      |   |        |        | 
|------------------------------- | ----------------------------------------- | -------------------- | - | ------ | ------ | 
|Net assets acquired, including: |                                           |                      |   |       
|                                | Current assets                            |                      | $ | 6,674  |       
|                                | Property and equipment                    |                      |   | 1,013  |       
|                                | Liabilities assumed                       |                      |   | (5,371 | )     
|                                |                                           |                      |  
|                                |                                           | Net assets acquired  |   |        | 2,316  | 
|                                | Trade and domain name                     |                      |   | 10,200 |       
|                                | Customer lists and non-compete agreements |                      |   | 750    |       
|                                | Goodwill                                  |                      |   | 17,176 |       
|                                |                                           |                      |  
|                                |                                           | Total purchase price |   | $      | 30,442 | 
|                                |                                           |                      |  



|                                              |                          |   |        |        | 
|--------------------------------------------- | ------------------------ | - | ------ | ------ | 
|Fair value of net working capital acquired    |                          | $ | 1,303  |       
|Fair value of property and equipment acquired |                          |   | 1,013  |       
|Purchase price assigned to:                   |                          |   |        |       
|                                              | Goodwill                 |   |        | 17,176 | 
|                                              | Identifiable intangibles |   |        | 10,950 | 
|                                              |                          |   |       
|Cash purchase price                           |                          | $ | 30,442 |       
|                                              |                          |   |       



39



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE D  ACQUISITION (Continued)


breach of the sellers representations and warranties,
or undisclosed liabilities. In accordance with and subject to
the escrow agreement, the escrow agent shall distribute amounts
(net of claims) from the escrow account to the Sellers as
follows (in thousands):


|                            |  |  |                  | 
|--------------------------- |  |  | ---------------- | 
|90 days after closing date  |  |  | $  500           | 
|180 days after closing date |  |  | 500              | 
|360 days after closing date |  |  | 1,500            | 
|540 days after closing date |  |  | Remaining  Funds | 









|                               |  |      |         |  |      |   |         | 
|------------------------------ |  | ---- | ------- |  | ---- | - | ------- | 
|                               |  | 2004 |         |  | 2003 |  
|                               |  |      |         |  |      |  
|Net sales                      |  | $    | 259,542 |  |      | $ | 237,129 | 
|Net income                     |  |      | 8,079   |  |      |   | 6,646   | 
|Basic net earnings per share   |  |      | 1.14    |  |      |   | .93     | 
|Diluted net earnings per share |  |      | 1.01    |  |      |   | .84     | 

NOTE E  INCOME TAXES




|         |         |                          |       |       |      |   |       |       |   |   |       |        |  
|-------- | ------- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ------ | -
|         |         | Years ended December 31, |      
|         |         |                          |      
|         |         | 2004                     |       |       | 2003 |   |       | 2002  |  
|         |         |                          |       |       |      |   |       |       |  
|Current  |         |                          |       |       |      |   |       |       |   |   |       |       
|         | Federal |                          | $     | 1,934 |      |   | $     | 4,253 |   |   | $     | 3,337  |  
|         | State   |                          |       | 66    |      |   |       | 42    |   |   |       | 22     |  
|         |         |                          |       |       |      |   |       |       |  
|         |         |                          | 2,000 |       |      |   | 4,295 |       |   |   | 3,359 |       
|Deferred |         |                          |       |       |      |   |       |       |   |   |       |       
|         | Federal |                          |       | 2,305 |      |   |       | (832  | ) |   |       | (1,049 | )
|         |         |                          |       |       |      |   |       |       |  
|         |         | $                        | 4,305 |       |      | $ | 3,463 |       |   | $ | 2,310 |       
|         |         |                          |       |       |      |   |       |       |  

40



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE E  INCOME TAXES (Continued)




|                            |  |              |      |   |      |  |      |      |  |  |      |  
|--------------------------- |  | ------------ | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                            |  | Years ended  |     
|                            |  | December 31, |     
|                            |  |              |     
|                            |  | 2004         |      |   | 2003 |  |      | 2002 | 
|                            |  |              |      |   |      |  |      |      | 
|U.S. federal statutory rate |  |              | 34.0 | % |      |  | 34.0 | %    |  |  | 34.0 | %
|State taxes                 |  |              | 0.6  |   |      |  | 0.4  |      |  |  | 0.3  |  
|Other                       |  |              | 1.6  |   |      |  | 1.6  |      |  |  | 2.2  |  
|                            |  |              |      |   |      |  |      |      | 
|                            |  |              | 36.2 | % |      |  | 36.0 | %    |  |  | 36.5 | %
|                            |  |              |      |   |      |  |      |      | 



|                                             |                                   |                                  |   |      |              |   |   |       |       |  
|-------------------------------------------- | --------------------------------- | -------------------------------- | - | ---- | ------------ | - | - | ----- | ----- | -
|                                             |                                   | December 31,                     |   |      | December 31, |  
|                                             |                                   | 2004                             |   |      | 2003         |  
|                                             |                                   |                                  |   |      |              |  
|Current deferred tax assets (liabilities):   |                                   |                                  |   |      |              |   |   |      
|                                             | Inventory                         |                                  | $ | 682  |              |   | $ | 736   |      
|                                             | Vacation accrual                  |                                  |   | 214  |              |   |   | 174   |      
|                                             | Returns reserve                   |                                  |   | 854  |              |   |   | 852   |      
|                                             | Promotional material              |                                  |   | (732 | )            |   |   | (238  | )    
|                                             | Prepaid expenses                  |                                  |   | (345 | )            |   |   | (333  | )    
|                                             | Deferred revenue                  |                                  |   |     |              |   |   | 1,547 |      
|                                             | Other                             |                                  |   | 449  |              |   |   | 438   |      
|                                             |                                   |                                  |   |      |              |  
|                                             |                                   | Current deferred tax asset       |   |      | 1,122        |   |   |       | 3,176 |  
|Long-term deferred tax assets (liabilities): |                                   |                                  |   |      |              |   |   |      
|                                             | Internally developed software     |                                  |   | (923 | )            |   |   | (923  | )    
|                                             | Amortization of intangible assets |                                  |   | (347 | )            |   |   |      |      
|                                             | Depreciation                      |                                  |   | 965  |              |   |   | 869   |      
|                                             |                                   |                                  |   |      |              |  
|                                             |                                   | Long-term deferred tax liability |   |      | (305         | ) |   |       | (54   | )
|                                             |                                   |                                  |   |      |              |  
|                                             |                                   | Net deferred tax asset           |   | $    | 817          |   |   | $     | 3,122 |  
|                                             |                                   |                                  |   |      |              |  

NOTE F  COMMITMENTS AND CONTINGENCIES




| |                            
| | ---------------------------
| | Lease and Other Commitments





|           |  |   |        | 
|---------- |  | - | ------ | 
|2005       |  | $ | 3,681  | 
|2006       |  |   | 3,584  | 
|2007       |  |   | 2,636  | 
|2008       |  |   | 1,810  | 
|2009       |  |   | 453    | 
|Thereafter |  |   |       | 
|           |  |   |       
|           |  | $ | 12,164 | 
|           |  |   |       

41



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE F  COMMITMENTS AND
CONTINGENCIES (Continued)






| |                      
| | ---------------------
| | Employment Agreements









| |                    
| | -------------------
| | Profit Sharing Plan







| |                  
| | -----------------
| | Legal Proceedings







42



---



##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE F  COMMITMENTS AND
CONTINGENCIES (Continued)




| |      
| | -----
| | Other



NOTE G  RELATED PARTY TRANSACTIONS




NOTE H  SHAREHOLDERS EQUITY






| |                         
| | ------------------------
| | Stock Repurchase Program



|                           |  |              |        |  |                |                    |                     |                 |                    |                  |                 |  |  |  |         | 
|-------------------------- |  | ------------ | ------ |  | -------------- | ------------------ | ------------------- | --------------- | ------------------ | ---------------- | --------------- |  |  |  | ------- | 
|                           |  |              |        |  |                | Total Number of    |                     |                 | Maximum Number     |                 
|                           |  |              |        |  |                | Shares Repurchased |                     |                 | of Shares 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     |                    |                  | or Programs     | 
|                           |  |              |        |  |                |                    |                     |                 |                    |                  |                 | 
|May 13  December 31, 2004 |  |              | 43,868 |  |                | $                  | 13.28               |                 |                    |                  | 43,868          |  |  |  | 662,266 | 



43



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE H  SHAREHOLDERS EQUITY (Continued)




|                          |  |              |         |  |                |                    |                     |                 |                    |                  |                 |  |  |  |         | 
|------------------------- |  | ------------ | ------- |  | -------------- | ------------------ | ------------------- | --------------- | ------------------ | ---------------- | --------------- |  |  |  | ------- | 
|                          |  |              |         |  |                | Total Number of    |                     |                 | Maximum Number     |                 
|                          |  |              |         |  |                | Shares Repurchased |                     |                 | of Shares 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     |                    |                  | or Programs     | 
|                          |  |              |         |  |                |                    |                     |                 |                    |                  |                 | 
|May 5  December 31, 2003 |  |              | 148,425 |  |                | $                  | 7.94                |                 |                    |                  | 148,425         |  |  |  | 565,747 | 
|January 1  May 5, 2004   |  |              | 389,466 |  |                |                    | 13.22               |                 |                    |                  | 389,466         |  |  |  |        | 
|                          |  |              |         |  |                |                    |                     |                 |                    |                  |                 | 
|Total                     |  |              | 537,891 |  |                | $                  | 11.76               |                 |                    |                  | 537,891         |  |  |  |        | 
|                          |  |              |         |  |                |                    |                     |                 |                    |                  |                 | 



| |              
| | -------------
| | Stock Options











44



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE H  SHAREHOLDERS EQUITY (Continued)




|                         |  |             |           |                  |                  |          |          |          |  |   |             |         |  |          |         |  |  |   |       | 
|------------------------ |  | ----------- | --------- | ---------------- | ---------------- | -------- | -------- | -------- |  | - | ----------- | ------- |  | -------- | ------- |  |  | - | ----- | 
|                         |  |             |           |                  |                  | Weighted |          |          |  |   | Weighted    |        
|                         |  |             |           | Weighted Average |                  |          | Average  |          |  |   |             | Average | 
|                         |  | Number      |           |                  | Remaining        |          |          | Exercise |  |   | Number      |         |  | Exercise |        
|Range of Exercise Prices |  | Outstanding |           |                  | Contractual Life |          |          | Price    |  |   | Exercisable |         |  | Price    |        
|                         |  |             |           |                  |                  |          |          |          |  |   |             |         |  |          |        
|$ 1.67  $ 1.97          |  |             | 335,752   |                  |                  |          | 6 years  |          |  | $ | 1.91        |         |  |          | 335,752 |  |  | $ | 1.91  | 
|$ 2.67  $ 3.92          |  |             | 104,790   |                  |                  |          | 3 years  |          |  |   | 3.24        |         |  |          | 104,790 |  |  |   | 3.24  | 
|$ 4.33  $ 4.50          |  |             | 561,276   |                  |                  |          | 6 years  |          |  |   | 4.44        |         |  |          | 441,276 |  |  |   | 4.42  | 
|$10.77  $14.91          |  |             | 1,012,500 |                  |                  |          | 10 years |          |  |   | 13.06       |         |  |          | 92,000  |  |  |   | 10.77 | 
|                         |  |             |           |                  |                  |          |          |          |  |   |             |         |  |          |        
|                         |  |             | 2,014,318 |                  |                  |          |          |          |  |   |             |         |  |          | 973,818 |  |  |   |       | 
|                         |  |             |           |                  |                  |          |          |          |  |   |             |         |  |          |        



|                                                               |           |        |           |          |       |   |      |        |          |  |           |          |   |          |      |       |       |  |           |         |   |   |      |      | 
|-------------------------------------------------------------- | --------- | ------ | --------- | -------- | ----- | - | ---- | ------ | -------- |  | --------- | -------- | - | -------- | ---- | ----- | ----- |  | --------- | ------- | - | - | ---- | ---- | 
|                                                               |           | 2004   |           |          | 2003  |   |      | 2002   |         
|                                                               |           |        |           |          |       |   |      |        |         
|                                                               |           |        |           | Weighted |       |   |      |        | Weighted |  |           |          |   | Weighted |     
|                                                               |           |        |           | Average  |       |   |      |        | Average  |  |           |          |   | Average  |     
|                                                               |           |        |           | Exercise |       |   |      |        | Exercise |  |           |          |   | Exercise |     
|                                                               |           | Shares |           |          | Price |   |      | Shares |          |  | Price     |          |   | Shares   |      |       | Price | 
|                                                               |           |        |           |          |       |   |      |        |          |  |           |          |   |          |      |       |       | 
|Outstanding at beginning of year                               |           |        | 1,569,417 |          |       | $ | 4.80 |        |          |  | 1,575,609 |          |   | $        | 3.37 |       |       |  | 1,210,734 |         |   | $ | 3.01 |     
|                                                               | Granted   |        |           | 736,500  |       |   |      | 13.91  |          |  |           | 276,000  |   |          |      | 10.77 |       |  |           | 375,000 |   |   |      | 4.50 | 
|                                                               | Exercised |        |           | (291,599 | )     |   |      | 3.75   |          |  |           | (257,192 | ) |          |      | 2.54  |       |  |           | (7,500  | ) |   |      | 3.02 | 
|                                                               | Canceled  |        |           |         |       |   |      |       |          |  |           | (25,000  | ) |          |      | 3.49  |       |  |           | (2,625  | ) |   |      | 4.20 | 
|                                                               | Expired   |        |           |         |       |   |      |       |          |  |           |         |   |          |      |      |       |  |           |        |   |   |      |     | 
|                                                               |           |        |           |          |       |   |      |        |          |  |           |          |   |          |      |       |       | 
|Outstanding at end of year                                     |           |        | 2,014,318 |          |       | $ | 8.29 |        |          |  | 1,569,417 |          |   | $        | 4.80 |       |       |  | 1,575,609 |         |   | $ | 3.37 |     
|                                                               |           |        |           |          |       |   |      |        |          |  |           |          |   |          |      |       |       | 
|Options exercisable at end of year                             |           |        | 973,818   |          |       | $ | 4.03 |        |          |  | 933,417   |          |   | $        | 3.48 |       |       |  | 941,233   |         |   | $ | 3.31 |     
|                                                               |           |        |           |          |       |   |      |        |          |  |           |          |   |          |      |       |       | 
|Weighted average fair value of options granted during the year |           |        |           |          |       | $ | 6.03 |        |          |  |           |          |   | $        | 8.19 |       |       |  |           |         |   | $ | 4.00 |     



| |         
| | --------
| | Warrants



45



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE I  SEGMENT INFORMATION


tm




|                              |                       |              |   |         |         |  |   |         |         | 
|----------------------------- | --------------------- | ------------ | - | ------- | ------- |  | - | ------- | ------- | 
|                              |                       | Years ended  |  
|                              |                       | December 31, |  
|                              |                       |              |  
|                              |                       | 2004         |   |         | 2003    | 
|                              |                       |              |   |         |         | 
|Net Sales                     |                       |              |   |         |         |  |   |        
|                              | The Sportsmans Guide |              | $ | 207,221 |         |  | $ | 194,703 |        
|                              | The Golf Warehouse    |              |   | 25,241  |         |  |   |        |        
|                              |                       |              |   |         |         | 
|                              |                       | Total        |   | $       | 232,462 |  |   | $       | 194,703 | 
|                              |                       |              |   |         |         | 
|Earnings From Operations      |                       |              |   |         |         |  |   |        
|                              | The Sportsmans Guide |              | $ | 10,692  |         |  | $ | 9,597   |        
|                              | The Golf Warehouse    |              |   | 1,567   |         |  |   |        |        
|                              |                       |              |   |         |         | 
|                              |                       | Total        |   | $       | 12,259  |  |   | $       | 9,597   | 
|                              |                       |              |   |         |         | 
|Depreciation and Amortization |                       |              |   |         |         |  |   |        
|                              | The Sportsmans Guide |              | $ | 1,214   |         |  | $ | 1,322   |        
|                              | The Golf Warehouse    |              |   | 217     |         |  |   |        |        
|                              |                       |              |   |         |         | 
|                              |                       | Total        |   | $       | 1,431   |  |   | $       | 1,322   | 
|                              |                       |              |   |         |         | 
|Capital Expenditures          |                       |              |   |         |         |  |   |        
|                              | The Sportsmans Guide |              | $ | 546     |         |  | $ | 941     |        
|                              | The Golf Warehouse    |              |   | 226     |         |  |   |        |        
|                              |                       |              |   |         |         | 
|                              |                       | Total        |   | $       | 772     |  |   | $       | 941     | 
|                              |                       |              |   |         |         | 
|Assets                        |                       |              |   |         |         |  |   |        
|                              | The Sportsmans Guide |              | $ | 39,493  |         |  | $ | 63,822  |        
|                              | The Golf Warehouse    |              |   | 40,776  |         |  |   |        |        
|                              |                       |              |   |         |         | 
|                              |                       | Total        |   | $       | 80,269  |  |   | $       | 63,822  | 
|                              |                       |              |   |         |         | 

NOTE J  SUBSEQUENT EVENTS






46



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE K  ADVERTISING EXPENSE




NOTE L  INTERIM FINANCIAL INFORMATION
(UNAUDITED)




|                         |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |     | 
|------------------------ | ------- | ------------------------------------- | ------ | --- | -------------- | - | ------ | ------------- |  | - | -------------- | --- |  | - | ------ | --- | 
|                         |         | First Quarter                         |        |     | Second Quarter |   |        | Third Quarter |  |   | Fourth Quarter |    
|                         |         |                                       |        |     |                |   |        |               |  |   |                |    
|                         |         | (In thousands, except per share data) |       
|2004                     |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |    
|Net sales                |         | $                                     | 44,594 |     |                | $ | 38,861 |               |  | $ | 56,554         |     |  | $ | 92,453 |    
|Gross profit             |         |                                       | 14,128 |     |                |   | 12,137 |               |  |   | 16,415         |     |  |   | 31,701 |    
|Earnings from operations |         |                                       | 1,782  |     |                |   | 1,208  |               |  |   | 1,851          |     |  |   | 7,418  |    
|Net earnings             |         |                                       | 1,167  |     |                |   | 797    |               |  |   | 1,069          |     |  |   | 4,558  |    
|Net earnings per share:  |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |    
|                         | Basic   |                                       |        | .16 |                |   |        | .11           |  |   |                | .15 |  |   |        | .65 | 
|                         | Diluted |                                       |        | .15 |                |   |        | .10           |  |   |                | .13 |  |   |        | .57 | 
|2003                     |         |                                       |        |     |                |   |        |               |  |   |                |     |  |   |        |    
|Net 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   |                                       |        | .13 |                |   |        | .09           |  |   |                | .10 |  |   |        | .53 | 
|                         | Diluted |                                       |        | .12 |                |   |        | .08           |  |   |                | .09 |  |   |        | .47 | 



|      |                                                                                                                                                                                                  
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: | The acquisition of The Golf Warehouse, L.L.C. was effective
    June 29, 2004. The third quarter of 2004 was the first
    quarter for inclusion of TGWs net sales, operations and
    earnings.

47



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##### 



The Sportsmans Guide, Inc. and Subsidiaries


SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS


|                                |                   |                           |   |           |             |  |   |                  |   |  |              |     |     |               |   |        |     |  |   |       | 
|------------------------------- | ----------------- | ------------------------- | - | --------- | ----------- |  | - | ---------------- | - |  | ------------ | --- | --- | ------------- | - | ------ | --- |  | - | ----- | 
|Column A                        |                   | Column B                  |   |           | Column C    |  |   | Column D         |   |  | Column E     |    
|                                |                   |                           |   |           |             |  |   |                  |   |  |              |    
|                                |                   |                           |   | Additions |             |  |   |                  |  
|                                |                   |                           |   |           |             |  |   |                  |  
|                                |                   | Balance at                |   |           | Charged to: |  |   | Charged to:      |   |  |              |     |    
|                                |                   | Beginning                 |   |           | Costs and   |  |   | Other Accounts  |   |  | Deductions  |     |     | Balance at    |  
|Description                     |                   | of Period                 |   |           | Expenses    |  |   | Describe         |   |  | Describe     |     |     | End of Period |  
|                                |                   |                           |   |           |             |  |   |                  |   |  |              |     |     |               |  
|                                |                   | (in thousands of dollars) |  
|Allowance for Doubtful Accounts |                   |                           |   |           |             |  |   |                  |   |  |              |     |     |               |   |        |     |  |   |      
|                                | December 31, 2004 |                           | $ | 146       |             |  | $ | 101              |   |  | $            |    |     |               | $ | 123    | (B) |  | $ | 124   | 
|                                | December 31, 2003 |                           | $ | 195       |             |  | $ | 56               |   |  | $            |    |     |               | $ | 105    | (B) |  | $ | 146   | 
|                                | December 31, 2002 |                           | $ | 211       |             |  | $ | 105              |   |  | $            |    |     |               | $ | 121    | (B) |  | $ | 195   | 
|Inventory Reserves              |                   |                           |   |           |             |  |   |                  |   |  |              |     |     |               |   |        |     |  |   |      
|                                | December 31, 2004 |                           | $ | 1,351     |             |  | $ | (356             | ) |  | $            | 160 | (A) |               | $ | 193    | (C) |  | $ | 962   | 
|                                | December 31, 2003 |                           | $ | 1,492     |             |  | $ | 70               |   |  | $            |    |     |               | $ | 211    | (C) |  | $ | 1,351 | 
|                                | December 31, 2002 |                           | $ | 1,138     |             |  | $ | 475              |   |  | $            |    |     |               | $ | 121    | (C) |  | $ | 1,492 | 
|Returns Reserve                 |                   |                           |   |           |             |  |   |                  |   |  |              |     |     |               |   |        |     |  |   |      
|                                | December 31, 2004 |                           | $ | 2,240     |             |  | $ | 10,570           |   |  | $            | 74  | (A) |               | $ | 10,566 | (D) |  | $ | 2,318 | 
|                                | December 31, 2003 |                           | $ | 1,738     |             |  | $ | 9,176            |   |  | $            |    |     |               | $ | 8,674  | (D) |  | $ | 2,240 | 
|                                | December 31, 2002 |                           | $ | 1,402     |             |  | $ | 9,040            |   |  | $            |    |     |               | $ | 8,704  | (D) |  | $ | 1,738 | 




|    |  |                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Represents the addition of The Golf Warehouses inventory
    reserve and returns reserve as a result of the acquisition on
    June 29, 2004.
|   
|(B) |  | Represents write off of bad debts.                                                                                                            
|   
|(C) |  | Represents loss on inventory liquidations.                                                                                                    
|   
|(D) |  | Represents actual net returns from customers.                                                                                                 



|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on Accounting
    and Financial Disclosure





|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and
Procedures




Managements Report on Internal Control Over Financial
Reporting


48



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##### 



Internal Control  Integrated Framework Internal Control  Integrated
Framework,


Item 9B. Other Information




49



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##### 



PART III




|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant





|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation





|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters





|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions





|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



50



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##### 



PART IV




|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

(a) 1. Financial Statements




| |                                                                                     
| | ------------------------------------------------------------------------------------
| | The following financial statements of the Company are
    included herein at Item 8.



| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Reports of Independent Registered Public Accounting Firm                                                           
|
| | Consolidated Balance Sheets as of December 31, 2004 and 2003                                                       
|
| | Consolidated Statements of Earnings for the years ended
    December 31, 2004, 2003 and 2002                       
|
| | Consolidated Statements of Changes in Shareholders Equity
    for the years ended December 31, 2004, 2003 and 2002
|
| | Consolidated Statements of Cash Flows for the years ended
    December 31, 2004, 2003 and 2002                     
|
| | Notes to Consolidated Financial Statements                                                                         

2. Financial Statement
Schedules




| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | The following financial statement schedule of the Company
    is included herein at Item 8.



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Schedule II  Valuation and Qualifying Accounts
    for the years ended December 31, 2004, 2003 and 2002

3. Exhibits




| |                                             
| | --------------------------------------------
| | See Exhibit Index at page 53 of this report.

51



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##### 



SIGNATURES






| |                            
| | ---------------------------
| | THE SPORTSMANS GUIDE, INC.



| |    |                      
| | -- | ---------------------
| | By | /s/Gregory R. Binkley

| |                                      
| | -------------------------------------
| |                                      
| | Gregory R. Binkley                   
| | President and Chief Executive Officer





|                                             |  |                                                                                                                                                                         |  |              |  | 
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ |  | 
|Signature                                    |  | Capacity                                                                                                                                                                |  | Date        
|                                             |  |                                                                                                                                                                         |  |             
|                                            
|/s/ Gregory R. BinkleyGregory
    R. Binkley |  | President, Chief Executive Officer and Director (principal
    executive officer)                                                                                       |  | May 12, 2005
|                                            
|/s/ Charles B. LingenCharles
    B. Lingen   |  | Executive Vice President of Finance and Administration, Chief
    Financial Officer, Secretary, Treasurer and Director (principal
    financial and accounting officer) |  | May 12, 2005
|                                            
|*William
    T. Sena                         |  | Chairman of the Board of Directors                                                                                                                                      |  | May 12, 2005
|                                            
|*Gary
    Olen                               |  | Director                                                                                                                                                                |  | May 12, 2005
|                                            
|*Jay
    A. Leitch                           |  | Director                                                                                                                                                                |  | May 12, 2005
|                                            
|*Darold
    D. Rath                          |  | Director                                                                                                                                                                |  | May 12, 2005
|                                            
|Ronald
    G. Olson                          |  | Director                                                                                                                                                                |  | May 12, 2005
|                                            
|*By                                          |  | /s/ Gregory R. BinkleyGregory
    R. Binkley,
    Attorney-In-Fact                                                                                                      |  |              |  | 

52



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##### 



EXHIBIT INDEX


|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | ----- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       | Description
|        |       |            
|        | 2.1   |             |  | Membership Interest Purchase Agreement dated as of June 29,
    2004 by and among TGW Acquisition Corporation, The Golf
    Warehouse, L.L.C., Sports Capital Partners, L.P., Sports Capital
    Warehouse, L.P., Sports Capital Partners (CEV), L.L.C., Marney
    Enterprises, Inc., Mark S. Marney, R. Michael Marney, and
    Richard D. Marney (incorporated by reference to Exhibit 2.1
    to Form 8-K dated July 13, 2004)                                                                
|       
|        | 3.1   |             |  | Restated Articles of Incorporation as restated through
    March 5, 1997 (incorporated by reference to
    Exhibit 3.1 to Form 10-K for the year ended
    December 27, 1996, File No. 0-15767)                                                                                                                                                                                                                                                                                                   
|       
|        | 3.2   |             |  | Bylaws (incorporated by reference to Exhibit 3.2 to
    Form S-18 Registration Statement No. 33-4496C filed
    April 1, 1986)                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 4.1   |             |  | Specimen of the Companys Common Stock certificate
    (incorporated by reference to Exhibit 4.1 to Amendment
    No. 1 to Form S-18 Registration Statement
    No. 33-4496C filed May 8, 1986)                                                                                                                                                                                                                                                                                                   
|       
|        | 4.2   |             |  | Rights Agreement dated as of May 11, 1999 between the
    Company and Norwest Bank Minnesota, N.A., as Rights Agent
    (incorporated by reference to Exhibit 4.1 to Form 8-K
    dated May 11, 1999)                                                                                                                                                                                                                                                                                             
|       
|        | 10.1  | *           |  | The Companys 1991 Incentive Stock Option Plan
    (incorporated by reference to Exhibit 10.16 to
    Form 10-K for the year ended December 27, 1991)                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10.2  |             |  | Industrial Real Estate Lease between the Company and CB
    Commercial Real Estate Group, Inc. dated April 22, 1993
    (incorporated by reference to Exhibit 10.20 to
    Form 10-K for the year ended December 31, 1993)                                                                                                                                                                                                                                                                        
|       
|        | 10.3  |             |  | Amendment to Industrial Real Estate Lease between the Company
    and American Real Estate Holdings, L.P. dated February 23,
    1998 (incorporated by reference to Exhibit 10.1 to
    Form 10-Q for the quarter ended June 28, 1998)                                                                                                                                                                                                                                                            
|       
|        | 10.4  |             |  | Industrial Real Estate Lease between the Company and AMB
    Property, L.P. as amended May 24, 1999 (incorporated by
    reference to Exhibit 10.1 to Form 10-Q for the quarter
    ended July 4, 1999)                                                                                                                                                                                                                                                                                           
|       
|        | 10.5  |             |  | Lease Agreement dated November 19, 1999 between Stephen L.
    Clark, as trustee of the Steve Clark Trust, created pursuant to
    a Trust Agreement dated October 4, 1996 (Clark)
    and The Golf Warehouse, L.L.C. (TGW) as amended by
    First Amendment Agreement dated March 1, 2003 between
    U.S. Business Centers, L.L.C. as successor to Clark and TGW
    and Second Amendment Agreement dated July 9, 2004 between
    U.S. Business Centers, L.L.C. and TGW (previously filed)
|       
|        | 10.6  |             |  | Sublease dated July 5, 2004 between Facilitech, Inc.
    dba Business Interiors and The Golf Warehouse, L.L.C.
    (previously filed)                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10.7  |             |  | Credit Agreement by and between the Company and Wells Fargo
    Bank, National Association dated June 29, 2004
    (incorporated by reference to Exhibit 10.1 to
    Form 10-Q for the quarter ended June 30, 2004)                                                                                                                                                                                                                                                                               
|       
|        | 10.8  | *           |  | Form of Stock Option Agreement pursuant to the
    Companys 1994 Non-Qualified Performance Option Plan
    (incorporated by reference to Exhibit 10.16 to
    Form 10-K for the year ended December 27, 1996)                                                                                                                                                                                                                                                                                    
|       
|        | 10.9  | *           |  | The Companys 1996 Stock Option Plan (incorporated by
    reference to Exhibit 10.17 to Form 10-K for the year
    ended December 27, 1996)                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10.10 | *           |  | Form of Employment Agreement with members of senior
    management (incorporated by reference to Exhibit 10.10 to
    Amendment No. 1 to Form S-2 Registration Statement
    No. 333-31111 filed January 2, 1998)                                                                                                                                                                                                                                                                                 

53



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##### 



|        |       |             |  |                                                                                                                                                                                                                    
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       | Description
|        |       |            
|       
|        | 10.11 | *           |  | Agreement between the Company and Gary Olen dated June 28,
    2002 for the use of name, likeness and services (incorporated by
    reference to Exhibit 10.1 to Form 10-Q for the quarter
    ended June 30, 2002)
|       
|        | 10.12 | *           |  | The Companys 1999 Stock Option Plan (incorporated by
    reference to Exhibit 10.16 to Form 10-K for the year
    ended December 31, 1999)                                                                        
|       
|        | 10.13 | *           |  | The Sportsmans Guide, Inc. Deferred Compensation Plan
    effective September 1, 2002 (incorporated by reference to
    Exhibit 10.2 to Form 10-Q for the quarter ended
    September 30, 2002)                   
|       
|        | 10.14 | *           |  | The Companys 2004 Stock Incentive Plan (incorporated by
    reference to Exhibit 10.2 to Form 10-Q for the quarter
    ended June 30, 2004)                                                                       
|       
|        | 10.15 | *           |  | Form of Stock Option Agreement under 2004 Stock Incentive Plan
    (incorporated by reference to Exhibit 10.1 to Form 10-Q for
    the quarter ended September 30, 2004)                                           
|       
|        | 10.16 | *           |  | Annual Bonus Program (incorporated by reference to
    Exhibit 10.2 to Form 10-Q for the quarter ended
    September 30, 2004)                                                                                     
|       
|        | 10.17 | *           |  | Fees for Nonemployee Directors (incorporated by reference to
    Exhibit 10.1 to Form 8-K dated March 2, 2005)                                                                                                     
|       
|        | 10.18 | *           |  | Form of Employment Agreement between The Golf Warehouse, Inc.
    and members of TGW management (incorporated by reference to
    Exhibit 7.1(h) to Exhibit 2.1 to Form 8-K dated
    July 13, 2004)               
|       
|        | 14.1  |             |  | Code of Business Conduct and Ethics (incorporated by reference
    to Exhibit 14.1 to Form 10-K for the year ended
    December 31, 2003)                                                                          
|       
|        | 21.1  |             |  | Subsidiaries of the Company (previously filed)                                                                                                                                                                     
|       
|        | 23.1  |             |  | Consent of Grant Thornton LLP                                                                                                                                                                                      
|       
|        | 24.1  |             |  | Powers of Attorney of each person whose name is signed to this
    report pursuant to a power of attorney (previously filed)                                                                                       
|       
|        | 31.1  |             |  | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                            
|       
|        | 32.1  |             |  | Section 1350 Certifications                                                                                                                                                                                        
|       
|        | 99.1  |             |  | Risk Factors                                                                                                                                                                                                       



54