<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K


[X]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
       EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

                                       OR
[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
       EXCHANGE ACT OF 1934.

For the transition period from __________________ to _________________________

COMMISSION FILE NUMBER: 333-43129


                                   BIG 5 CORP.
                    SUCCESSOR TO: UNITED MERCHANDISING CORP.
                            DBA: BIG 5 SPORTING GOODS
             (Exact name of registrant as specified in its charter)
                                    DELAWARE
                            (State of Incorporation)
                                   95-1854273
                      (IRS Employer Identification Number)
                         2525 EAST EL SEGUNDO BOULEVARD
                          EL SEGUNDO, CALIFORNIA 90245
                                 (310) 536-0611
                   (Address, including zip code, and telephone
             number, including area code, of registrant's principal
                               executive offices)
          SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
                                      None
          SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. [X]

No voting stock of the registrant is held by non-affiliates of the registrant.
The registrant's voting stock is wholly owned by Big 5 Holdings Corp., a
Delaware Corporation. Neither the registrant's nor Big 5 Holdings Corp.'s voting
stock is publicly traded.

Indicate the number of shares outstanding for each of the registrant's classes
of common stock, as of the latest practicable date: 1,000 shares of common
stock, $.01 par value, at March 26, 2001.


                      DOCUMENTS INCORPORATED BY REFERENCE:
                                      None


<PAGE>   2



                                     PART I

ITEM 1:  BUSINESS

GENERAL

     Big 5 Corp. (the "Company" or "Big 5") is the leading sporting goods
retailer in the Western United States, operating 249 stores under the "Big 5
Sporting Goods" name at December 31, 2000. Big 5 provides a full-line product
offering of over 25,000 SKU's in a traditional sporting goods store format that
averages 11,000 square feet. The Company's products include athletic shoes and
apparel, tennis, golf, ski, snowboard, in-line skating, fitness, outdoor and
team sports equipment for the competitive and recreational sporting goods
customer. Big 5 offers customers attractive values on recognized brand-name
merchandise at a wide variety of price points. Important brand-names offered by
the Company include Nike, Reebok, Wilson, New Balance, Rollerblade, Coleman,
Spalding, Adidas, Everlast, Rawlings, Easton and Columbia, among others. The
Company augments its value image by emphasizing merchandise produced exclusively
for the Company, and on a selective basis, opportunistic buys comprising first
quality items, including overstock and close-out merchandise. These merchandise
values are communicated weekly through print advertising created by the Company
in order to generate store traffic and drive sales. For the twelve months ended
December 31, 2000, the Company generated $571.5 million of revenue, $50.1
million of EBITDA (see "Selected Historical Financial Data") and a same store
sales increase of 6.6% over the prior period. Through the period ended December
31, 2000, Big 5 has enjoyed 20 consecutive quarterly increases in same store
sales over the comparable prior periods.

     Big 5 was founded in 1955 by Robert W. Miller, Maurie Liff and Harry Liff,
with the establishment of five retail locations in Los Angeles, Burbank,
Inglewood, Glendale and San Jose. The Company originally sold World War II
surplus items including tents, sleeping bags, air mattresses, housewares, tools
and other merchandise. Other sporting goods gradually entered the product mix
and as a result, in 1963, the Company decided to become a sporting goods
specialist and changed its trade name to "Big 5 Sporting Goods." In 1971, the
Company was acquired by Thrifty Corporation ("Thrifty"), which was subsequently
purchased by Pacific Enterprises ("PE") in 1986. Throughout these changes in
ownership, management remained relatively constant and in 1992, management in
conjunction with Leonard Green & Partners, LP ("LGP") bought the Company. In
October 1997, Big 5 Holdings Corp., the parent corporation of the Company
("Parent"), Robert W. Miller, Steven G. Miller and Green Equity Investors, LP
("GEI") agreed to a Plan of Recapitalization and Stock Repurchase Agreement (the
"Recapitalization Agreement") which resulted in existing management and
employees of the Company (and members of their families) beneficially owning the
majority of Parent. Several transactions (collectively referred to as the
"Recapitalization") were effected pursuant to the Recapitalization Agreement,
including the reincorporation of the Company in Delaware as Big 5 Corp. See
"Liquidity and Capital Resources" for a description of the Recapitalization.

MERCHANDISING

     Offering approximately 25,000 SKUs, the typical Big 5 Sporting Goods store
targets the competitive and recreational sporting goods customer with a
full-line product offering at a wide variety of price points. The Company
believes its long history of success is attributable to its adherence to a
consistent merchandising strategy, the key elements of which are summarized
below:

     Delivering Consistent Value to Consumers. The Company offers consistent
value to consumers by offering a distinctive combination of in-line products,
"special make-up" merchandise (produced exclusively for the Company under a
manufacturer's brand name), private label merchandise and opportunistic buys.
The Company offers this consistent value to its customers while maintaining
strong margins as a result of its ability to purchase in large quantities and
quickly adjust this combination of


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<PAGE>   3


merchandise to take advantage of purchasing opportunities. Through its 45 years
of operations, the Company has developed specific expertise in selling its
particular mix of these products, thereby building the Company's price image,
driving its weekly print advertisements and creating retail traffic.

     The Company sources its in-line branded merchandise from an extensive list
of major sporting goods equipment, athletic footwear and apparel manufacturers.
Below is a selection of some of the brands carried by the Company:

<TABLE>

     <S>               <C>                    <C>                <C>                    <C>
     Adidas            Everlast               K2                 Remington              Speedo
     Bauer             Fila                   New Balance        Rollerblade            Titleist
     Bushnell          Franklin               Nike               Russell Athletic       Wilson
     Casio             Head                   Prince             Saucony                Winchester
     Coleman           Hillerich & Bradsby    Rawlings           Shakespeare            Zebco
     Columbia          Icon (Proform)         Razor              Shimano
     Easton            Jansport               Reebok             Spalding

</TABLE>


     The Company also offers a variety of private label merchandise to
complement its branded product offerings. The Company's private label items
include shoes, apparel, tennis rackets, binoculars, camping equipment and
fishing supplies. They are sold under the labels: Fives, Court Casuals, Sport
Essentials, Rugged Exposure, Hot Voltage, Golden Bear, Body Glove (licensed),
Kemper (licensed), Pacifica and South Bay Golf.

     Offering a Customized Product Assortment. Through its 45 years of
experience across different demographic, economic and competitive markets, the
Company's management has refined its merchandising strategy to increase sales by
offering a selection of goods that meets customer demands while managing
inventory levels. The Company believes it provides consumers with a merchandise
offering that compares favorably to its competitors, including the superstores,
in terms of category selection. A goal of the Company's merchandising strategy
is to offer a customized and selected assortment of products, which enables the
consumer to comparison shop at a Big 5 store without being overwhelmed by a
large number of different products in any one category. The Company tailors its
merchandise selection and quantity on a store-by-store basis in order to satisfy
each region's specific needs and buying habits.

     The Company's buyers work closely with senior management to determine the
product selection, promotion and pricing of the merchandise mix. The Company
utilizes an integrated merchandising, distribution and financial information
system. Management uses the information provided to continually refine its
merchandise mix, pricing strategy, advertising effectiveness and inventory
levels.

     Market Leader in Markets Served. The Company has built a recognized
franchise by establishing a strong presence in its markets and by consistently
promoting quality brand-name products at attractive prices. The Company
concentrates its stores within its markets in a manner which provides economies
of scale in advertising and distribution as well as increased customer awareness
of the Big 5 name.

ADVERTISING

     The Company believes that the consistency and reach of Big 5's print
advertising programs have created high customer awareness of Big 5. Through
years of focused advertising, Big 5 has reinforced its reputation for providing
quality products at attractive prices. The Company attempts to highlight a broad
range of merchandise categories in every advertisement to maintain customer
awareness of its full-line product offering. The Company's advertising message
is reinforced 52 weeks a year in the form of newspaper inserts or mailers,
typically consisting of four standard pages using color photography. The Company
believes that its print advertising consistently reaches more households in its
major markets than does the print advertising of its competitors. The Company's
effectiveness in communicating the product


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<PAGE>   4

values it offers is evidenced by the fact that typically 40% of sales have been
products included in these weekly advertisements.

     The Company uses its professional in-house advertising staff rather than an
outside advertising agency. The staff centrally handles all of its advertising,
including design, layout, production and media management. This approach has
been in place since its founding. Big 5's in-house advertising enables
management the flexibility to react quickly to merchandise trends and maximize
the effectiveness of its weekly inserts and mailers.

EXPANSION AND STORE DEVELOPMENT

     The Company's expansion has been systematic and designed to take advantage
of Big 5's name recognition and to capitalize on the Company's economical store
format and distinctive merchandise mix. Throughout the Company's history,
management has emphasized careful site selection and controlled growth. Over the
past five fiscal years, the Company has added 60 stores (12 new stores annually
on average), of which 68% were outside of California where the Company currently
operates 159 of its 249 stores. The following table sets forth certain
information regarding the Company's expansion program during the periods
indicated:

<TABLE>
<CAPTION>

                                                                No. Of Stores
                 Year                New Stores    Closures     at Period End
                 ----                ----------    --------     -------------
     <S>                             <C>           <C>           <C>
     1996 ..........................       4           --             196
     1997 ..........................      14           --             210
     1998 ..........................      12            (1)           221
     1999 ..........................      15            (2)           234
     2000 ..........................      15           --             249

</TABLE>

     The Company has identified numerous expansion opportunities to further
penetrate its mature markets, develop recently entered markets and expand into
new contiguous market areas with similar demographic, competitive and economic
profiles as its existing markets. The typical Big 5 store size provides the
Company with a large selection of locations for new store placement, which in
turn, allows the Company to open stores conveniently located to the customer.
Continuing its controlled growth strategy, the Company plans on opening
approximately 15-20 stores annually over the next five years. This expansion
plan is designed to take advantage of the growing economies of the Company's
existing and recently entered markets and to capitalize on opportunities in fast
growing new markets.

     Big 5's store format requires a low investment in fixtures and equipment
(approximately $350,000), working capital (approximately $500,000, of which
one-third is typically financed by vendors) and real estate (leased,
"built-to-suit" locations). The Company's leases generally require the lessor,
rather than the Company, to fund all or a significant portion of the capital
expenditures related to new store construction and costs of improvements. The
Company expects that the net cash generated from operations, together with
borrowings under the CIT Credit Facility (see "Liquidity and Capital
Resources"), will enable the Company to finance the expenditures related to its
planned expansion.

MANAGEMENT INFORMATION SYSTEMS

     Big 5 believes its ability to generate an efficiently stocked merchandise
selection and store inventory level that satisfies customer demands while
effectively managing inventory levels is a critical component of its
merchandising strategy. The Company is able to execute this strategy as a result
of its effective use of its integrated management information systems, called
the COACH (Customer Oriented Approach for Continued High-Performance) system.


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<PAGE>   5

     The COACH system provides the Company with valuable inventory tracking
information through the implementation of store-level perpetual inventories.
Each store has a unique inventory model that allows the Company to maximize
inventory mix at the store level. The COACH system also includes a local area
network that connects all corporate users to electronic mail, scheduling and the
host AS/400 system. The host system and the Company's stores are linked by a
network that provides satellite communications for credit card, in-house tender
authorization, and daily polling of sales at the store level. In Big 5's
distribution center, radio frequency terminals are used in the areas of
receiving, stock putaway, stock movement, order filling, cycle counting and
inventory management. At the store level radio frequency, hand-held terminals
are used to assist in store ordering, receiving transfers and perpetual
inventories. Management believes its use of these systems is more extensive,
disciplined and sophisticated than that of many of its competitors.

     During Fiscal 1999 the Company embarked on a project to replace the
existing 10 plus year-old technology point-of-sale (POS) registers component of
the COACH system with new hardware and software. The new system utilizes state
of the art hardware based on a Microsoft Windows NT operating system, which
enables the Company to utilize a variety of readily available Windows
applications in conjunction with the JDA POS software that has been purchased to
replace existing POS applications. Additional benefits include improved system
speed, stability and flexibility. The system continues to utilize existing
satellite communications to verify credit cards and checks and to provide
corporate data exchange. The Company expended approximately $4.7 million on this
project in Fiscal 1999 and Fiscal 2000 on software and store related hardware,
and expects to expend another $0.3 million primarily for customized software
revisions to complete the project. The Company has completed rollout of the new
POS system to 78 stores through the end of Fiscal 2000 and anticipates
completing the rollout during Fiscal 2001.

DISTRIBUTION

     The Company maintains a 440,000 square foot leased distribution center in
Fontana, California that serviced all 249 of its stores at December 31, 2000.
The Fontana facility is fully integrated with the COACH management information
system that provides warehousing and distribution capabilities. The Company is
currently exploring options to expand its distribution capacity to accommodate
future growth.

     The distribution facility was constructed in 1990 and warehouses the
majority of the merchandise carried in the Company's stores. Big 5 estimates
that 98% of all store merchandise is received from its distribution center. The
Company distributes merchandise from the facility to its stores at least once a
week, Monday through Saturday, using a fleet of 26 leased tractors, 12 leased
trailers, two Company-owned tractors, 65 Company-owned trailers as well as
contract carriers.

     On March 5, 1996, the Company purchased the Fontana facility building and
improvements from MLTC Funding, Inc. ("MLTC"), which previously owned and leased
such property to the Company, and then entered into a sale and leaseback
agreement with regard to the Fontana facility. Prior to this transaction, the
Company owned the land associated with the facility and leased the buildings and
improvements.

INDUSTRY AND COMPETITION

     Sporting goods are marketed through various retail entities, including
sporting goods stores, department stores, discount retailers, specialty stores,
electronic commerce and mail order. According to the National Sporting Goods
Association, total U.S. retail sales of sporting goods were approximately $45.6
billion in 1999. In general, the Company's competitors tend to fall into five
basic categories: traditional sporting goods stores, mass merchandisers,
specialty sporting goods stores, sporting goods superstores and e-tailers.

     Traditional Sporting Goods Stores. This category consists of traditional
sporting goods chains, including the Company. These stores range in size from
5,000 to 20,000 square feet and are frequently


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<PAGE>   6

located in regional malls and multi-store shopping centers. The traditional
chains typically carry a varied assortment of merchandise and attempt to
position themselves as convenient neighborhood stores. Sporting goods retailers
operating stores within this category include Hibbett's and Copeland's.

     Mass Merchandisers. This category includes discount retailers such as
Wal-Mart and Kmart and department stores such as JC Penney and Sears. These
stores range in size from approximately 50,000 to 200,000 square feet and are
primarily located in regional malls, shopping centers or freestanding sites.
Sporting goods merchandise and apparel represent a small portion of the total
merchandise in these stores and the selection is often more limited than in
other sporting goods retailers. Although generally price competitive, discount
and department stores typically have limited customer service in their sporting
goods departments.

     Specialty Sporting Goods Stores. This category consists of two groups. The
first group generally includes athletic footwear specialty stores, which are
typically 2,000 to 20,000 square feet in size and are located in shopping malls.
Examples include such retail chains as Foot Locker, Lady Foot Locker and The
Athlete's Foot. These retailers are highly focused, with most of their sales
coming from athletic footwear and team licensed apparel. The second group
consists of pro shops and stores specializing in a particular sport or
recreation. This group includes backpacking and mountaineering specialty stores
and specialty skate shops and golf shops. Typically, prices at specialty stores
tend to be higher than prices at the sporting goods superstores and traditional
sporting goods stores.

     Sporting Goods Superstores. Stores in this category typically are larger
than 35,000 square feet and tend to be freestanding locations. These stores
emphasize high volume sales and a large number of SKU's. Examples include
Oshman's Super Sports, The Sports Authority, Sport Chalet, Gart Sports and
Sportmart.

     E-tailers. This category consists of on-line internet retailers such as
dsports.com and Global Sports Interactive. These competitors sell a full line of
sporting goods products via the internet.

     The Company believes that it competes successfully with each of the
competitors discussed above by focusing on what the Company believes are the
primary factors of competition in the sporting goods industry. These factors
include experienced and knowledgeable personnel, personal attention given to
customers, breadth, depth, price and quality of merchandise offered,
advertising, purchasing and pricing policies, effective sales techniques, direct
involvement of senior officers in monitoring store operations, management
information systems and store location and format.

DESCRIPTION OF SERVICE MARKS AND TRADEMARKS

     The Company uses the "Big 5 Sporting Goods" name as a service mark in
connection with its business operations and has registered this name as a
federal service mark. The Company has also registered federally and/or locally
as trademarks and service marks certain private labels, under which it sells a
variety of merchandise, including apparel.

EMPLOYEES

     As of December 31, 2000, Big 5 had approximately 5,885 full and part-time
employees. The General Warehousemen Union, Local 578, International Brotherhood
of Teamsters ("Local 578") currently represents 468 hourly employees (or
approximately 8.0%) in the Company's distribution center and certain stores. In
September 2000, the Company negotiated two contracts with Local 578 covering
these employees, which expire on August 31, 2005. The Company has not had a
strike or work stoppage in the last 21 years. The Company believes that it
provides working conditions and wages that are comparable to those offered by
other retailers in the industry, and that its employee relations are good.



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<PAGE>   7


     The Company emphasizes friendly and knowledgeable customer service at its
stores. To provide the proper incentives, the Company has established various
advancement and compensation programs. Store managers and first assistant
managers receive a commission based on their store's gross sales. In addition,
full-time employees are given opportunities for career advancement, and
part-time employees are eligible to receive merit-based pay increases. Periodic
store sales contests are held throughout the year.

EMPLOYEE TRAINING

     The Company has developed an extensive training program for all store
employees, including salespeople, cashiers and management trainees. An
introductory program for all full-time retail employees stresses excellence in
customer service as well as effective selling skills. Management trainees
receive additional training throughout their careers, including seminars that
focus on advanced management and sales skills, and store specific information
relating to loss prevention, scheduling and merchandising strategy.

ITEM 2: PROPERTIES

     As of December 31, 2000, Big 5 operated 249 stores in nine western states.
All but one of the Company's store sites are leased. Only seven, or
approximately 3%, of the Company's leases are due to expire in the next five
years without renewal options, and most of the Company's long-term leases
contain renewal options. The average lease expiration term of the Company's
existing leases, taking into account renewal options, is approximately 20 years.
The Company believes that it benefits from long-term below-market leases in many
of its locations. The Company's stores average approximately 11,000 square feet
in size typically ranging from 8,000 to 15,000 square feet and are located
primarily in multi-store shopping centers or as freestanding units. Specific
store locations are selected based on market demographics, competitive factors
and site economics. The Company currently leases its Fontana warehouse facility
from the State of Wisconsin Investment Board. The lease for the facility has an
initial term of ten years and commenced on March 5, 1996. The Company also has
the right to exercise three five-year options beyond the initial ten-year term.

     The chart below sets forth information with respect to Big 5's geographic
markets:

                           STORE STATISTICS BY REGION
                             AS OF DECEMBER 31, 2000

<TABLE>
<CAPTION>

                                                                             PERCENTAGE
                                                YEAR         NUMBER           OF TOTAL
      REGIONS                                 ENTERED       OF STORES     NUMBER OF STORES
      -------                                 -------       ---------     ----------------
      <S>                                     <C>           <C>           <C>
      California:
             Southern California                  1955          88                35%
             Northern California                  1971          71                29
                                                             ------           ------
                         Total California                      159                64
                                                             ------           ------
      Washington                                  1984          28                11
      Oregon                                      1995          15                 6
      Arizona                                     1993          14                 6
      Texas                                       1995          10                 4
      New Mexico                                  1995           7                 3
      Nevada                                      1978           7                 3
      Utah                                        1998           5                 2
      Idaho                                       1993           4                 1
                                                             ------           ------
      Total                                                    249               100%
                                                             ======           ======
</TABLE>



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<PAGE>   8

ITEM 3: LEGAL PROCEEDINGS

     The Company is from time to time involved in routine litigation incidental
to the conduct of its business. The Company regularly reviews all pending
litigation matters in which it is involved and establishes reserves deemed
appropriate by management for such litigation matters. The Company believes that
no litigation currently pending against it will have a material adverse effect
on its financial position or results of operations.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to a vote of security holders during the
year ended December 31, 2000.



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<PAGE>   9


                                     PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
        MATTERS.

     The Company is a wholly-owned subsidiary of Parent. Neither the Company's
nor Parent's capital stock is publicly traded. Restrictive covenants in the
Company's revolving credit facility generally restrict the declaration or
payment of dividends on the Company's common stock other than to enable Parent
to pay operating and overhead expenses and certain other limited types of
expenses. The Senior Notes (see "Liquidity and Capital Resources") restrict the
declaration and payment of dividends unless the Company satisfies certain
financial covenants, among other things.

ITEM 6: SELECTED HISTORICAL FINANCIAL DATA

     The following selected historical financial data have been prepared by the
Company's management from the audited financial statements and the notes thereto
of United Merchandising Corp. (which was reincorporated in Delaware as Big 5
Corp. in connection with the Recapitalization) and Big 5 Corp. With respect to
the selected historical financial data, the Company means United Merchandising
Corp. for fiscal year 1996 and Big 5 Corp. for fiscal years 1997 through 2000.
The selected historical financial data should be read in conjunction with, and
are qualified in their entirety by, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical financial
statements of the Company and the related notes thereto.

<TABLE>
<CAPTION>

                                                                   FISCAL YEAR (a)
                                         ----------------------------------------------------------------
                                             2000          1999          1998         1997        1996
                                         ------------   -----------   -----------  ----------   ---------
                                                              (dollar amounts in thousands)
<S>                                        <C>          <C>           <C>          <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net sales ..............................   $ 571,476    $ 514,324     $ 491,430    $ 443,541     $ 404,265
Cost of goods sold, buying and
      occupancy ........................     377,040      341,852       330,243      298,893       277,116
                                           ---------    ---------     ---------    ---------     ---------
      Gross profit .....................     194,436      172,472       161,187      144,648       127,149
Operating expenses:
      Selling and administrative .......     144,323      130,833       121,643      110,131       101,053
      Depreciation and
            amortization ...............       9,340        9,479         8,890        8,176         9,578
                                           ---------    ---------     ---------    ---------     ---------
Total operating expenses ...............     153,663      140,312       130,533      118,307       110,631
                                           ---------    ---------     ---------    ---------     ---------
Operating income .......................      40,773       32,160        30,654       26,341        16,518
Interest expense .......................      17,035       17,461        19,285       12,442        11,482
                                           ---------    ---------     ---------    ---------     ---------
Income before income taxes
      and extraordinary gain/(loss) ....      23,738       14,699        11,369       13,899         5,036
Income taxes ...........................       9,438        5,829         4,604        1,436           970
                                           ---------    ---------     ---------    ---------     ---------
Income before extraordinary gain/
      (loss) ...........................      14,300        8,870         6,765       12,463         4,066
Extraordinary gain/(loss) from early
      extinguishment of debt, net of
      income taxes .....................          87         (396)         --         (1,597)       (1,285)
                                           ---------    ---------     ---------    ---------     ---------
Net income .............................   $  14,387    $   8,474     $   6,765    $  10,866     $   2,781
                                           =========    =========     =========    =========     =========

</TABLE>

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<PAGE>   10

<TABLE>
<CAPTION>

                                                                        FISCAL YEAR (a)
                                           ----------------------------------------------------------------------
                                               2000          1999           1998           1997           1996
                                           -----------    -----------    -----------    -----------   ------------
                                                                (dollar amounts in thousands)
<S>                                         <C>            <C>            <C>            <C>            <C>
OTHER DATA:
EBITDA (b) .............................    $  50,113      $  41,639      $  39,544      $  34,517      $  26,096
EBITDA margin ..........................          8.8%           8.1%           8.0%           7.8%           6.5%
Cash flow provided by
      operating activities .............    $  20,041      $  16,471      $  29,699      $   3,631      $  19,798
Cash flow used in
      investing activities .............      (11,602)       (14,438)       (11,106)        (5,151)         1,539
Cash flow used in
      financing activities .............       (8,439)        (2,033)       (19,957)        (1,913)       (19,738)
Capital expenditures ...................       11,602         13,075          8,500          5,151          3,453
Ratio of earnings to fixed
      charges (c) ......................         1.8x           1.5x           1.4x           1.7x           1.3x

OPERATING DATA:
Same store sales increase(d) ...........          6.6%           2.0%           5.2%           6.6%           3.7%
End of period stores ...................          249            234            221            210            196
Inventory turns (e) ....................         2.3x           2.3x           2.3x           2.2x           2.2x

BALANCE SHEET DATA END OF PERIOD:
Net working capital (f) ................    $  70,503      $  72,081      $  67,625      $  80,881      $  70,428
Total assets ...........................      251,673        231,465        217,415        216,322        197,869
Total debt .............................      141,089        151,309        151,352        173,660         86,450
Stockholder's equity/ (deficit) ........       (3,658)       (18,045)       (27,877)       (38,843)        31,855

</TABLE>

(Notes to table on previous page and this page)
 -------------------------------------------------------
(a)  The Company's fiscal year is a 52 or 53-week year ending on the Sunday
     closest to the calendar year end. Fiscal years 1996, 1997, 1999 and 2000
     consist of 52 weeks and fiscal year 1998 consists of 53 weeks.
(b)  EBITDA represents net income before taking into consideration interest
     expense, income tax expense, depreciation expense, amortization expense,
     and non-cash rent expense (see Footnote 5 in "Notes to Financial
     Statements"), and where relevant to the period referenced, extraordinary
     gain/(loss) from early extinguishment of debt. While EBITDA is not intended
     to represent cash flow from operations as defined by generally accepted
     accounting principles ("GAAP") and should not be considered as an indicator
     of operating performance or an alternative to cash flow (as measured by
     GAAP) as a measure of liquidity, it is included herein to provide
     additional information with respect to the ability of the Company to meet
     its future debt service, capital expenditure and working capital
     requirements. See "Management's Discussion and Analysis of Financial
     Condition and Results of Operations."
(c)  For the purpose of calculating the ratio of earnings to fixed charges,
     "earnings" represents income before provisions for income taxes and fixed
     charges. "Fixed charges" consist of interest expense, amortization of debt
     financing costs, and one third of lease expense, which management believes
     is representative of the interest component of lease expense.
(d)  Same store sales data for a fiscal year reflects stores open throughout
     that fiscal year and the prior fiscal year.
(e)  Inventory turns equal fiscal year cost of goods sold, buying and occupancy
     costs divided by 4 quarter average FIFO inventory balances adjusted to
     exclude overhead costs capitalized into inventory balances.
(f)  Net working capital is defined as current assets less current liabilities
     excluding current maturities of long-term debt.



                                       10
<PAGE>   11




ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The Company's fiscal year ends on the Sunday closest to December 31.
Accordingly, fiscal years 2000, 1999 and 1998 ended on December 31, 2000,
January 2, 2000 and January 3, 1999, respectively. Certain information in this
Management's Discussion and Analysis section includes forward-looking
statements. Such forward-looking statements relate to the Company's financial
condition, results of operations, expansion plans, and business (see
"Forward-Looking Statements").

RESULTS OF OPERATIONS

     The Company operates in one business segment, as a sporting goods retailer
under the Big 5 Sporting Goods name. The table below sets forth certain
statement of operation components as a percentage of net sales.

<TABLE>
<CAPTION>

                                                                     FISCAL YEAR
                                                             ----------------------------
                                                               2000     1999       1998
                                                             -------   -------   --------
        <S>                                                  <C>       <C>       <C>
        STATEMENT OF OPERATIONS DATA:
        Net sales ........................................    100.0%    100.0%    100.0%
        Gross profit .....................................     34.0%     33.5%     32.8%
        Selling and administrative .......................     25.3%     25.4%     24.8%
        Depreciation and amortization ....................      1.6%      1.8%      1.8%
        Operating income .................................      7.1%      6.3%      6.2%
        EBITDA ...........................................      8.8%      8.1%      8.0%

</TABLE>


(The fiscal years ended December 31, 2000, January 2, 2000 and January 3, 1999
are referred to below as "Fiscal 2000", "Fiscal 1999" and "Fiscal 1998",
respectively.)

FISCAL 2000 VERSUS FISCAL 1999

     Net sales. Net sales increased 11.1% (or $57.2 million) from $514.3 million
in Fiscal 1999 to $571.5 million in Fiscal 2000. Same store sales, or sales for
stores open throughout the year in Fiscal 2000 and Fiscal 1999, increased 6.6%
for Fiscal 2000 versus Fiscal 1999. Store count at the end of Fiscal 2000 was
249 versus 234 at the end of Fiscal 1999 as the Company opened fifteen new
stores. Sales attributable to this increase in store count represented a net
sales increase of 4.5% over Fiscal 1999. The Company achieved positive same
store sales of 8.1% during the fourth quarter of Fiscal 2000, representing the
twentieth consecutive quarter of positive quarterly same store sales results.

     Gross Profit. Gross profit increased 12.7% (or $21.9 million) from $172.5
million in Fiscal 1999 to $194.4 million in Fiscal 2000, reflecting increased
sales (as discussed above) and improved gross profit margin. Gross profit margin
increased from 33.5% in Fiscal 1999 to 34.0% in Fiscal 2000. The improvement is
primarily the result of increased selling margins in the majority of the
Company's product categories.

     Operating Expenses. Selling and administrative expenses increased 10.3% (or
$13.5 million) from $130.8 million in Fiscal 1999 to $144.3 million in Fiscal
2000, primarily reflecting the increase in the Company's store count between
periods, added store labor in response to positive sales trends and planned
increases in advertising expenses during certain periods of Fiscal 2000. As a
percentage of sales, selling and administrative expenses decreased from 25.4% in
Fiscal 1999 to 25.3% in Fiscal 2000.


                                       11
<PAGE>   12


     Depreciation and Amortization Expense. Depreciation and amortization
expense decreased 1.5% (or $0.2 million) from $9.5 million in Fiscal 1999 to
$9.3 million in Fiscal 2000. This decrease resulted primarily from the
completion in the fourth quarter of Fiscal 1999 of depreciation of fixed assets
related to the company's original acquisition by Green Equity Investors and
management in Fiscal 1992, and a decrease in non-cash rent expense. These
decreases were partially offset by added depreciation and amortization related
to expenditures for the growth in the Company's base during Fiscal 2000, with
store count growing from 234 at the end of Fiscal 1999 to 249 at the end of
Fiscal 2000 (see "Liquidity and Capital Resources").

     Interest Expense. Interest expense decreased 2.9% (or $0.5 million) from
$17.5 million in Fiscal 1999 to $17.0 million in Fiscal 2000. This variance was
primarily due to lower average debt balances during Fiscal 2000 versus Fiscal
1999 and was partially offset by higher interest rates on the Company's
revolving debt in Fiscal 2000 versus Fiscal 1999. The Company's debt balances
consist of borrowings under the CIT Credit Facility and the Senior Notes (see
"Liquidity and Capital Resources").

     Income Taxes. There was an income tax provision of $9.4 million in Fiscal
2000 versus $5.8 million in Fiscal 1999. The increase in income tax expense in
Fiscal 2000 compared to Fiscal 1999 is attributable to the increase in earnings
before income taxes. Income taxes are based upon the estimated effective tax
rate applied to pre-tax income for the year. The effective rate is subject to
ongoing evaluation by management.

     Extraordinary Gain/(Loss) from Early Extinguishment of Debt. There was an
extraordinary gain of $0.1 million, net of taxes, reported for Fiscal 2000, in
connection with the repurchase and retirement of $7.75 million face value of the
Company's previously outstanding Senior Notes. There was an extraordinary loss
of $0.4 million, net of taxes, reported for Fiscal 1999, in connection with the
repurchase and retirement of $19.1 million face value of the Company's
previously outstanding Senior Notes.

     Net Income. Net income for Fiscal 2000 increased 69.8% (or $5.9 million)
from $8.5 million in Fiscal 1999 to $14.4 million in Fiscal 2000. This variance
results primarily from higher operating income achieved during Fiscal 2000
versus Fiscal 1999.

     EBITDA. EBITDA increased 20.4% (or $8.5 million) from $41.6 million in
Fiscal 1999 to $50.1 million in Fiscal 2000. Positive sales comparisons along
with improved gross profit margins were the primary factors creating Fiscal
2000's positive operating results versus Fiscal 1999.

FISCAL 1999 VERSUS FISCAL 1998

     Fiscal 1998 was a 53-week period for the Company. As a result, the
following discussion of Fiscal 1999 versus Fiscal 1998 reflects a comparison of
a 1999 52-week period to a 1998 53-week period. Exceptions to this comparison
are noted where appropriate.

     Net sales. Net sales increased 4.7% (or $22.9 million) from $491.4 million
for 53 weeks in Fiscal 1998 to $514.3 million for 52 weeks in Fiscal 1999. Net
sales on a comparable 52-week basis period would have increased 6.3% (or $30.6
million) from $483.7 million in Fiscal 1998 to $514.3 million in Fiscal 1999.
Same store sales, or sales for stores open throughout the year in Fiscal 1999
and Fiscal 1998, increased 2.0% for Fiscal 1999 versus a comparable 52-week
period in Fiscal 1998. Store count at the end of Fiscal 1999 was 234 versus 221
at the end of Fiscal 1998 as the Company opened fifteen new stores, of which two
replaced existing stores. Sales attributable to this increase in store count
represented a net sales increase of 4.3% over Fiscal 1998. The Company achieved
positive same store sales of 3.5% during the fourth quarter of Fiscal 1999,
representing the sixteenth consecutive quarter of positive quarterly same store
sales results.

     Gross Profit. Gross profit increased 7.0% (or $11.3 million) from $161.2
million in Fiscal 1998 to $172.5 million in Fiscal 1999, reflecting increased
sales (as discussed above) and improved gross profit margin. Gross profit margin
increased from 32.8% in Fiscal 1998 to 33.5% in Fiscal 1999. The


                                       12
<PAGE>   13

improvement is primarily the result of increased gross profit margins in the
majority of the Company's product categories and improved store inventory
results, both of which are aided by data provided by the Company's information
systems.

     Operating Expenses. Selling and administrative expenses increased 7.6% (or
$9.2 million) from $121.6 million in Fiscal 1998 to $130.8 million in Fiscal
1999. As a percentage of sales, selling and administrative expenses increased
from 24.8% in Fiscal 1998 to 25.4% in Fiscal 1999, reflecting increases in store
related expenses as well as planned increases in advertising expenses during
certain periods of Fiscal 1999.

     Depreciation and Amortization Expense. Depreciation and amortization
expense increased 6.6% (or $0.6 million) from $8.9 million in Fiscal 1998 to
$9.5 million in Fiscal 1999. The increase was due primarily to added
depreciation and amortization related to expenditures for the growth in the
Company's store base during Fiscal 1999, with store count growing from 221 at
the end of Fiscal 1998 to 234 at the end of Fiscal 1999 (see "Liquidity and
Capital Resources").

     Interest Expense. Interest expense decreased 9.5% (or $1.8 million) from
$19.3 million in Fiscal 1998 to $17.5 million in Fiscal 1999. This variance was
primarily due to lower average debt balances during Fiscal 1999 versus Fiscal
1998. The Company's debt balances consist of borrowings under the CIT Credit
Facility and the Senior Notes (see "Liquidity and Capital Resources").

     Income Taxes. There was an income tax provision of $5.8 million in Fiscal
1999 versus $4.6 million in Fiscal 1998. The increase in income tax expense in
Fiscal 1999 compared to Fiscal 1998 is attributable to the increase in earnings
before income taxes.

     Extraordinary Loss from Early Extinguishment of Debt. There was an
extraordinary loss of $0.4 million, net of taxes, reported for Fiscal 1999, in
connection with the repurchase and retirement of $19.1 million face value of the
Company's previously outstanding Senior Notes. The proportionate write off of
unamortized deferred financing fees related to the Senior Notes resulted in an
extraordinary loss of $0.6 million, net of related income taxes of $0.3 million.
There was no such extraordinary loss for Fiscal 1998.

     Net Income. Net income for Fiscal 1999 increased 25.3% (or $1.7 million)
from $6.8 million in Fiscal 1998 to $8.5 million in Fiscal 1999. This variance
reflects higher operating income as well as decreased interest expense in Fiscal
1999.

     EBITDA. EBITDA increased 5.3% (or $2.1 million) from $39.5 million in
Fiscal 1998 to $41.6 million in Fiscal 1999. Positive sales comparisons along
with improved gross profit margins were the primary factors creating Fiscal
1999's positive operating results versus Fiscal 1998.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of liquidity are cash flow from operations
and borrowings under the Company's five year, non-amortizing, $125.0 million
revolving credit facility (the "CIT Credit Facility"). The CIT Credit Facility
is secured by the Company's trade accounts receivable, merchandise inventories
and general intangible assets. Subject to certain terms and conditions, the CIT
Credit Facility permits the Company to obtain revolving loans up to a maximum
aggregate principal amount that, together with the aggregate undrawn amount of
all outstanding letters of credit and of all unreimbursed amounts drawn under
letters of credit, does not exceed the lesser of $125.0 million and the
Borrowing Base (as defined therein), which is generally equal to 70% of the
aggregate value of Eligible Inventory (as defined therein) during November
through February and 65% of the aggregate value of Eligible Inventory during the
remaining months of the year. The value of the Company's Eligible Inventory as
of December 31, 2000 was approximately $158.8 million. The Company intends to
use net cash provided by operating activities and borrowings under the CIT
Credit Facility to fund its anticipated capital expenditures and working capital
requirements. However, if additional cash is required, it may be difficult for
the Company to obtain because



                                       13
<PAGE>   14

the Company is highly leveraged and is limited from incurring additional
indebtedness, among other things, by restrictions contained in the CIT Credit
Facility and the indenture governing the Senior Notes. Available borrowings on
the CIT Credit Facility amounted to $73.8 million at December 31, 2000.

     In October 1997, Parent, Robert W. Miller, Steven G. Miller and Green
Equity Investors, LP ("GEI") agreed to the Recapitalization Agreement. The
following transactions (collectively constituting the Recapitalization) were
effected pursuant to the Recapitalization Agreement: (i) the Company issued the
Senior Notes (as defined below) ($130.4 million gross proceeds); (ii) the
Company defeased and repaid all of its outstanding 13 5/8% Senior Subordinated
Notes due 2002 (the "Old Subordinated Notes"); (iii) Parent issued Senior
Discount Notes in an aggregate principal amount at maturity of $48.2 million
maturing on November 30, 2008 (the "Parent Discount Notes") with a warrant to
purchase approximately three percent of the Common Stock of Parent, par value
$.01 per share (the "Common Stock") at a nominal exercise price (the "Warrant")
($24.5 million proceeds); (iv) Parent accelerated vesting of substantially all
outstanding options and restricted stock held by management and employees of the
Company; (v) Parent redeemed for cash its existing Series A 9% Cumulative
Redeemable Preferred Stock (the "Parent Old Preferred") for approximately $21.9
million in the aggregate, including accrued dividends; (vi) Parent paid a cash
distribution of $15 per share on its outstanding shares of Common Stock
(approximately $63.2 million in the aggregate); (vii) Parent repurchased from
Pacific Enterprises ("PE") its warrant respecting 397,644 shares of Common Stock
and 16,667 shares of Parent Old Preferred (the "PE Warrant") and approximately
2,737,310 shares of Common Stock from the Selling Stockholders (as defined
below) (of which GEI owned 86.8% ) for an aggregate of $17.6 million in cash and
$35.0 million of Parent Senior Exchangeable Preferred Stock (the "Parent New
Preferred"); (viii) Parent sold additional Common Stock to middle and senior
level management of the Company (approximately $2.3 million gross proceeds),
increasing the beneficial ownership of management and employees (and members of
their families) from 14.0% to 55.3% (in each instance on a fully diluted basis);
and (ix) other transactions occurred, including a distribution of $81.5 million
from the Company to Parent, so that the above referenced transactions could be
effected. The Recapitalization is accounted for as a recapitalization for
accounting purposes. As a result of the Recapitalization, existing management
and employees of the Company (and members of their families) beneficially own
the majority of Parent. Chairman Robert W. Miller, who co-founded the Company in
1955, and his son Steven G. Miller, President and Chief Executive Officer, who
has been with the Company for 31 years, significantly increased their ownership
in Parent and control the Board of Directors of Parent and thus the Company (see
"Principal Stockholders").

     In connection with the Recapitalization, the Company issued $131.0 million
in aggregate principal amount of 10 7/8% Senior Notes due 2007 (the "Senior
Notes"), requiring semi-annual interest payments. The Company has no mandatory
payments of principal on the Senior Notes prior to their final maturity in 2007.
The Company repurchased and retired $19.1 million face value of the Senior Notes
during Fiscal 1999. The Company retired an additional $7.75 million face value
of the Senior Notes during Fiscal 2000. As of December 31, 2000, $103.8 million
in Senior Notes remained outstanding.

     The Company's interest expense decreased from $17.5 million in Fiscal 1999
to $17.0 million in Fiscal 2000. The Company believes that cash flow from
operations will be sufficient to cover the interest expense arising from the CIT
Credit Facility and the Senior Notes. However, the Company's ability to meet its
debt service obligations depends upon its future performance, which, in turn, is
subject to general economic conditions and regional risks, and to financial,
business and other factors affecting the operations of the Company, including
factors beyond its control. Accordingly, there can be no assurance that cash
flow from operations will be sufficient to meet the Company's debt service
obligations.

     Net cash provided by operating activities increased from $16.5 million in
Fiscal 1999 to $20.0 million in Fiscal 2000. The change between periods
primarily reflected higher earnings in Fiscal 2000.

     Net cash used in financing activities was $8.4 million in Fiscal 2000
versus $2.0 million in Fiscal 1999 reflecting higher cash provided by operating
activities in Fiscal 2000. As of December 31, 2000, the Company had borrowings
of $37.3 million and letter of credit commitments of $4.0 million outstanding
under the CIT Credit Facility and Senior Notes outstanding of $103.8 million
compared to $39.9 million,



                                       14
<PAGE>   15

$3.5 million and $111.5 million, respectively, at January 2, 2000. The Company
had no cash and cash equivalents at both December 31, 2000 and at January 2,
2000. During Fiscal 2000, the Company repurchased and retired $7.75 million face
value of the Company's Senior Notes resulting in a net gain of $0.1 million, net
of the write off of deferred financing fees. Subsequent to Fiscal 2000, on
January 10, 2001, the Company repurchased and retired $12.5 million face value
of the Parent Discount Notes.

     Capital expenditures for Fiscal 2000 were $11.6 million as the Company
opened a total of 15 new stores and expended approximately $2.2 million for the
hardware and software for its new point of sale system, which had been rolled
out to 78 stores in Fiscal 2000, with remaining stores to be completed in Fiscal
2001. Expenditures on this project through year-end Fiscal 2000 totaled $4.7
million. Management expects capital expenditures for Fiscal 2001 will range from
$9 to $10 million and will be used primarily to fund the opening of
approximately 15 to 20 new stores, store maintenance and remodels, distribution
center needs and management information expenditures including completion of the
rollout of the Company's new point-of-sale system. The Company's store format
requires a low investment in fixtures and equipment (approximately $350,000),
working capital (approximately $500,000, of which one-third is typically
financed by vendors) and real estate (leased "built-to-suit" locations).

     The CIT Credit Facility and the Senior Notes indenture contain various
covenants, which impose certain restrictions on the Company, including the
incurrence of additional indebtedness, the payment of dividends, and the ability
to make acquisitions. In addition, the CIT Credit Facility requires compliance
with the maintenance of certain financial ratios and other financial covenants.
The Company is in compliance with all the covenants under the CIT Credit
Agreement and the Senior Notes indenture.

     The Company is not aware of any material environmental liabilities relating
to either past or current properties owned, operated or leased by it. There can
be no assurance that such liabilities do not currently exist or will not exist
in the future.

SEASONALITY

     The Company's business is seasonal in nature. As a result, the Company's
results of operations are likely to vary during its fiscal year. Historically,
the Company's revenues and income are highest during its fourth quarter, due to
industry wide retail sales trends during the holidays. The fourth quarter
contributed 27.7% in 2000 and 27.3% in 1999 of fiscal year net sales and 35.5%
in 2000 and 35.1% in 1999 of fiscal year EBITDA. Any decrease in sales for such
period could have a material adverse effect on the Company's business, financial
condition and operating results for the entire fiscal year.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

     The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 133, (Accounting for Derivative Instruments and
Hedging Activities) effective for all fiscal quarters of fiscal years beginning
after June 15, 2000, as amended by SFAS No. 137. Management has determined that
the accounting and disclosure requirements from this statement will not impact
the financial statements of the Company.


IMPACT OF INFLATION

     The Company does not believe that inflation has a material impact on the
Company's earnings from operations. The Company believes that it is generally
able to pass any inflationary increases in costs to its customers.



                                       15
<PAGE>   16

FORWARD-LOOKING STATEMENTS

     Certain information contained herein includes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and
is subject to the safe harbor created by that Act. Forward-looking statements
can be identified by the use of forward-looking terminology, such as "may,"
"will," "should," "expect," "anticipate," "estimate," "continue," "plan,"
"intend" or other similar terminology. Such forward-looking statements, which
relate to, among other things, the financial condition, results of operations
and business of the Company, are subject to significant risks and uncertainties
that could cause actual results to differ materially and adversely from those
set forth in such statements. These include, without limitation, the Company's
ability to open new stores on a timely and profitable basis, the impact of
competition on revenues and margins, the effect of weather conditions and
general economic conditions in the Western United States (which is the Company's
area of operation), the seasonal nature of the Company's business, and other
risks and uncertainties including the risk factors listed in the Company's
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission on January 16, 1998 and as may be detailed from time to time in the
Company's public announcements and filings with the Securities and Exchange
Commission. The Company assumes no obligation to publicly release the results of
any revisions to the forward-looking statements contained herein which may be
made to reflect events or circumstances occurring subsequent to the filing of
this Form 10-K with the Securities and Exchange Commission or otherwise to
revise or update any oral or written forward-looking statements that may be made
from time to time by or on behalf of the Company.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     In the ordinary course of its business, the Company is exposed to certain
market risks, primarily changes in interest rates. After an assessment of these
risks to the Company's operations, the Company believes that its primary market
risk exposures (within the meaning of Regulation S-K Item 305) are not material
and are not expected to have any material adverse effect on the Company's
financial condition, results of operations or cash flows for the next fiscal
year. (See Note 3 of the accompanying financial statements.)


                                       16
<PAGE>   17


ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Information called for by this item is set forth in the Company's financial
statements contained in this report. Specific financial statements can be found
at the pages listed in the following index.


                          INDEX TO FINANCIAL STATEMENTS


<TABLE>

Index to Financial Statements...............................................................  F-1
Independent Auditors' Report ...............................................................  F-2
Balance Sheets at December 31, 2000 and January 2, 2000.....................................  F-3
Fiscal Years Ended December 31, 2000, January 2, 2000 and January 3, 1999
         Statements of Operations...........................................................  F-5
         Statements of Stockholder's Equity(Deficit) .......................................  F-6
         Statements of Cash Flows ..........................................................  F-7
Notes to Financial Statements...............................................................  F-9

<CAPTION>

                                                                                           Schedule
                                                                                           --------
<S>                                                                                       <C>
Financial Statement Schedule:
         Valuation and Qualifying Accounts ................................................. II-1

</TABLE>


ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.






                                       17
<PAGE>   18



                                    PART III


ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

EXECUTIVE OFFICERS AND DIRECTORS

     The following table sets forth certain information regarding the current
executive officers and directors of the Company. The Company's directors are
elected at each annual meeting of shareholders to serve for a period of one year
or until their successors are duly elected and qualified. The Company's
executive officers serve at the discretion of the Company's Board of Directors.

<TABLE>
<CAPTION>

NAME                                   AGE                 POSITIONS
----                                   ---                 ---------
<S>                                    <C>           <C>
Robert W. Miller                       77            Chairman of the Board

Steven G. Miller                       48            President, Chief Executive Officer and
                                                     Director

Charles P. Kirk                        45            Senior Vice President and
                                                     Chief Financial Officer

Gary S. Meade                          54            Secretary, Vice President and
                                                     General Counsel

Richard A. Johnson                     55            Senior Vice President,
                                                     Store Operations

Thomas J. Schlauch                     56            Senior Vice President, Buying

Dr. Michael D. Miller                  51            Director

John G. Danhakl                        45            Director
</TABLE>



     ROBERT W. MILLER became Chairman of the Board of the Company in 1992. Mr.
Miller had been the Company's President from 1973 to 1992 and Chief Executive
Officer from 1973 to 2000.

     STEVEN G. MILLER became President, Chief Operating Officer and a Director
of the Company in 1992 and was named Chief Executive Officer on November 15,
2000. Mr. Miller is Robert W. Miller's son and Dr. Michael D. Miller's brother.
He had been the Company's Executive Vice President, Administration, since 1988.

     CHARLES P. KIRK became Senior Vice President and Chief Financial Officer of
the Company in 1992. Mr. Kirk had been Thrifty's Director of Planning and Vice
President of Planning and Treasury since October 1990. Prior to joining Thrifty,
Mr. Kirk had held various financial positions with Thrifty's former parent,
Pacific Enterprises ("PE"), since 1981.



                                       18
<PAGE>   19


     GARY S. MEADE became Secretary, Vice President and General Counsel of the
Company in August 1997. Mr. Meade had been Thrifty Payless, Inc.'s Vice
President, Secretary and General Counsel since 1992 and Thrifty's Vice President
- Legal Affairs since 1979.

     RICHARD A. JOHNSON became Senior Vice President, Store Operations, for the
Company in 1992. Mr. Johnson had been the Company's Vice President, Store
Operations, since 1986.

     THOMAS J. SCHLAUCH became Senior Vice President, Buying, for the Company in
1992. Mr. Schlauch had been the Company's Head of Buying since 1990 and Vice
President, Buying, since 1982.

     MICHAEL D. MILLER, PH.D. became a director of the Company in October 1997.
Dr. Miller is a senior mathematician at RAND. Dr. Miller is Robert W. Miller's
son and Steven G. Miller's brother.

     JOHN G. DANHAKL became a director of the Company in October 1997. Mr.
Danhakl has been an executive officer and equity owner of LGP, a merchant
banking firm that manages GEI, since 1995. Mr. Danhakl had previously been a
Managing Director at Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
and had been with DLJ since 1990. Prior to joining DLJ, Mr. Danhakl was a Vice
President at Drexel Burnham Lambert Incorporated. Mr. Danhakl is also a director
of the Arden Group, Inc. and Twinlab Corporation.

ITEM 11: EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The following table sets forth the annual and long-term compensation of the
Company's Chief Executive Officer and four additional most highly compensated
executive officers whose annual salaries and bonus exceeded $100,000 in total
during the fiscal year ended December 31, 2000.

<TABLE>
<CAPTION>
                                                                          ----------------------------------------
                                                                                   LONG-TERM COMPENSATION AWARDS
                                    ------------------------------------------------------------------------------
                                        ANNUAL COMPENSATION                         AWARDS              PAYOUTS
-------------------------------------------------------------------------------------------------------------------------------
                                                                           Restricted     Securities
     Name and                                               Other Annual      Stock       Underlying       LTIP
     Principal                       Salary      Bonus      Compensation     Awards          Stock       Payouts     All Other
     Position                Year     ($)         ($)            ($)           ($)       Options/SARs      ($)     Compensation
-------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>     <C>         <C>         <C>            <C>           <C>             <C>       <C>
Robert W. Miller,           2000    $330,000    $540,000       $   -0-        $-0-           -0-          $ -0-          $ -0-
Chairman of the Board       1999     330,000     445,000           -0-         -0-           -0-            -0-            -0-
                            1998     315,000     425,000           -0-         -0-           -0-            -0-            -0-

Steven G. Miller,           2000    $300,000    $425,000       $   -0-        $-0-           -0-          $ -0-          $ -0-
President and               1999     285,000     330,000           -0-         -0-           -0-            -0-            -0-
Chief Executive Officer     1998     270,000     315,000           -0-         -0-           -0-           --0-           --0-

Thomas J. Schlauch,         2000    $186,000    $140,000       $   -0-        $-0-           -0-          $ -0-          $ -0-
Senior Vice President ,     1999     178,000     109,000           -0-         -0-           -0-            -0-            -0-
Buying                      1998     168,000     104,000           -0-         -0-           -0-            -0-            -0-

Richard A. Johnson,         2000    $158,000    $120,000       $   -0-        $-0-           -0-          $ -0-          $ -0-
Senior Vice President,      1999     150,000      90,000           -0-         -0-           -0-            -0-            -0-
Store Operations            1998     140,000      85,000           -0-         -0-           -0-            -0-            -0-

Charles P. Kirk,            2000    $168,000    $105,000       $   -0-        $-0-           -0-          $ -0-          $ -0-
Senior Vice President       1999     160,000      80,000           -0-         -0-           -0-            -0-            -0-
& Chief Financial Officer   1998     150,000      75,000           -0-         -0-           -0-            -0-            -0-
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       19
<PAGE>   20


AGGREGATED OPTION/SAR EXERCISES IN FISCAL 2000 AND 2000 FISCAL YEAR-END OPTION
VALUE -

     None.

EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS

     The Company and each of Steven G. Miller and Robert W. Miller
(collectively, the "Millers") have entered into employment agreements, dated as
of January 1, 1993, whereby Steven G. Miller and Robert W. Miller are to
continue employment with the Company until December 31, 1994 and for additional
successive one-year periods thereafter, unless any party gives timely notice to
the other that the employment term shall not be so extended. The agreements
require the Company to provide the Millers with a base salary and those benefits
generally available to the Company's senior executive officers, including health
insurance, sick leave, and profit sharing plan participation, and require the
Board to make an annual determination as to whether each is entitled to receive
a bonus for such year and an increase in base salary for the next year. Robert
W. Miller's agreement also provides for supplemental annual retirement benefits
and health insurance benefits for himself and his surviving spouse upon his
retirement.

     Employment under both agreements is terminable by the Company at any time,
with or without cause, and, under Robert W. Miller's agreement, by him, if for
good reason (as defined in his employment agreement). If Steven G. Miller or
Robert W. Miller is terminated without cause or, in the case of Robert W.
Miller, by him for good reason, each is entitled to receive as severance pay his
base salary through the remainder of the employment term as then in effect. The
agreement of either of the Millers may be terminated if such person becomes
unable to render full services during certain prescribed periods of time. The
agreements contain covenants precluding the Millers from engaging in certain
competition with the Company and from soliciting certain employees of the
Company and its affiliates for a specified period following the termination of
employment, the basis of which depends upon the reason for the termination.

MANAGEMENT STOCK PURCHASES

     Pursuant to the Recapitalization, Parent accelerated the vesting periods
under substantially all outstanding employee option and restricted stock
agreements. Parent facilitated the exercise of such stock options by existing
employees by offering to such employees the option to pay the aggregate exercise
price of such outstanding options (in excess of the par value of the shares
being acquired upon exercise) by way of a personal recourse obligation secured
by such employee's existing Common Stock and the Common Stock issued pursuant to
the exercise of the options, and the proceeds thereof. Option holders who
exercised their stock options at the effective date of the Recapitalization
received the distributions on Common Stock described under the description of
the Recapitalization included under the heading "Liquidity and Capital
Resources". As a result thereof, there were outstanding 4,215,301 shares (or
4,612,945 shares on a fully diluted basis) of Common Stock immediately prior to
the Recapitalization.

     As part of the Recapitalization, and pursuant to Parent's newly adopted
1997 Management Equity Plan applicable to employees of Parent and its
subsidiaries, Parent sold to existing middle and senior level management
employees of the Company, 462,009 shares of Common Stock for $5 per share (the
"Management Stock Purchases"). Such shares were not entitled to the distribution
on Common Stock described above under the heading "Liquidity and Capital
Resources," although any current employees who owned shares otherwise entitled
to such distribution could pay all or a portion of the purchase price of the
shares being purchased by having Parent offset or withhold such amount from the
distribution. The agreements under the 1997 Management Equity Plan prohibit the
transfer of such Common Stock until the fifth anniversary of the issuance
thereof or the occurrence of any earlier specified event that terminates such
prohibition, with an exception for transfers of vested shares to "related
transferees" (as defined therein). Thereafter, such shares of Common Stock are
transferable subject to a right of first refusal in favor of Parent. The
agreements also contain certain "call" options as to unvested shares of Common
Stock, exercisable, generally, upon termination of a management employee's
employment with the Company. As a result of the


                                       20
<PAGE>   21

Management Stock Purchases, immediately after the Recapitalization the
continuing management and employees of the Company (and members of their
families) beneficially owned approximately 55.3% of Parent on a fully diluted
basis. Senior management (and members of their families) beneficially own
approximately 34.3% of the outstanding Common Stock on a fully diluted basis.

COMPENSATION OF DIRECTORS

     Directors of the Company, as such, do not receive any compensation.
However, during each of the fiscal years ended December 31, 2000, January 2,
2000 and January 3, 1999 the Company, on behalf of Parent, paid Leonard Green &
Associates, LP ("LGA"), a California limited partnership, compensation for
management services fees of $340,091, including out-of-pocket expenses. Parent
and the Company have a Management Services Agreement pursuant to which Parent
and the Company will pay LGA an annual fee for management services ($333,333)
plus reasonable and customary fees for financial advisory and investment banking
services in connection with major financial transactions (plus expenses and
indemnities, if any) through May 2005. LGA is an affiliate of Leonard Green &
Partners, LP ("LGP"). Mr. Danhakl and two former directors of the Company are
executive officers and equity owners of LGP. LGA is the sole general partner and
manager of GEI, a stockholder of Parent. The Company believes that the terms of
its agreement and arrangements with LGA are comparable to what could be obtained
from unrelated, but equally qualified, third parties.




                                       21
<PAGE>   22

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

     The Company's outstanding capital stock is wholly owned by Parent. Parent's
outstanding equity securities consist of Common Stock and the Parent New
Preferred. The following table sets forth the ownership of Common Stock as of
March 26, 2001 by any person known to the Company to be the beneficial owner of
more than 5% of either class of Parent's securities, the Company's directors,
executive officers named in the Summary Compensation Table above, and all
executive officers and directors of the Company as a group.

<TABLE>
<CAPTION>

                                                               COMMON STOCK
   NAME AND ADDRESS (1)                                        -------------
  OF BENEFICIAL OWNER                               NUMBER OF SHARES   PERCENT OF CLASS
  -------------------                               ----------------   ----------------
<S>                                                 <C>                 <C>
Robert W. Miller (2)                                    350,809(3)          17.5%
Steven G. Miller (2)                                    200,000             10.0%
Dr. Michael D. Miller                                          (4)              (4)
Thomas J. Schlauch                                       40,000              2.0%
Richard A. Johnson                                       48,000              2.4%
Charles P. Kirk                                          48,000              2.4%
John G. Danhakl                                                (5)              (5)
Green Equity Investors, LP (2)                          723,577             36.2%
All Executive Officers and Directors as a Group       1,488,289(6)          74.4%

</TABLE>


(1)  The address for each stockholder is 2525 East El Segundo Boulevard, El
     Segundo, California 90245, except GEI and Mr. Danhakl for which the address
     is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025.

(2)  Pursuant to the Stockholders Agreement (as defined), each of GEI and the
     Millers has agreed to vote for the directors designated by the other. See
     "Parent Equity and Debt".

(3)  Includes shares of Common Stock owned by Dr. Miller over which Robert W.
     Miller has voting control.

(4)  Effective as of the Recapitalization, Dr. Miller granted voting control
     over his shares to Robert W. Miller, and such shares are included with
     Robert W. Miller's shares.

(5)  Mr. Danhakl is a general partner of LGP and may be deemed to be a
     beneficial owner of the shares of Common Stock and Parent New Preferred
     owned by GEI because of his interest in LGP, which is an affiliate of the
     sole general partner of GEI. GEI owns 273,426 shares of Parent New
     Preferred and an affiliate of GEI owns 35,070 shares of Parent New
     Preferred.

(6)  Includes the shares identified in note (5) above.


PARENT EQUITY AND DEBT

     Parent's certificate of incorporation contains restrictions on transfer of
its outstanding stock and grants to Parent, or Parent's assignee, a right of
first refusal in the event of a proposed sale by any stockholder of Parent. In
addition to the Common Stock, Parent has outstanding the Parent New Preferred
and the Warrant issued with the Parent Discount Notes. In connection with the
Recapitalization, Parent, the Millers and GEI entered into a stockholders
agreement (the "Stockholders Agreement") which, among other things, generally
provides that GEI will vote its Common Stock (and will cause its affiliates to
vote) in favor of the election of the Millers and an additional person
designated by them to be directors of Parent. Likewise, the Millers agreed to
vote their Common Stock (and will cause their affiliates to vote) in favor of
the election of two persons designated by GEI to be directors of Parent. The
Stockholders Agreement further provides that all such persons will cause Parent
to vote the common stock of the Company in favor of the election of



                                       22
<PAGE>   23

the same five persons as directors of the Company. The Stockholders Agreement
and the respective certificates of incorporation of Parent and the Company
contain a requirement for a supermajority director vote generally applicable to
transactions not in the ordinary course of business. The Stockholders Agreement
is generally for a term of ten years, subject to earlier termination upon the
occurrence of certain events, including if the Common Stock is listed or
admitted to trading on a national securities exchange or quoted on The Nasdaq
Stock Market's National Market.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH THRIFTY PAYLESS AND RITE AID CORPORATION

     Prior to September 1992, the Company was a wholly-owned subsidiary of
Thrifty, which was in turn a wholly-owned subsidiary of PE. In December 1996,
Thrifty was acquired by Rite Aid Corporation. References herein to "Rite Aid"
include Rite Aid Corporation and its subsidiaries, including Thrifty PayLess,
Inc. and Thrifty.

     As a result of the Company's prior relationship with Thrifty and its
affiliates, the Company continues to maintain certain relationships with Rite
Aid and PE. These relationships include continuing indemnification obligations
of PE to the Company for certain environmental matters; arrangements between the
Company and PE with respect to various tax matters and obligations under ERISA
(as defined), including the allocation of various tax obligations relating to
the inclusion of the Company and each member of the affiliated group of which
the Company is the common parent in certain consolidated and/or unitary tax
returns of PE; and the subleases described below.

     The Company previously subleased the building and improvements of its
Fontana, California distribution center from Thrifty Realty Company, a
California corporation and a wholly owned subsidiary of Thrifty. See "Business -
Distribution." On March 5, 1996, as permitted by the terms of such sublease, the
Company purchased the facility from MLTC for a purchase price of $8.9 million,
thereby terminating such sublease. Concurrently with such purchase, the Company
entered into a sale/leaseback transaction with respect to the distribution
center.

     The Company subleased certain business equipment and other personal
property from Thrifty (the "Equipment"), pursuant to a Sublease (the "Sublease")
dated as of September 25, 1992 between the Company and Thrifty, as subsequently
amended. Thrifty held a leasehold interest in the Equipment pursuant to an
Amended and Restated Master Lease Agreement dated as of April 20, 1994 between
MLTC, as lessor, and Thrifty, as lessee (the "Master Lease"). The Master Lease
contained a non-disturbance and attornment agreement pursuant to which the
Company's use and enjoyment of the Equipment would not be disturbed as a result
of any default under the Master Lease provided that the Company was not in
default under the Sublease.

     The Master Lease provided Thrifty with an option to purchase the Equipment,
and the Sublease provided the Company with the same option. The Company's option
to purchase was exercisable notwithstanding any default under the Master Lease
provided the Company was not otherwise in default under the Sublease; however,
in the event a default existed under the Master Lease, the Company's exercise of
its purchase option required the payment by the Company of all amounts due and
payable under the Master Lease at the time of the consummation of the purchase
pursuant to the exercise of such option. Such amounts may have included rent,
fees and other expenses that are not allocable to the Equipment (the "Excess
Fees") if the same were due and payable but were not otherwise paid by Thrifty.
To the extent the Company was required to pay such Excess Fees, Thrifty was
obligated under the Sublease to reimburse the Company for the full amount of
such Excess Fees.

     The Company believes that all other material terms of the Sublease,
including rent payments, were comparable to what could be obtained from an
unrelated third party. During Fiscal 2000, the Company


                                       23
<PAGE>   24


purchased all remaining Equipment covered by the Sublease and has no future
obligations under the Sublease or the Master Lease.

POTENTIAL CONFLICTS OF INTEREST; PAST TRANSACTIONS WITH AFFILIATES

     Mr. Danhakl of LGP holds a seat on the Board of Directors of the Company.
Jonathan Sokoloff and Jonathan Seiffer, who previously served as directors of
the Company, hold two seats on the Board of Directors of Gart Sports Company
("Gart"). Also, affiliates of LGA have a controlling interest in Gart, and LGA
and LGP are affiliates. Mr. Danhakl may have conflicts of interest with respect
to certain matters affecting the Company, such as potential business
opportunities and business dealings between the Company and LGP and its
affiliated companies.

     Gart completed a merger with Sportmart, Inc. ("Sportmart") in January 1998.
Subsequent to Fiscal 2000, Gart announced a pending merger with Oshman's
Sporting Goods, Inc. ("Oshman's"), which is scheduled to close in the third
quarter of 2001. Gart, Sportmart and Oshman's compete with the Company. Although
Gart, Sportmart and Oshman's currently pursue different business strategies than
the Company, they compete in some of the Company's markets and offer some of the
same or similar merchandise, and there can be no assurance that the Company will
not encounter increased competition from Gart, Sportmart or Oshman's in the
future or that actions by either will not inhibit the Company's growth strategy.
In addition, there can be no assurance that all potential conflicts will be
resolved in a manner that is favorable to the Company, or that the Company will
be offered business opportunities made available to Gart, Sportmart or Oshman's.
The Company believes it is impossible to predict the precise circumstances under
which future potential conflicts may arise and therefore intends to address
potential conflicts on a case-by-case basis. Under Delaware law, directors have
a fiduciary duty to act in good faith and in what they believe to be in the best
interest of the corporation and its stockholders. Such duties include the duty
to refrain from impermissible self-dealing and to deal fairly with respect to
transactions in which the directors, or other companies with which such
directors are affiliated, have an interest.

CONSULTING FEES

     As consideration for the provision of ongoing management and financial
advisory services, the Company, on behalf of the Parent, pays LGA certain fees.
See "Executive Compensation - Compensation of Directors."




                                       24
<PAGE>   25


                                     PART IV


ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (A)  Documents filed as part of this report:

     (1)  Financial Statements.
          See Financial Statements Index included in Item 8 of Part II of this
          Form 10-K.

     (2)  Financial Statement Schedule.

          See Financial Statements Index included in Item 8 of Part II of this
          Form 10-K.

     (3)  Exhibits and Reports on Form 8-K.

   (a) Exhibits

     3.1(i)(1)    Restated Certificate of Incorporation of the Company

     3.1(ii)(1)   By-Laws of the Company, as amended October 27, 1997

     4.1(5)       Indenture dated as of November 13, 1997 between the Company
                  and First Trust National Association, as trustee

     4.2(5)       Form of the Company's Series B 10 7/8% Senior Notes due 2007
                  (included in Exhibit 4.1)

     10.1(a)(2)   Employment Agreement between the Company and Robert W. Miller
                  dated as of January 1, 1993

     10.1(b)(2)   Employment Agreement between the Company and Steven G. Miller
                  dated as of January 1, 1993

     10.1(c)(2)   Sublease between the Company and Thrifty dated as of
                  September 25, 1992

     10.2(a)(3)   Amended and Restated Indemnification Implementation Agreement
                  between the Company (formerly known as United Merchandising
                  Corp.) and Thrifty PayLess Holdings, Inc. dated as of April
                  20, 1994

     10.2(b)(3)   Agreement and Release among Pacific Enterprises, Thrifty
                  PayLess Holdings, Inc., Thrifty PayLess, Inc., Thrifty and the
                  Company (formerly known as United Merchandising Corp.) dated
                  as of March 11, 1994

     10.3(a)(4)   Financing Agreement dated March 8, 1996 between The CIT
                  Group/Business Credit, Inc. and the Company

     10.3(b)(4)   Grant of Security Interest in and Collateral Assignment of
                  Trademarks and Licenses dated as of March 8, 1996 by the
                  Company in favor of The CIT Group/Business Credit, Inc.

     10.3(c)(4)   Guarantee dated March 8, 1996 by Big 5 Corporation (now known
                  as Big 5 Holdings Corp.) in favor of The CIT Group/Business
                  Credit, Inc.

     10.4(a)(4)   Agreement on Purchase and Sale among the Company and the
                  State of Wisconsin dated as of February 13, 1996

     10.4(b)(4)   Lease among the Company (Lessee) and the State of Wisconsin
                  Investment Board (Lessor) dated as of March 5, 1996



                                       25
<PAGE>   26

     10.5(5)      Purchase Agreement, dated as of November 13, 1997, by and
                  among the Company and the Initial Purchasers named therein

     10.6(5)      Registration Rights Agreement, dated as of November 13, 1997,
                  by and among the Company and the Initial Purchasers named
                  therein

     10.7(5)      Management Services Agreement, dated as of November 13, 1997,
                  by and between the Company, Big 5 Holdings Corp. and Leonard
                  Green & Associates, LP

     10.8(5)      Letter from The CIT Group/Business Credit, Inc. to the
                  Company dated November 13, 1997, amending the Financing
                  Agreement, dated March 8, 1996 between the Company (formerly
                  known as United Merchandising Corp.) and The CIT
                  Group/Business Credit, Inc.

     12.1         Ratio of Earnings to Fixed Charges

     27           Financial Data Schedule


     --------------------------------------

     (1)  Incorporated by reference to the Company's Current Report on Form 8-K
          filed November 26, 1997.

     (2)  Incorporated by reference to the Company's Registration Statement on
          Form S-4 (file no. 33-61096) effective as of June 29, 1993.

     (3)  Incorporated by reference to the Company's Annual Report on Form 10-K
          for the year ended January 1, 1995 (4) Incorporated by reference to
          the Company's Annual Report on Form 10-K for the year ended December
          31, 1995.

     (5)  Incorporated by reference to the Company's Registration Statement on
          Form S-4 (file no. 333-43129) filed with the Securities and Exchange
          Commission on December 23, 1997.


     SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
     SECTION 15 (d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
     SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

     The Company has not provided any annual report covering its last fiscal
     year nor any proxy statement to security holders.



                                       26
<PAGE>   27


                                   SIGNATURES

Pursuant to the requirements of Section 15 (d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.


                                       BIG 5 CORP.
                                       a Delaware Corporation


Date : March 26, 2001                  By:  /s/ Robert W. Miller
       ----------------                   ----------------------------------
                                          Robert W. Miller
                                          Chairman of the Board of Directors


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

<TABLE>
<CAPTION>

        Signatures                               Title                                 Date
        ----------                               -----                                 ----

<S>                                    <C>                                         <C>
    /s/ Robert W. Miller              Chairman of the Board of Directors           March 26, 2001
-----------------------------
       Robert W. Miller


    /s/ Steven G. Miller              President,
-----------------------------           Chief Executive Officer
       Steven G. Miller                 and Director of the Company
                                        (Principal Executive Officer)              March 26, 2001


    /s/ Charles P. Kirk               Senior Vice President
----------------------------            and Chief Financial Officer (Principal
      Charles P. Kirk                   Financial and Accounting Officer)          March 26, 2001


    /s/ Michael D. Miller             Director of the Company                      March 26, 2001
------------------------------
       Michael D. Miller


                                      Director of the Company                      March 26, 2001
------------------------------
       John G. Danhakl

</TABLE>




                                       27


<PAGE>   28


                                   BIG 5 CORP.



                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<S>                                                                               <C>
Index to Financial Statements...................................................     F-1

Independent Auditors' Report....................................................     F-2

Balance Sheets at December 31, 2000 and January 2, 2000.........................     F-3

Fiscal Years Ended December 31, 2000, January 2, 2000 and January 3, 1999

     Statements of Operations...................................................     F-5

     Statements of Stockholder's Equity(Deficit)................................     F-6

     Statements of Cash Flows...................................................     F-7

Notes to Financial Statements...................................................     F-9

<CAPTION>


                                                                                   Schedule
                                                                                   --------
Financial Statement Schedule:

<S>                                                                                <C>
      Valuation and Qualifying Accounts as of December 31, 2000,
          January 2, 2000 and January 3, 1999 ..................................     II-1

</TABLE>


                                      F-1
<PAGE>   29




                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholder
Big 5 Corp.:


We have audited the financial statements of Big 5 Corp. as listed in the
accompanying index. In connection with our audits of the financial statements,
we also have audited the financial statement schedule as listed in the
accompanying index. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Big 5 Corp. as of December 31,
2000 and January 2, 2000 and the results of its operations and its cash flows
for each of the fiscal years ended December 31, 2000, January 2, 2000 and
January 3, 1999 in conformity with accounting principles generally accepted in
the United States of America. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.



                                              KPMG LLP


Los Angeles, California
February 28, 2001




                                      F-2
<PAGE>   30




                                   BIG 5 CORP.

                                 Balance Sheets

                          (Dollar amounts in thousands)

<TABLE>
<CAPTION>

                                                                        DECEMBER 31, 2000   JANUARY 2, 2000
                                                                        -----------------   ---------------
                                     ASSETS
<S>                                                                     <C>                 <C>
Current assets:
    Cash                                                                     $    --              --
    Trade and other receivables, net of allowance for doubtful accounts
      of $11 and $93, respectively                                               7,085           6,405
    Merchandise inventories                                                    168,981         155,283
    Prepaid expenses                                                             1,146           1,435
                                                                             ---------       ---------

           Total current assets                                                177,212         163,123
                                                                             ---------       ---------

Property and equipment:
    Land                                                                           186             186
    Buildings and improvements                                                  27,264          22,885
    Furniture and equipment                                                     50,089          45,396
    Less accumulated depreciation and amortization                             (37,577)        (32,910)
                                                                             ---------       ---------

           Net property and equipment                                           39,962          35,557
                                                                             ---------       ---------

Deferred income taxes, net                                                       8,461           7,824
Leasehold interest, net of accumulated amortization of $19,387 and
    $17,452, respectively                                                        9,347          11,131
Other assets, at cost, less accumulated amortization of $1,030 and
    $1,015, respectively                                                        12,011           8,903
Goodwill, less accumulated amortization of $1,865 and $1,618,
    respectively                                                                 4,680           4,927
                                                                             ---------       ---------

                Total Assets                                                 $ 251,673         231,465
                                                                             =========       =========
</TABLE>


                                   (Continued)



                                      F-3
<PAGE>   31


                                   BIG 5 CORP.

                            Balance Sheets, Continued

                          (Dollar amounts in thousands)

<TABLE>
<CAPTION>

                                                                        DECEMBER 31, 2000  JANUARY 2, 2000
                                                                        -----------------  ---------------
                      LIABILITIES AND STOCKHOLDER'S DEFICIT
<S>                                                                      <C>                <C>
Current liabilities:
    Accounts payable                                                         $  59,241          51,087
    Accrued expenses                                                            47,468          39,955
                                                                             ---------       ---------

           Total current liabilities                                           106,709          91,042

Deferred rent                                                                    7,533           7,159
Long-term debt                                                                 141,089         151,309
                                                                             ---------       ---------
           Total liabilities                                                   255,331         249,510
                                                                             ---------       ---------

Commitments and contingencies

Stockholder's deficit:
    Common stock, $.01 par value.  Authorized 3,000 shares; issued and
      outstanding 1,000 shares at December 31, 2000 and January 2, 2000           --              --
    Additional paid-in capital                                                  40,639          40,639
    Accumulated deficit                                                        (44,297)        (58,684)
                                                                             ---------       ---------

           Net stockholder's deficit                                            (3,658)        (18,045)
                                                                             ---------       ---------
                                                                             $ 251,673         231,465
                                                                             =========       =========
</TABLE>


See accompanying notes to financial statements.




                                      F-4
<PAGE>   32


                                   BIG 5 CORP.

                            Statements of Operations

                          (Dollar amounts in thousands)


<TABLE>
<CAPTION>

                                                              YEAR ENDED        YEAR ENDED    YEAR ENDED JANUARY
                                                          DECEMBER 31, 2000  JANUARY 2, 2000       3, 1999
                                                              (52 WEEKS)        (52 WEEKS)        (53 WEEKS)
                                                          -----------------  ---------------     ---------------
<S>                                                        <C>                <C>                <C>
Net sales                                                       $571,476          514,324           491,430

Cost of goods sold, buying and occupancy                         377,040          341,852           330,243
                                                                --------         --------          --------

           Gross profit                                          194,436          172,472           161,187
                                                                --------         --------          --------

Operating expenses:
    Selling and administrative                                   144,323          130,833           121,643
    Depreciation and amortization                                  9,340            9,479             8,890
                                                                --------         --------          --------

           Total operating expenses                              153,663          140,312           130,533
                                                                --------         --------          --------

           Operating income                                       40,773           32,160            30,654

Interest expense                                                  17,035           17,461            19,285
                                                                --------         --------          --------

           Income before income taxes and extraordinary
              gain/(loss)                                         23,738           14,699            11,369

Income taxes                                                       9,438            5,829             4,604
                                                                --------         --------          --------

           Income before extraordinary gain/(loss)                14,300            8,870             6,765

Extraordinary gain/(loss) from early extinguishment of
    debt, net of income tax (expense)/benefit                         87             (396)             --
                                                                --------         --------          --------

           Net income                                           $ 14,387            8,474             6,765
                                                                ========         ========          ========
</TABLE>


See accompanying notes to financial statements.




                                      F-5
<PAGE>   33


                                   BIG 5 CORP.

                  Statements of Stockholder's Equity (Deficit)

       Years ended December 31, 2000, January 2, 2000 and January 3, 1999

                          (Dollar amounts in thousands)

<TABLE>
<CAPTION>

                                                     ADDITIONAL                          NET
                                                      PAID-IN         ACCUMULATED     STOCKHOLDER'S
                                                      CAPITAL           DEFICIT       EQUITY/(DEFICIT)
                                                    ------------      ------------    ----------------
<S>                                                  <C>             <C>              <C>
Balance at December 28, 1997                            $35,080         (73,923)         (38,843)

Forgiveness of net payable to Parent (Note 2)             4,201            --              4,201

Net income for the year ended January 3, 1999              --             6,765            6,765
                                                        -------         -------          -------

Balance at January 3, 1999                               39,281         (67,158)         (27,877)

Forgiveness of net payable to Parent (Note 2)             1,358            --              1,358

Net income for the year ended January 2, 2000              --             8,474            8,474
                                                        -------         -------          -------

Balance at January 2, 2000                               40,639         (58,684)         (18,045)

Net income for the year ended December 31, 2000            --            14,387           14,387
                                                        -------         -------          -------

Balance at December 31, 2000                            $40,639         (44,297)          (3,658)
                                                        =======         =======          =======

</TABLE>


See accompanying notes to financial statements.



                                      F-6
<PAGE>   34



                                   BIG 5 CORP.

                            Statements of Cash Flows

                          (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                             YEAR ENDED           YEAR ENDED         YEAR ENDED
                                                          DECEMBER 31, 2000     JANUARY 2, 2000    JANUARY 3, 1999
                                                             (52 WEEKS)           (52 WEEKS)          (53 WEEKS)
                                                         -------------------   -----------------    ---------------
<S>                                                       <C>                  <C>                  <C>
Cash flows from operating activities:
    Net income                                                  $ 14,387             8,474             6,765
    Adjustments to reconcile net income to net cash
      provided by operating activities:
        Depreciation and amortization                              9,340             9,479             8,890
        Amortization of deferred finance charges and
          discounts                                                  (39)              179               948
        Deferred tax provision (benefit)                            (637)           (1,666)               99
        Loss on disposal of equipment
           and leasehold interest                                    278               133              --
        Extraordinary gain/(loss) from early
          extinguishment of debt                                    (148)              661              --
        Changes in assets and liabilities:
          Merchandise inventories                                (13,698)           (7,987)              (17)
          Trade and other accounts receivable, net                  (680)              (58)              355
          Prepaid expenses and other assets                       (2,994)             (555)             (993)
          Accounts payable                                         6,719               225             9,621
          Accrued expenses                                         7,513             7,586             4,031
                                                                --------          --------          --------
                  Net cash provided by operating
                    activities                                    20,041            16,471            29,699
                                                                --------          --------          --------
Cash flows from investing activities:
    Purchases of property and equipment                          (11,602)          (13,075)           (8,500)
     Purchase of long-term investments                              --              (1,363)           (2,606)
                                                                --------          --------          --------
                  Net cash used in investing activities
                                                                 (11,602)          (14,438)          (11,106)
                                                                --------          --------          --------

</TABLE>

                                   (Continued)




                                      F-7
<PAGE>   35



                                   BIG 5 CORP.

                       Statements of Cash Flows, Continued

                          (Dollar amounts in thousands)


<TABLE>
<CAPTION>

                                                             YEAR ENDED         YEAR ENDED         YEAR ENDED
                                                          DECEMBER 31, 2000   JANUARY 2, 2000    JANUARY 3, 1999
                                                             (52 WEEKS)          (52 WEEKS)        (53 WEEKS)
                                                         -------------------    ---------------  ---------------
<S>                                                       <C>                   <C>              <C>
Cash flows from financing activities:
    Net borrowings (repayments) under revolving credit
      facilities, and other                                     $ (1,100)           17,027           (19,957)
    Repayment of Senior Notes                                     (7,339)          (19,060)             --
                                                                --------          --------          --------
                  Net cash used in financing activities
                                                                  (8,439)           (2,033)          (19,957)
                                                                --------          --------          --------
                  Net increase (decrease) in cash and
                    cash equivalents                                --                --              (1,364)

Cash and cash equivalents at beginning of year                      --                --               1,364
                                                                --------          --------          --------
Cash and cash equivalents at end of year                        $   --                --                --
                                                                ========          ========          ========
Supplemental disclosures of cash flow information:
      Interest paid                                             $ 17,013            16,935            18,044
      Income taxes paid                                            8,143             1,664              --
                                                                ========          ========          ========

</TABLE>


See accompanying notes to financial statements.







                                      F-8
<PAGE>   36



                                   BIG 5 CORP.

                          Notes to Financial Statements

          As of December 31, 2000 and January 2, 2000 and for the years

          ended December 31, 2000, January 2, 2000 and January 3, 1999

                          (Dollar amounts in thousands)


(1)    BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

       The accompanying financial statements as of December 31, 2000 and January
       2, 2000 and for the years ended December 31, 2000, January 2, 2000 and
       January 3, 1999 represent the financial position and results of
       operations of Big 5 Corp. In connection with the Recapitalization, which
       was completed November 13, 1997, the Company was reincorporated in
       Delaware and changed its name to Big 5 Corp. Prior to this
       reincorporation, the Company was incorporated in California as United
       Merchandising Corp. As used herein, the Company means Big 5 Corp. when
       discussing the financial position and results of operations subsequent to
       the Recapitalization and United Merchandising Corp. when discussing the
       financial position or results of operations prior to the
       Recapitalization. The Company is a wholly owned subsidiary of Big 5
       Holdings Corp.

       The Company operates in one business segment, as a sporting goods
       retailer under the Big 5 Sporting Goods name carrying a broad range of
       hardlines, softlines and footwear, operating 249 stores at December 31,
       2000 in California, Washington, Arizona, Oregon, Texas, New Mexico,
       Nevada, Utah and Idaho.


(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       REPORTING PERIOD

       The Company reports on a 52-53 week fiscal year ending on the Sunday
       nearest December 31. Information presented for the years ended December
       31, 2000 and January 2, 2000 represent 52-week fiscal years, while
       information presented for the year ended January 3, 1999 represents a
       53-week fiscal year.

       REVENUE RECOGNITION

       The Company's revenue is received from retail sales of merchandise
       through the Company's stores. Revenue is recognized when merchandise is
       received by the customer and is shown net of returns. The costs of
       distribution center operations are included in cost of sales, buying and
       occupancy.

       OTHER RECEIVABLES

       Other receivables consist principally of amounts due from vendors for
       certain co-op advertising and amounts due from credit card companies. An
       allowance for doubtful accounts is provided when accounts are determined
       to be uncollectible.




                                      F-9
<PAGE>   37



       MERCHANDISE INVENTORIES

       The Company values merchandise inventories using the lower of average
       cost (which approximates the first-in, first-out cost) or market method.
       Average cost includes the direct purchase price of merchandise inventory
       and overhead costs associated with the Company's distribution center.

       PROPERTY AND EQUIPMENT

       Property and equipment are stated at cost and depreciated over the
       estimated useful lives or lease terms, using the straight-line method.

       The estimated useful lives are 40 years for buildings, 7 to 10 years for
       fixtures and equipment and the shorter of the lease term or 10 years for
       leasehold improvements. Maintenance and repairs are charged to expense as
       incurred.

       LEASEHOLD INTEREST

       Upon acquisition of the Company in 1992, an asset was recognized for the
       net fair value of favorable operating lease agreements. The leasehold
       interest asset is being amortized on a straight-line basis over 13.5
       years. The unamortized balance attributable to leases terminated since
       the acquisition has been reflected as a component of the gain or loss
       upon disposition of the underlying properties.

       GOODWILL

       Goodwill, which represents the excess of purchase price over fair value
       of net assets acquired, is amortized on a straight-line basis over
       periods ranging from 15 to 30 years. The Company assesses the
       recoverability of goodwill by determining whether the carrying value can
       be recovered through undiscounted future operating cashflows from the
       assets. The impairment, if any, is measured based on projected discounted
       future operating cashflows using a discount rate equal to the Company's
       average cost of funds. Recoverability of goodwill will be impacted if
       estimated future operating cash flows are not achieved.

       OTHER ASSETS

       Other assets consist principally of deferred financing costs and
       long-term investments held-to-maturity. Deferred financing costs are
       amortized straight line over the terms of the respective debt.
       Investments held-to-maturity are carried at amortized cost and consist of
       Parent Senior Discount Notes. Investments held-to-maturity at December
       31, 2000 and January 2, 2000 were $5,306 and $4,590, respectively.

       SELF-INSURANCE RESERVES

       The Company maintains self-insurance programs for workers' compensation
       and general liability risks. The Company is self-insured up to specified
       per-occurrence limits and maintains insurance coverage for losses in
       excess of specified amounts. Estimated costs under these programs,
       including incurred but not reported claims, are recorded as expenses
       based upon actuarially determined historical experience and trends of
       paid and incurred claims.

       PREOPENING EXPENSES

       New store preopening expenses are charged against operations as incurred.




                                      F-10
<PAGE>   38



       ADVERTISING EXPENSES

       The Company recognizes advertising costs the first time the advertising
       takes place. Advertising expenses amounted to $33,498 for the year ended
       December 31, 2000, $30,613 for the year ended January 2, 2000, and
       $28,465 for the year ended January 3, 1999. Advertising expense is
       included in selling and administrative.

       INCOME TAXES

       The Company accounts for income taxes under the asset and liability
       method whereby deferred tax assets and liabilities are recognized for the
       future tax consequences attributable to differences between financial
       statement carrying amounts of existing assets and liabilities and their
       respective tax bases. Deferred tax assets and liabilities are measured
       using tax rates expected to apply to taxable income in the years in which
       those temporary differences are expected to be recovered or settled. The
       effect on deferred tax assets and liabilities of a change in tax rates is
       recognized in income in the period that includes the enactment date. The
       realizability of deferred tax assets is assessed throughout the year and
       a valuation allowance is established accordingly.

       The Company files a consolidated tax return with its Parent, however, tax
       expense is recorded based on the stand alone operations of the Company.
       In 1999 and 1998, the excess tax liability of the Company over amounts
       due under the consolidated tax return of $1,358 and $4,201, respectively
       were treated as capital contributions from the parent. In 2000, the
       excess of amounts due under the consolidated return over the Company's
       current tax liability of $2,745 was reflected as a receivable from Parent
       in other long-term assets.

       USE OF ESTIMATES

       Management of the Company has made a number of estimates and assumptions
       relating to the reporting of assets and liabilities and the disclosure of
       contingent assets and liabilities at the date of the financial statements
       and reported amounts of revenues and expenses during the reporting period
       to prepare these financial statements in conformity with generally
       accepted accounting principles. Actual results could differ from these
       estimates.

       CONCENTRATION OF CREDIT RISK

       Customer purchases are generally transacted using cash or credit cards.
       In certain instances, the Company grants credit to schools and
       youth-oriented organizations, under normal trade terms. Trade accounts
       receivable were approximately $337 and $306 at December 31, 2000 and
       January 2, 2000, respectively. Credit losses have historically been
       within management's expectations.

       RECLASSIFICATIONS

       Certain prior year balances in the accompanying financial statements have
       been reclassified to conform to current year presentation.

       IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

       The Company reviews its long-lived assets and certain identifiable
       intangibles for impairment whenever events or changes in circumstances
       indicate that the carrying amount of an asset may not be recoverable.
       Recoverability of assets to be held and used is measured by a comparison
       of the carrying amount of an asset to future undiscounted net cash flows
       expected to be generated by the asset. If such assets are considered to
       be impaired, the impairment to be recognized is measured by the amount by



                                      F-11
<PAGE>   39



       which the carrying amount of the assets exceeds the fair value of the
       assets. Assets to be disposed of are reported at the lower of the
       carrying amount or fair value, less costs to sell.


(3)    FAIR VALUES OF FINANCIAL INSTRUMENTS

       The following methods and assumptions were used to estimate the fair
       value of each class of financial instruments for which it is practicable
       to estimate that value:

              Cash and cash equivalents, trade and other receivables, trade
              accounts payable and accrued expenses: The carrying amounts
              approximate the fair values of these instruments due to their
              short-term nature.

              The fair value of the Company's investments held-to-maturity
              approximated $3,700 based upon recent market prices.

              The fair value of the Company's Senior Notes at December 31, 2000
              approximated $92,700 based on recent market prices and net of the
              repurchase and retirement of $7,750 face value of Senior Notes
              during the year ended December 31, 2000 and $19,100 face value of
              Senior Notes during the year ended January 2, 2000. The carrying
              amount of the revolving credit facility reflects the fair value
              based on current rates available to the Company for debt with the
              same remaining maturities.

(4)    LONG-TERM DEBT

       Long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                               DECEMBER 31, 2000   JANUARY 2, 2000
                                                               -----------------   ---------------
<S>                                                            <C>                 <C>
Revolving credit facility                                          $ 37,321           39,856
10 7/8% Senior Notes, net of unamortized discount, $104.1
million face amount due in 2007 with an effective interest
rate of 10.95%                                                      103,768          111,453
                                                                   --------         --------
 Total long-term debt                                              $141,089          151,309
                                                                   ========         ========
</TABLE>


       In connection with the Recapitalization, the Company issued $131 million
       face amount, 10 7/8% Senior Notes due 2007 (Senior Notes), less discount
       of $591 based on an imputed interest rate of 10.95%. The notes require
       semiannual interest payments on each May 15 and November 15, commencing
       on May 15, 1998. The Company has no mandatory payments of principal on
       the Senior Notes prior to their maturity in 2007. The notes may be
       redeemed in whole or in part, at the option of the Company, at any time
       on or after November 15, 2002, at the redemption prices set forth below
       with respect to the indicated redemption date, together with any accrued
       and unpaid interest to such redemption date. During Fiscal 1999 the
       Company repurchased and retired $19,100 face value of Senior Notes. The
       Company repurchased and retired an additional $7,750 face value of Senior
       Notes during the year ended December 31, 2000.




                                      F-12
<PAGE>   40


       If redeemed during the 12-month period beginning November 15:

<TABLE>
<CAPTION>

                       YEAR                           PERCENTAGE
          --------------------                        -----------
          <S>                                         <C>
          2002                                          105.475%
          2003                                          103.650
          2004                                          101.825
          2005 and thereafter                           100.000
                                                       =========
</TABLE>


       The Company has a five year, non-amortizing $125 million revolving credit
       facility (the CIT Credit Facility), expiring in November 2002. The CIT
       Credit Facility bears interest at various rates based on the Company's
       performance, with a floor of LIBOR plus 1.5% or the Chase Manhattan prime
       lending rate and a ceiling of LIBOR plus 2.5% or the Chase Manhattan
       prime lending rate plus 0.75% and are secured by trade accounts
       receivable, merchandise inventory and general intangible assets
       (including trademarks and trade names) of the Company. At December 31,
       2000, loans under the CIT Credit Facility bear interest at a rate of
       LIBOR (6.73% at December 31, 2000) plus 1.50% or the Chase Manhattan
       prime lending rate (9.50% at December 31, 2000) plus 0.0%. A monthly fee
       of 0.325% per annum is assessed on the unused portion of the facility. On
       December 31, 2000, the Company had $37,321 in LIBOR and prime lending
       rate borrowings and letters of credit of $4,046 outstanding. The
       Company's maximum eligible borrowing available under the facility is
       limited to 70% of the aggregate value of eligible inventory during
       November through February and 65% of the aggregate value of eligible
       inventory during the remaining months of the year. Available borrowings
       over and above actual LIBOR and prime rate borrowings and letters of
       credit outstanding on the CIT Credit Facility amounted to $73,826 at
       December 31, 2000.

       The various debt agreements contain covenants restricting the ability of
       the Company to, among other things, incur additional debt, pay dividends,
       merge or consolidate with or invest in other companies, sell, lease or
       transfer all or substantially all of its properties or assets, or make
       certain payments with respect to its outstanding capital stock, and
       engage in certain transactions with affiliates. In addition, the Company
       must comply with certain financial covenants. The Company was in
       compliance with such covenants at December 31, 2000.

       On January 10, 2001 the Company repurchased and retired $12,500 face
       value of the Parent Discount Notes.


(5)    LEASES

       The Company currently leases certain stores, distribution facilities,
       vehicles and equipment under noncancelable operating leases that expire
       through the year 2019. These leases generally contain renewal options for
       periods ranging from 5 to 15 years and require the Company to pay all
       executory costs such as maintenance and insurance.

       Certain leases contain escalation clauses and provide for contingent
       rentals based on percentages of sales. The Company recognizes rental
       expense on a straight-line basis over the terms of the underlying leases,
       without regard to when rentals are paid. The accrual of the current
       noncash portion of this rental expense has been included in depreciation
       and amortization in the accompanying statements of operations and cash
       flows and deferred rent in the accompanying balance sheets.



                                      F-13
<PAGE>   41



       Rental expense for operating leases consisted of the following:

<TABLE>
<CAPTION>

                                             YEAR ENDED       YEAR ENDED        YEAR ENDED
                                         DECEMBER 31, 2000  JANUARY 2, 2000   JANUARY 3, 1999
                                         -----------------  ---------------   ----------------
       <S>                               <C>                <C>                <C>
       Cash rental payments                  $  29,667          27,179             25,711
       Noncash rentals                             375             625                546
       Contingent rentals                        1,592           1,360              1,506
                                              --------       ---------           --------
                Rental expense               $  31,634          29,164             27,763
                                              ========       =========          =========
</TABLE>


       Future minimum lease payments (cash rentals) under noncancelable
       operating leases (with initial or remaining lease terms in excess of one
       year) as of December 31, 2000 are:

<TABLE>
<CAPTION>

          Year ending:
          <S>                                  <C>
              2001                             $   30,944
              2002                                 29,765
              2003                                 28,995
              2004                                 28,213
              Thereafter                          145,966
                                               ===========
</TABLE>


(6)    ACCRUED EXPENSES

       Accrued expenses consist of the following:

<TABLE>
<CAPTION>

                                       DECEMBER 31, 2000   JANUARY 2, 2000
                                       -----------------   ---------------
       <S>                             <C>                 <C>
       Payroll and related expenses         $13,557            11,651
       Advertising                            5,059             4,973
       Sales tax                              6,781             5,946
       Income tax                             8,111             3,313
       Other                                 13,960            14,072
                                            -------            -------
                                            $47,468            39,955
                                            =======            =======

</TABLE>




                                      F-14
<PAGE>   42


(7)    INCOME TAXES

       Total income tax expense consists of the following:

<TABLE>
<CAPTION>

                                                DECEMBER 31, 2000    JANUARY 2, 2000   JANUARY 3, 1999
                                                -----------------    ---------------   ---------------
     <S>                                         <C>                  <C>               <C>
     Income tax before
         extraordinary gain/(loss)                    $  9,438             5,829             4,604
     Extraordinary item                                     61              (265)             --
                                                      --------          --------          --------

         Total income tax expense                     $  9,499             5,564             4,604
                                                      ========          ========          ========

<CAPTION>

                                                       CURRENT           DEFERRED           TOTAL
                                                       --------          --------          --------
     <S>                                              <C>               <C>               <C>

     2000:
         Federal                                      $  8,268              (583)            7,685
         State                                           1,807               (54)            1,753
                                                      --------          --------          --------

                                                      $ 10,075              (637)            9,438
                                                      ========          ========          ========

     1999:
         Federal                                      $  6,161            (1,416)            4,745
         State                                           1,334              (250)            1,084
                                                      --------          --------          --------

                                                      $  7,495            (1,666)            5,829
                                                      ========          ========          ========

     1998:
         Federal                                      $  3,991              (275)            3,716
         State                                             514               374               888
                                                      --------          --------          --------
                                                      $  4,505                99             4,604
                                                      ========          ========          ========
</TABLE>


       The provision for income taxes differs from the amounts computed by
       applying the Federal statutory tax rate of 35% to earnings before income
       taxes and extraordinary item, as follows:

<TABLE>
<CAPTION>

                                                             YEAR ENDED    YEAR ENDED      YEAR ENDED
                                                            DECEMBER 31,    JANUARY 2,     JANUARY 3,
                                                               2000           2000            1999
                                                            ------------    ----------     ----------
      <S>                                                   <C>             <C>             <C>
      Tax expense at statutory rate                           $8,180          5,145           3,979
      State taxes, net of Federal benefit                      1,131            713             551
      Increase (decrease) in valuation allowance, net
          of IRS adjustment in 1998                             --             --              (157)
      Other                                                      127            (29)            231
                                                              ------         ------          ------

                                                              $9,438          5,829           4,604
                                                              ======         ======          ======

</TABLE>




                                      F-15
<PAGE>   43



       Deferred tax assets and liabilities consist of the following tax-effected
       temporary differences:

<TABLE>
<CAPTION>

                                                                DECEMBER 31, 2000       JANUARY 2, 2000
                                                                -----------------       ---------------
     <S>                                                        <C>                     <C>
     Deferred assets:
         Self-insurance reserves                                      $ 1,844                  1,401
         Employee benefits                                              1,754                  1,476
         State taxes                                                      651                    455
         Noncash rentals                                                3,001                  2,852
         Amortization of tangible and intangible assets                   598                    827
         Other                                                            903                    857
                                                                      -------                -------

                Deferred tax assets                                   $ 8,751                  7,868

     Deferred liabilities - basis in fixed assets                     $   290                     44
                                                                      -------                -------

                Net deferred tax assets                               $ 8,461                  7,824
                                                                      =======                =======
</TABLE>


       In 1998 and 1997, the Company reduced the valuation allowance to reflect
       realizability of its deferred tax assets. In doing so, management
       considers whether it is more likely than not that some portion or all of
       the deferred tax assets will be realized. The ultimate realization of
       deferred tax assets is dependent upon the generation of future taxable
       income during the periods in which those temporary differences become
       deductible. Management considers the scheduled reversals of deferred tax
       liabilities, projected future taxable income and tax planning strategies
       in making this assessment. Based upon the level of historical taxable
       income and projections of future taxable income over the periods during
       which the deferred tax assets are deductible, management believes it is
       more likely than not that the Company will realize the benefits of these
       deductible differences. The amount of the deferred tax asset considered
       realizable, however, could be reduced in the near term if estimates of
       future taxable income during the carryforward period are reduced.

(8)    EMPLOYEE BENEFIT PLANS

       The Company has a 401(k) plan to cover all eligible employees. All
       employees' contributions may be supplemented by Company contributions.
       The Company contributed $1,650 for the year ended December 31, 2000,
       $1,483 for the year ended January 2, 2000 and $1,411 for the year ended
       January 3, 1999 in employer matching and profit sharing contributions.

       The Company has no other significant postretirement or post employment
       benefits.

(9)    RELATED PARTY TRANSACTIONS

       Prior to September 1992, the Company was a wholly owned subsidiary of
       Thrifty, which was in turn a wholly owned subsidiary of Pacific
       Enterprises (PE). In December 1996, Thrifty was acquired by Rite Aid
       Corporation.

       As a result of the Company's prior relationship with Thrifty and its
       affiliates, the Company continues to maintain certain relationships with
       Rite Aid and PE. These relationships include continuing indemnification
       obligations of PE to the Company for certain environmental matters;
       agreements



                                      F-16
<PAGE>   44

       between the Company and PE with respect to various tax matters and
       obligations under ERISA, including the allocation of various tax
       obligations relating to the inclusion of the Company and each member of
       the affiliated group of which the Company was a subsidiary in certain
       consolidated and/or unitary tax returns of PE; and subleases described as
       follows.

       The Company leases certain property and equipment from Rite Aid, which
       leases this property and equipment from an outside party. Charges related
       to these leases totaled $203 for the year ended December 31, 2000, $194
       for the year ended January 2, 2000 and $435 for the year ended January 3,
       1999.

       In 1997, Parent, and the Company, entered into a new Management Services
       Agreement with an investment advisor group that is a shareholder of the
       Parent for a term of seven and one-half years, under which $333, plus
       expenses, will be paid annually for financial advisory and investment
       banking services. During each of the years ended December 31, 2000,
       January 2, 2000 and January 3, 1999, the Company, on behalf of the
       Parent, paid $340, plus expenses, to this advisor group. An individual of
       the investor advisor group is a member of the Company's Board of
       Directors.

       The 1997 Management Equity Plan (the "1997 Plan") provides for the
       granting of incentive stock options or nonqualified options to officers,
       directors and selected key employees of the Company to purchase shares of
       the Parent's common stock. The 1997 Plan is administered by the Board of
       Directors of the Parent and the granting of awards under the Plan is
       discretionary with respect to the individuals to whom and the times at
       which awards are made, the number of options awarded, and the vesting and
       exercise period of such awards. The options granted under the Plan must
       have an exercise price that is no less than 85% of the fair value of the
       Parent common stock at the time the stock option is granted. The
       aggregate number of Parent common shares that may be allocated to awards
       under the Plan is 560,000 shares.

       The Company has elected to follow Accounting Principles Board Opinion No.
       25, Accounting for Stock Issued to Employees (APB 25) and related
       interpretation in accounting for its employee stock options under the
       Plan. No awards have been granted under the Plan as of December 31, 2000.

(10)   CONTINGENCIES

       The Company is involved in various claims and legal actions arising in
       the ordinary course of business. In the opinion of management, the
       ultimate disposition of these matters will not have a material adverse
       effect on the Company's financial position, results of operations or
       liquidity.

(11)   BUSINESS CONCENTRATIONS

       The Company operates traditional sporting goods retail stores located
       principally in the Western states of the United States. The Company is
       subject to regional risks such as the local economies, weather conditions
       and natural disasters and government regulations. If the region were to
       suffer an economic downturn or if other adverse regional events were to
       occur, there could be a significant adverse effect on management's
       estimates and an adverse impact on the Company's performance. The retail
       industry is impacted by the general economy. Changes in the marketplace
       may significantly affect management's estimates and the Company's
       performance.



                                      F-17
<PAGE>   45




(12)   QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                   YEAR ENDED DECEMBER 31, 2000

                   FIRST           SECOND         THIRD        FOURTH
                  QUARTER          QUARTER       QUARTER       QUARTER        TOTAL
                 ---------        ----------    ---------     ----------    ---------
<S>               <C>              <C>           <C>           <C>           <C>
Net sales         $129,712         137,271       146,169       158,324       571,476
Gross Profit      $ 42,888          48,394        48,913        54,241       194,436
Net Income        $    851           3,372         3,191         6,973        14,387
EBITDA            $  8,013          12,355        11,946        17,799        50,113

<CAPTION>

                                     YEAR ENDED JANUARY 2, 2000

                   FIRST         SECOND          THIRD        FOURTH
                  QUARTER        QUARTER        QUARTER       QUARTER          TOTAL
                 ---------      ----------     ---------     ----------      ---------
<S>               <C>            <C>            <C>           <C>            <C>
Net sales         $ 117,097       125,579        131,440        140,208        514,324
Gross Profit      $  38,269        43,857         43,040         47,306        172,472
Net Income        $    (212)        2,546          1,180          4,960          8,474
EBITDA            $   6,563        11,157          9,310         14,609         41,639


</TABLE>



                                      F-18
<PAGE>   46



                                   BIG 5 CORP.
                 Schedule II - Valuation and Qualifying Accounts
                          (Dollar amounts in thousands)


<TABLE>
<CAPTION>

                                               BALANCE AT           ADDITIONS:           DEDUCTIONS:            BALANCE
                                                BEGINNING           CHARGES TO               A/R               AT END OF
                                                 OF YEAR            OPERATIONS           WRITE OFFS              YEAR
                                            -----------------    -----------------    -----------------    ---------------
<S>                                         <C>                  <C>                 <C>                   <C>
January 3, 1999

        Allowance for doubtful receivables         118                  120                 (37)                  201


January 2, 2000

        Allowance for doubtful receivables         201                  120                (228)                   93


December 31, 2000

        Allowance for doubtful receivables          93                  120                (202)                   11


</TABLE>





                                      II-1