##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

|                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------
|[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

OR

|                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------
|[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 0-20736

Sport Chalet, Inc.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 95-4390071                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

One Sport Chalet Drive, La Canada, CA 91011
(Address of principal executive offices)

(818) 949-5301
(Registrants telephone number, including area code)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of Act). Yes [  ] No [X]

Number of shares outstanding of the registrants Common Stock, $0.01 par value,
as of October 31, 2003: 6,635,334

1



---

TABLE OF CONTENTS



|                               |                                                                                               |  |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements                                                                 
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                               | Item 4. Controls and Procedures.                                                             
|Part II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings                                                                    
|                               | Item 2. Changes in Securities and Use of Proceeds                                            
|                               | Item 3. Defaults Upon Senior Securities                                                      
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                               | Item 5. Other Information                                                                    
|                               | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                     
|EXHIBIT 10.1                  
|EXHIBIT 31.1                  
|EXHIBIT 31.2                  
|EXHIBIT 32.1                  



---



##### Table of Contents



SPORT CHALET, INC.

Index to Form 10-Q

|        |  |                                                                                       |  |                                |    |  |  |      |  | 
|------- |  | ------------------------------------------------------------------------------------- |  | ------------------------------ | -- |  |  | ---- |  | 
|        |  |                                                                                       |  |                                |    |  |  | Page
|        |  |                                                                                       |  |                                |    |  |  |     
|        |  |                                                                                       |  | PART I  FINANCIAL INFORMATION |    |  |  |     
|Item 1. |  | Financial Statements                                                                  |  |                                | 3  | 
|Item 2. |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  |                                | 9  | 
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                | 16 | 
|Item 4. |  | Controls and Procedures                                                               |  |                                | 16 | 
|        |  |                                                                                       |  | PART II  OTHER INFORMATION    |    |  |  |     
|Item 1. |  | Legal Proceedings                                                                     |  |                                | 17 | 
|Item 2. |  | Changes in Securities and Use of Proceeds                                             |  |                                | 17 | 
|Item 3. |  | Defaults Upon Senior Securities                                                       |  |                                | 17 | 
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                   |  |                                | 17 | 
|Item 5. |  | Other Information                                                                     |  |                                | 18 | 
|Item 6. |  | Exhibits and Reports on Form 8-K                                                      |  |                                | 18 | 

2



---



##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1. Financial Statements.

SPORT CHALET, INC.

CONDENSED STATEMENTS OF OPERATIONS(UNAUDITED)

|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |           | 
|----------------------------------------------------- | ------- | - | ------------------ | --------- | ---------------- | - | ---------- | --------- | ---- | - | ----------- | --------- |  | - | ----------- | --------- | 
|                                                      |         |   | Three months ended |           | Six months ended
|                                                      |         |   | September 30,      |           | September 30,   
|                                                      |         |   |                    |           |                 
|                                                      |         |   | 2003               |           | 2002             |   | 2003       |           | 2002
|                                                      |         |   |                    |           |                  |   |            |           |     
|Net sales                                             |         | $ | 61,818,702         |           |                  | $ | 56,327,344 |           |      | $ | 115,127,978 |           |  | $ | 107,532,004 |          
|Cost of goods sold, buying and
occupancy              |         |   | 43,305,377         |           |                  |   | 39,541,506 |           |      |   | 81,841,640  |           |  |   | 76,964,847  |          
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|Gross profit                                          |         |   | 18,513,325         |           |                  |   | 16,785,838 |           |      |   | 33,286,338  |           |  |   | 30,567,157  |          
|Selling, general and administrative
expenses          |         |   | 15,580,745         |           |                  |   | 14,340,812 |           |      |   | 31,302,214  |           |  |   | 27,940,301  |          
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|Income from operations                                |         |   | 2,932,580          |           |                  |   | 2,445,026  |           |      |   | 1,984,124   |           |  |   | 2,626,856   |          
|Interest expense                                      |         |   | (55,746            | )         |                  |   | (84,585    | )         |      |   | (89,756     | )         |  |   | (124,527    | )        
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|Income before taxes                                   |         |   | 2,876,834          |           |                  |   | 2,360,441  |           |      |   | 1,894,368   |           |  |   | 2,502,329   |          
|Income tax provision                                  |         |   | 1,149,000          |           |                  |   | 943,000    |           |      |   | 760,000     |           |  |   | 1,001,000   |          
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|Net income                                            |         | $ | 1,727,834          |           |                  | $ | 1,417,441  |           |      | $ | 1,134,368   |           |  | $ | 1,501,329   |          
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|Earnings per share:                                   |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|                                                      | Basic   |   | $                  | 0.26      |                  |   | $          | 0.21      |      |   | $           | 0.17      |  |   | $           | 0.23      | 
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|                                                      | Diluted |   | $                  | 0.25      |                  |   | $          | 0.20      |      |   | $           | 0.16      |  |   | $           | 0.22      | 
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|Weighted average number of
common shares outstanding: |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|                                                      | Basic   |   |                    | 6,633,667 |                  |   |            | 6,617,667 |      |   |             | 6,631,667 |  |   |             | 6,610,806 | 
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          
|                                                      | Diluted |   |                    | 6,944,024 |                  |   |            | 6,939,971 |      |   |             | 6,937,438 |  |   |             | 6,970,037 | 
|                                                      |         |   |                    |           |                  |   |            |           |      |   |             |           |  |   |             |          

See accompanying notes.

3



---



##### Table of Contents



SPORT CHALET, INC.

CONDENSED BALANCE SHEETS

|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |            | 
|--------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ---------- | ------------- | ---------- | --------- | ---------- | ---------- | ---------- | 
|                                                    |                                                |                                                                                                                                |            | September 30, |            | March 31,
|                                                    |                                                |                                                                                                                                |            | 2003          |            | 2003     
|                                                    |                                                |                                                                                                                                |            |               |            |          
|                                                    |                                                |                                                                                                                                |            | (Unaudited)   |            |           |            |           
|Assets                                              |                                                |                                                                                                                                |            |               |            |           |            |           
|Current assets:                                     |                                                |                                                                                                                                |            |               |            |           |            |           
|                                                    | Cash                                           |                                                                                                                                | $          | 3,665,797     |            |           | $          | 4,230,003  |           
|                                                    | Accounts receivable, less allowance of $25,000 |                                                                                                                                |            | 1,002,537     |            |           |            | 1,090,519  |           
|                                                    | Merchandise Inventories                        |                                                                                                                                |            | 61,725,465    |            |           |            | 50,886,630 |           
|                                                    | Prepaid expenses and other current assets      |                                                                                                                                |            | 2,281,159     |            |           |            | 2,038,588  |           
|                                                    | Refundable income taxes                        |                                                                                                                                |            |              |            |           |            | 58,990     |           
|                                                    | Deferred income taxes                          |                                                                                                                                |            | 1,279,815     |            |           |            | 1,325,249  |           
|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |           
|                                                    |                                                | Total current assets                                                                                                           |            |               | 69,954,773 |           |            |            | 59,629,979 | 
|Furniture, equipment and leasehold improvements-net |                                                |                                                                                                                                | 27,545,941 |               |            |           | 27,095,314 |           
|Deferred income taxes                               |                                                |                                                                                                                                | 261,257    |               |            |           | 66,281     |           
|Other assets                                        |                                                |                                                                                                                                | 96,441     |               |            |           | 109,905    |           
|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |           
|                                                    |                                                | Total assets                                                                                                                   |            | $             | 97,858,412 |           |            | $          | 86,901,479 | 
|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |           
|Liabilities and stockholders equity                |                                                |                                                                                                                                |            |               |            |           |            |           
|Current liabilities:                                |                                                |                                                                                                                                |            |               |            |           |            |           
|                                                    | Bank overdraft                                 |                                                                                                                                | $          | 5,197,929     |            |           | $          | 5,764,355  |           
|                                                    | Accounts payable                               |                                                                                                                                |            | 18,940,155    |            |           |            | 9,353,444  |           
|                                                    | Salaries and wages payable                     |                                                                                                                                |            | 1,927,191     |            |           |            | 2,191,335  |           
|                                                    | Income taxes payable                           |                                                                                                                                |            | 746,488       |            |           |            |           |           
|                                                    | Other accrued expenses                         |                                                                                                                                |            | 5,022,864     |            |           |            | 5,041,753  |           
|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |           
|                                                    |                                                | Total current liabilities                                                                                                      |            |               | 31,834,627 |           |            |            | 22,350,887 | 
|Deferred rent                                       |                                                |                                                                                                                                | 5,571,957  |               |            |           | 5,276,696  |           
|Stockholders equity                                |                                                |                                                                                                                                |            |               |            |           |            |           
|                                                    | Preferred stock, $.01 par value:               |                                                                                                                                |            |               |            |           |            |            |           
|                                                    |                                                | Authorized shares - 2,000,000
Issued and outstanding shares  none                                                             |            |               |           |           |            |            |           | 
|                                                    | Common stock, $.01 par value:                  |                                                                                                                                |            |               |            |           |            |            |           
|                                                    |                                                | Authorized shares - 15,000,000
Issued and outstanding shares  6,635,334
at September 30, 2003 and 6,628,334
at March 31, 2003 |            |               | 66,353     |           |            |            | 66,283     | 
|                                                    | Additional paid-in capital                     |                                                                                                                                |            | 22,164,863    |            |           |            | 22,121,369 |           
|                                                    | Retained earnings                              |                                                                                                                                |            | 38,220,612    |            |           |            | 37,086,244 |           
|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |           
|                                                    | Total stockholders equity                     |                                                                                                                                |            | 60,451,828    |            |           |            | 59,273,896 |           
|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |           
|                                                    |                                                | Total liabilities and stockholders equity                                                                                     |            | $             | 97,858,412 |           |            | $          | 86,901,479 | 
|                                                    |                                                |                                                                                                                                |            |               |            |           |            |            |           

See accompanying notes.

4



---



##### Table of Contents



SPORT CHALET, INC.

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                                                            |                                                                     |                                           |            |                                |             |      |             |           |             |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ----------------------------------------- | ---------- | ------------------------------ | ----------- | ---- | ----------- | --------- | ----------- | -
|                                                                                            |                                                                     |                                           |            | Six months ended September 30,
|                                                                                            |                                                                     |                                           |            |                               
|                                                                                            |                                                                     |                                           |            | 2003                           |             | 2002
|                                                                                            |                                                                     |                                           |            |                                |             |     
|Operating activities                                                                        |                                                                     |                                           |            |                                |             |      |             |          
|Net income                                                                                  |                                                                     | $                                         | 1,134,368  |                                |             | $    | 1,501,329   |          
|Adjustments to reconcile net income to net cash provided
by (used in) operating activities: |                                                                     |                                           |            |                                |             |      |             |          
|                                                                                            | Depreciation and amortization                                       |                                           |            | 2,986,396                      |             |      |             | 2,674,465 |            
|                                                                                            | Loss on disposal of furniture, equipment and leasehold improvements |                                           |            | 244,821                        |             |      |             |          |            
|                                                                                            | Deferred income taxes                                               |                                           |            | (149,542                       | )           |      |             | (380,570  | )          
|                                                                                            | Tax benefit on employee stock options                               |                                           |            | 4,134                          |             |      |             | 45,087    |            
|                                                                                            | Changes in operating assets and liabilities:                        |                                           |            |                                |             |      |             |           |            
|                                                                                            |                                                                     | Accounts receivable                       |            |                                | 87,982      |      |             |           | (768,020    | )
|                                                                                            |                                                                     | Merchandise inventories                   |            |                                | (10,838,835 | )    |             |           | (13,760,675 | )
|                                                                                            |                                                                     | Refundable income taxes                   |            |                                | 58,990      |      |             |           | 448,760     |  
|                                                                                            |                                                                     | Prepaid expenses and other current assets |            |                                | (242,571    | )    |             |           | 31,695      |  
|                                                                                            |                                                                     | Bank overdraft                            |            |                                | (566,426    | )    |             |           | (2,311,007  | )
|                                                                                            |                                                                     | Accounts payable                          |            |                                | 9,586,711   |      |             |           | 8,886,829   |  
|                                                                                            |                                                                     | Salaries and wages payable                |            |                                | (264,144    | )    |             |           | (601,560    | )
|                                                                                            |                                                                     | Income taxes payable                      |            |                                | 746,488     |      |             |           | 61,707      |  
|                                                                                            |                                                                     | Other accrued expenses                    |            |                                | (18,889     | )    |             |           | 658,721     |  
|                                                                                            |                                                                     | Deferred rent                             |            |                                | 295,261     |      |             |           | 248,896     |  
|                                                                                            |                                                                     |                                           |            |                                |             |      |             |          
|Net cash provided by (used in) operating activities                                         |                                                                     |                                           | 3,064,744  |                                |             |      | (3,264,343  | )        
|Investing activities                                                                        |                                                                     |                                           |            |                                |             |      |             |          
|Purchase of furniture, equipment and leasehold improvements                                 |                                                                     |                                           | (3,681,844 | )                              |             |      | (2,381,663  | )        
|Other assets                                                                                |                                                                     |                                           | 13,464     |                                |             |      | 28,629      |          
|                                                                                            |                                                                     |                                           |            |                                |             |      |             |          
|Net cash used in investing activities                                                       |                                                                     |                                           | (3,668,380 | )                              |             |      | (2,353,034  | )        
|Financing activities                                                                        |                                                                     |                                           |            |                                |             |      |             |          
|Proceeds from bank borrowing                                                                |                                                                     |                                           |           |                                |             |      | 27,830,000  |          
|Repayments of bank borrowing                                                                |                                                                     |                                           |           |                                |             |      | (23,945,000 | )        
|Proceeds from exercise of stock options                                                     |                                                                     |                                           | 39,430     |                                |             |      | 88,108      |          
|                                                                                            |                                                                     |                                           |            |                                |             |      |             |          
|Net cash provided by financing activities                                                   |                                                                     |                                           | 39,430     |                                |             |      | 3,973,108   |          
|                                                                                            |                                                                     |                                           |            |                                |             |      |             |          
|Decrease in cash and cash equivalents                                                       |                                                                     |                                           | (564,206   | )                              |             |      | (1,644,269  | )        
|Cash and cash equivalents at beginning of period                                            |                                                                     |                                           | 4,230,003  |                                |             |      | 4,273,485   |          
|                                                                                            |                                                                     |                                           |            |                                |             |      |             |          
|Cash and cash equivalents at end of period                                                  |                                                                     | $                                         | 3,665,797  |                                |             | $    | 2,629,216   |          
|                                                                                            |                                                                     |                                           |            |                                |             |      |             |          
|Supplemental Disclosure of Cash Flow Information                                            |                                                                     |                                           |            |                                |             |      |             |          
|Cash paid during the period for:                                                            |                                                                     |                                           |            |                                |             |      |             |          
|                                                                                            |                                                                     | Income taxes                              |            | $                              | 100,000     |      |             | $         | 229,000     |  
|                                                                                            |                                                                     | Interest                                  |            |                                |            |      |             |           | 32,172      |  

See accompanying notes.

5



---



##### Table of Contents



SPORT CHALET, INC.

NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

1. Basis of Presentation

The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accruals, considered necessary
for a fair presentation of the results of operations for the periods presented
have been included.

The financial data at March 31, 2003 is derived from audited financial
statements which are included in the Companys Annual Report on Form 10-K for
the year ended March 31, 2003, and should be read in conjunction with the
audited financial statements and notes thereto. Interim results are not
necessarily indicative of results for the full year.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

2. Earnings per Share

Earnings per share, basic, is computed based on the weighted average
number of common shares outstanding for the period. Earnings per share,
diluted, is computed based on the weighted average number of common and
potentially dilutive common equivalent shares outstanding for the period. A
reconciliation is as follows:

|                                          |                                             |   |                    |           |                  |   |           |           |      |   |           |           |  |   |           |           | 
|----------------------------------------- | ------------------------------------------- | - | ------------------ | --------- | ---------------- | - | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                          |                                             |   | Three months ended |           | Six months ended
|                                          |                                             |   | September 30,      |           | September 30,   
|                                          |                                             |   |                    |           |                 
|                                          |                                             |   | 2003               |           | 2002             |   | 2003      |           | 2002
|                                          |                                             |   |                    |           |                  |   |           |           |     
|Net Income                                |                                             | $ | 1,727,834          |           |                  | $ | 1,417,441 |           |      | $ | 1,134,368 |           |  | $ | 1,501,329 |          
|Weighted average number of common
shares: |                                             |   |                    |           |                  |   |           |           |      |   |           |           |  |   |           |          
|                                          | Basic                                       |   |                    | 6,633,667 |                  |   |           | 6,617,667 |      |   |           | 6,631,667 |  |   |           | 6,610,806 | 
|                                          | Effect of dilutive securities-stock options |   |                    | 310,357   |                  |   |           | 322,304   |      |   |           | 305,771   |  |   |           | 359,231   | 
|                                          |                                             |   |                    |           |                  |   |           |           |      |   |           |           |  |   |           |          
|                                          | Diluted                                     |   |                    | 6,944,024 |                  |   |           | 6,939,971 |      |   |           | 6,937,438 |  |   |           | 6,970,037 | 
|                                          |                                             |   |                    |           |                  |   |           |           |      |   |           |           |  |   |           |          
|Earnings per share:                       |                                             |   |                    |           |                  |   |           |           |      |   |           |           |  |   |           |          
|                                          | Basic                                       |   | $                  | 0.26      |                  |   | $         | 0.21      |      |   | $         | 0.17      |  |   | $         | 0.23      | 
|                                          | Effect of dilutive securities               |   | $                  | 0.01      |                  |   | $         | 0.01      |      |   | $         | 0.01      |  |   | $         | 0.01      | 
|                                          |                                             |   |                    |           |                  |   |           |           |      |   |           |           |  |   |           |          
|                                          | Diluted                                     |   | $                  | 0.25      |                  |   | $         | 0.20      |      |   | $         | 0.16      |  |   | $         | 0.22      | 
|                                          |                                             |   |                    |           |                  |   |           |           |      |   |           |           |  |   |           |          

6



---



##### Table of Contents



3. Stock Compensation

In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure, and Amendment of FASB Statement No. 123 (SFAS No.148). SFAS No.
148 amends SFAS No. 123 Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a
voluntary change to fair value based method of accounting for employee
stock-based compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosure in annual and
interim financial statements about the method of accounting for stock-based
compensation and its effects on reporting. The Company continues to apply the
principles of APB Opinion No. 25 and related interpretations in accounting for
its stock-based compensation plans. Accordingly, no compensation expense has
been recorded in conjunction with options issued to employees. Had
compensation cost been determined based on the fair value of the options at the
grant date and amortized over the options vesting period, consistent with
the method prescribed by SFAS No. 123, the Companys net income would have
been (in thousands except per share information):

|                                      |                                                                                                                                            |   |                    |         |                  |   |           |        |      |   |           |         |  |   |           |         | 
|------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | - | ------------------ | ------- | ---------------- | - | --------- | ------ | ---- | - | --------- | ------- |  | - | --------- | ------- | 
|                                      |                                                                                                                                            |   | Three months ended |         | Six months ended
|                                      |                                                                                                                                            |   | September 30,      |         | September 30,   
|                                      |                                                                                                                                            |   | 2003               |         | 2002             |   | 2003      |        | 2002
|                                      |                                                                                                                                            |   |                    |         |                  |   |           |        |     
|Net income as reported                |                                                                                                                                            | $ | 1,727,834          |         |                  | $ | 1,417,441 |        |      | $ | 1,134,368 |         |  | $ | 1,501,329 |        
|Add:                                  |                                                                                                                                            |   |                    |         |                  |   |           |        |      |   |           |         |  |   |           |        
|                                      | Stock based compensation expense
included in reported net income,
net of related tax effects                                               |   |                    |        |                  |   |           |       |      |   |           |        |  |   |           |        | 
|Deduct:                               |                                                                                                                                            |   |                    |         |                  |   |           |        |      |   |           |         |  |   |           |        
|                                      | Total stock-based employee
compensation expense determined
under fair market value based
method for all awards, net of
related tax effects |   |                    | 131,268 |                  |   |           | 81,112 |      |   |           | 265,470 |  |   |           | 159,958 | 
|                                      |                                                                                                                                            |   |                    |         |                  |   |           |        |      |   |           |         |  |   |           |        
|Pro forma net income                  |                                                                                                                                            | $ | 1,596,566          |         |                  | $ | 1,336,328 |        |      | $ | 868,898   |         |  | $ | 1,341,370 |        
|                                      |                                                                                                                                            |   |                    |         |                  |   |           |        |      |   |           |         |  |   |           |        
|Earning per share  basic and diluted |                                                                                                                                            |   |                    |         |                  |   |           |        |      |   |           |         |  |   |           |        
|                                      | As reported  basic                                                                                                                        |   | $                  | 0.26    |                  |   | $         | 0.21   |      |   | $         | 0.17    |  |   | $         | 0.23    | 
|                                      | As reported  diluted                                                                                                                      |   | $                  | 0.25    |                  |   | $         | 0.20   |      |   | $         | 0.16    |  |   | $         | 0.22    | 
|                                      | Pro forma  basic                                                                                                                          |   | $                  | 0.24    |                  |   | $         | 0.20   |      |   | $         | 0.13    |  |   | $         | 0.20    | 
|                                      | Pro forma  diluted                                                                                                                        |   | $                  | 0.23    |                  |   | $         | 0.20   |      |   | $         | 0.13    |  |   | $         | 0.20    | 

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used for grants in fiscal 2004; expected volatility of 41%; risk-free interest
rate of 4.0% expected lives from one to four years and expected dividends of
0%. The Black-Scholes model was developed for use in estimating the fair
value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Companys employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

7



---



##### Table of Contents



4. New Accounting Pronouncements

In November 2002, the FASB issued Emerging Issues Task Force Issue No.
02-16 (Issue 02-16), Accounting by a Reseller for Cash Consideration
Received from a Vendor. Issue 02-16 addresses the issue of how a reseller of
a vendors product should account for cash consideration received from a
vendor. The adoption of Issue 02-16, effective with agreements entered into
after November 21, 2002, did not have a material impact on the Companys
financial position or results of operations.

8



---



##### Table of Contents






|        |  |                                                                                       
|------- |  | --------------------------------------------------------------------------------------
|Item 2. |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations.

Except for the historical information contained herein, the matters
addressed in this Item 2 constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements are subject to a variety of risks and uncertainties, including those
discussed below under the heading Factors That May Affect Future Results and
elsewhere in this Quarterly Report on Form 10-Q, that could cause actual
results to differ materially from those anticipated by the Companys
management. The Private Securities Litigation Reform Act of 1995 (the Act)
provides certain safe harbor provisions for forward-looking statements. All
forward-looking statements made in this Quarterly Report on Form 10-Q are made
pursuant to the Act.

The following should be read in conjunction with the Companys financial
statements and related notes thereto provided under Item 1  Financial
Statements above.

Results of Operations

The following tables set forth statements of operations data and relative
percentages of net sales for the periods indicated (dollar amounts in
thousands, except per share amounts).

|                                             |         |   |                                  |      |                                |  |        |   |         |   |        |      |         |  |        |   |         |   |         |      |  |  |       |   |  |   |         |      |  |  |       |   | 
|-------------------------------------------- | ------- | - | -------------------------------- | ---- | ------------------------------ |  | ------ | - | ------- | - | ------ | ---- | ------- |  | ------ | - | ------- | - | ------- | ---- |  |  | ----- | - |  | - | ------- | ---- |  |  | ----- | - | 
|                                             |         |   | Three months ended September 30, |      | Six months ended September 30,
|                                             |         |   |                                  |      |                               
|                                             |         |   | 2003                             |      | 2002                           |  | 2003   |   | 2002   
|                                             |         |   |                                  |      |                                |  |        |   |        
|                                             |         |   | Amount                           |      | Percent                        |  | Amount |   | Percent |   | Amount |      | Percent |  | Amount |   | Percent
|                                             |         |   |                                  |      |                                |  |        |   |         |   |        |      |         |  |        |   |        
|Net sales                                    |         | $ | 61,819                           |      |                                |  | 100.0  | % |         | $ | 56,327 |      |         |  | 100.0  | % |         | $ | 115,128 |      |  |  | 100.0 | % |  | $ | 107,532 |      |  |  | 100.0 | %
|Gross profit                                 |         |   | 18,513                           |      |                                |  | 29.9   | % |         |   | 16,786 |      |         |  | 29.8   | % |         |   | 33,286  |      |  |  | 28.9  | % |  |   | 30,567  |      |  |  | 28.4  | %
|Selling, general and administrative
expenses |         |   | 15,581                           |      |                                |  | 25.2   | % |         |   | 14,341 |      |         |  | 25.5   | % |         |   | 31,302  |      |  |  | 27.2  | % |  |   | 27,940  |      |  |  | 26.0  | %
|Income from operations                       |         |   | 2,932                            |      |                                |  | 4.7    | % |         |   | 2,445  |      |         |  | 4.3    | % |         |   | 1,984   |      |  |  | 1.7   | % |  |   | 2,627   |      |  |  | 2.4   | %
|Interest expense                             |         |   | (56                              | )    |                                |  | -0.1   | % |         |   | (85    | )    |         |  | -0.2   | % |         |   | (90     | )    |  |  | -0.1  | % |  |   | (125    | )    |  |  | -0.1  | %
|Income before taxes                          |         |   | 2,876                            |      |                                |  | 4.7    | % |         |   | 2,360  |      |         |  | 4.2    | % |         |   | 1,894   |      |  |  | 1.6   | % |  |   | 2,502   |      |  |  | 2.3   | %
|Net income                                   |         |   | 1,727                            |      |                                |  | 2.8    | % |         |   | 1,417  |      |         |  | 2.5    | % |         |   | 1,134   |      |  |  | 1.0   | % |  |   | 1,501   |      |  |  | 1.4   | %
|Earnings per share:                          |         |   |                                  |      |                                |  |        |   |         |   |        |      |         |  |        |   |         |   |         |      |  |  |       |   |  |   |         |      |  |  |       |  
|                                             | Basic   |   | $                                | 0.26 |                                |  |        |   |         |   | $      | 0.21 |         |  |        |   |         |   | $       | 0.17 |  |  |       |   |  |   | $       | 0.23 |  |  |       |   | 
|                                             | Diluted |   | $                                | 0.25 |                                |  |        |   |         |   | $      | 0.20 |         |  |        |   |         |   | $       | 0.16 |  |  |       |   |  |   | $       | 0.22 |  |  |       |   | 

Three Months Ended September 30, 2003 Compared to Three Months Ended
September 30, 2002.Sales increased from $56.3 million for the three months
ended September 30, 2002 to $61.8 million for the same period this year, a 9.8%
increase. The increase is the result of opening two new stores in late
November 2002, aided by a comparable store sales increase of 3.7%. Same store
sales are based upon stores opened throughout both periods.

Gross profit as a percent of sales increased from 29.8% for the three
months ended September 30, 2002, to 29.9% for the same three month period ended
September 30, 2003. The increase in gross profit was primarily due to lower
markdowns in dollars and as a percent of sales attributed to the Companys
focus on improved inventory procurement and administration.

Selling, general and administrative expenses, as a percent of sales,
decreased from 25.5% for the three months ended September 30, 2002, to 25.2%
for the same period this year. The decrease is primarily a result of higher
same store sales.

9



---



##### Table of Contents



The effective income tax rate was 39.9% for the three months ended
September 30, 2002 and September 30, 2003. These rates differ from the
statutory rate of 39.8% primarily as a result of permanent differences between
financial reporting and tax-basis income.

Net income increased from $1.4 million, or $0.20 per diluted share, for
the three months ended September 30, 2002, to $1.7 million, or $0.25 per
diluted share, for the same period this year, primarily as a result of lower
markdowns and increased same store sales.

Six Months Ended September 30, 2003 Compared to Six Months Ended September
30, 2002.Sales increased from $107.5 million for the six months ended
September 30, 2002 to $115.1 million for the same period this year, a 7.1%
increase. The increase is the result of opening two new stores in late
November 2002, aided by a comparable store sales increase of 1.0%. Same store
sales are based upon stores opened throughout both periods.

Gross profit as a percent of sales increased from 28.4% for the six months
ended September 30, 2002, to 28.9% for the same six month period ended
September 30, 2003. The increase in gross profit was primarily due to lower
markdowns in dollars and as a percent of sales attributed to the Companys
focus on improved inventory procurement and administration.

Selling, general and administrative expenses, as a percent of sales,
increased from 26.0% for the six months ended September 30, 2002, to 27.2% for
the same period this year. The increase is primarily a result of higher
advertising expense attributed to the timing of vendor reimbursements and the
write-off of undepreciated assets as a result of two large-scale store remodels
in the first quarter, offset in part by the increase in same store sales.

The effective income tax rate was 40.0% for the six months ended September
30, 2002, compared to 40.1% for the same period this year. These rates differ
from the statutory rate of 39.8% primarily as a result of permanent differences
between financial reporting and tax-basis income.

Net income decreased from $1.5 million, or $0.22 per diluted share, for
the six months ended September 30, 2002, to $1.1 million, or $0.16 per diluted
share, for the same period this year, primarily as a result of increased
advertising expense and the costs associated with remodels.

Liquidity and Capital Resources

The Companys primary capital requirements are for inventory and store
expansion, relocation and remodeling. Historically, cash from operations,
credit terms from vendors and bank borrowing have met the Companys liquidity
needs. Management believes that these sources will be sufficient to fund
currently anticipated cash requirements for the foreseeable future.

Net cash provided by operating activities is primarily the result of net
income, adjusted for depreciation and amortization, and increases in accounts
payable partially offset by inventory purchases. For the six months ended
September 30, 2003, $3.1 million was generated compared to $3.3 million used by
operating activities for the same period last year.

Inventories increased by $10.8 million and $13.8 million for the six
months ended September 30, 2003 and 2002, respectively, compared to the
respective year-end balances primarily due to the build-up of seasonal
inventory. The average inventory per store decreased by 7.1% at September 30,
2003 compared to September 30, 2002, as the Company has focused on inventory
management. As a result,

10



---



##### Table of Contents



inventory at September 30, 2003 is only slightly greater than the same period
last year notwithstanding the opening of two stores since the end of this
period in the prior year.

Bank overdraft represents the total of checks in transit in excess of cash
on hand. The overdraft is expected to continue and fluctuate due to the timing
of vendor payments. Historically, accounts payable has increased as inventory
increases. In the six months ended September 30, 2003, accounts payable
combined with the bank overdraft increased by $9.0 million compared to $6.6
million for the six months ended September 30, 2002. The relative change as
compared to inventory levels is primarily the result of the timing of inventory
receipts during the period.

Net cash used in investing activities for the six months ended September
30, 2003 was $3.7 million compared to $2.4 million for the same period ended
September 30, 2002; the increase is primarily the result of capital
expenditures for two large scale remodels of mature stores during the period.
As a result of the Companys continued expansion it will spend approximately
$3.6 million in opening three locations this fall, and has so far committed to
three new store sites in fiscal 2005, for which forecasted capital expenditures
are expected to be $3.2 million

Net cash provided by financing activities reflects advances and repayment
of borrowings under the Companys revolving credit facility. Due to improved
inventory management the Company did not borrow on this facility during the
period ended September 30, 2003.

The Companys amended credit facility with Bank of America, N.A. (the
Lender) provides for advances up to $20.0 million, increasing to $35.0
million for the period October 1, through December 31, each year, less the
amount of any outstanding draws, up to a $4.0 million maximum in authorized
letters of credit. Interest accrues at the Lenders prime rate plus .25%
(4.25% at September 30, 2003) or can be fixed for a period of time at the then
current rate established under one of several indices, all at the Companys
option. In addition, there is an unused commitment fee of .20% per year, based
on a weighted average formula. This credit facility expires on September 30,
2005, and the Company expects to renegotiate and extend the term of this
agreement or obtain another form of financing before that date. The Companys
obligation to the Lender is presently secured by a first priority lien on
substantially all of the Companys non-real estate assets, and the Company is
subject to several restrictive covenants. The principal operating covenants
require the Company to maintain certain minimum cash flow coverage and debt to
equity ratios and restrict the level of capital expenditures, calculated on a
quarterly basis. The Company currently is in compliance with the covenants.
The Company believes its credit line with the Lender is sufficient to fund
capital expenditures for the foreseeable future and to meet seasonal
fluctuations in cash flow requirements. However, unexpected conditions could
require the Company to request additional borrowing capacity from the Lender or
alter its expansion plans or operations.

The Companys primary contractual obligations and commitments as of March
31, 2003, are its store leases with initial terms expiring from 2004 through
2020 and typically provide for multiple five-year renewal option:

|                        |  |                  |             | 
|----------------------- |  | ---------------- | ----------- | 
|Payments due by period: |  | Operating Leases
|                        |  |                 
|Through March 31, 2004  |  | $                | 16,210,179  | 
|2 - 3 years             |  |                  | 34,067,581  | 
|4 - 5 years             |  |                  | 30,257,199  | 
|After 5 years           |  |                  | 62,902,620  | 
|                        |  |                  |             | 
|Total                   |  | $                | 143,437,579 | 

11



---



##### Table of Contents



All retail store leases provide for base rent which may or may not be
credited against percentage rent based upon gross sales from the premises. In
some of the leases, base rental amounts increase as the lease term progresses,
although in some cases, the Company expects that percentage rent will more than
offset the base rental amounts.

No cash dividends were declared on Common Stock in fiscal 2003. The
Company intends to retain earnings for use in the operation and expansion of
its business and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.

Critical Accounting Policies and Use of Estimates

The Companys significant accounting policies are described in Note 2 of
the Companys Annual Report on Form 10-K for the year ended March 31, 2003,
which have been prepared in accordance with accounting principles generally
accepted in the United States. In preparing the financial statements, the
Company is required to make estimates and judgments which affect the results of
its operations and the reported value of assets and liabilities. Actual results
may differ from these estimates. The Company believes that the following
summarizes critical accounting policies which require significant judgments and
estimates in the preparation of its consolidated financial statements.

Inventory Valuation.Merchandise inventories are stated at the lower of
cost (first-in, first-out determined by the retail method of accounting) or
market. The Company considers cost to include direct cost of merchandise, plus
internal costs associated with merchandise procurement, storage and handling.
The Company regularly reviews aged and excess inventories to determine if the
carrying value of such inventories exceeds market value; a reserve is recorded
to reduce the carrying value to market value as necessary. A determination of
market value requires estimates and judgment based on the Companys historical
markdown experience and anticipated markdowns based on future merchandising and
advertising plans, seasonal considerations, expected business trends and other
factors.

Gift Certificate Redemption.The Company offers its customers the option
of purchasing gift certificates which may be used toward the future purchase of
the Companys product offerings. These gift certificates have no expiration
dates. The Company records unredeemed gift certificates as a liability until
the point of redemption. The Companys historical experience indicates that
not all issued gift certificates get redeemed. Accordingly, the Company
periodically adjusts the carrying value of the gift certificate liability. The
Company monitors redemptions rates as a percent of issuances and uses this
information to estimate probable redemption of all outstanding gift
certificates. This calculation is based on historical experience, and future
redemption rates may vary if consumer purchasing practices change.

Factors That May Affect Future Results

The Companys short and long-term success is subject to many factors that
are beyond the Companys control. Stockholders and prospective stockholders in
the Company should consider carefully the following risk factors, in addition
to other information contained in this report. This Report on Form l0-Q
contains forward-looking statements, which are subject to a variety of risks
and uncertainties. The Companys actual results could differ materially from
those anticipated in these forward-looking statements as a result of various
factors including those set forth below.

Economic Conditions.The retail industry historically has been subject to
substantial cyclical variations. The merchandise sold by the Company is
generally a discretionary expense for its customers. A recession in the
general economy or uncertainties regarding future economic prospects that
affect

12



---



##### Table of Contents



consumer spending habits has had, and may in the future have, a materially
adverse effect on the Companys results of operations.

Competition.The sporting goods business and the retail environment are
highly competitive, and the Company competes with national, regional and local
full-line sporting goods chains, specialty stores, supplier owned stores,
discount and department stores, and e-tailers. A number of the Companys
competitors are larger and have greater resources than the Company.

Regional Market Concentration.Currently, all of the Companys stores are
located in Southern California and the Las Vegas area of Nevada. Accordingly,
the Company is subject to regional risks, such as the economy, weather
conditions, natural disasters and government regulations. For example, warm
winter weather in the resorts frequented by Southern California residents has
affected sales in the past. When the region suffers an economic downturn or
when other adverse events occur, historically there has been an adverse effect
on the Companys net sales and profitability and this could also affect the
Companys ability to implement its planned growth. Several of the Companys
competitors operate stores across the United States and, thus, are not as
vulnerable as the Company to such regional risks.

Reliance on a Single Distribution Center.The Company currently relies on
a single distribution center in Ontario, California. Any natural disaster or
other serious disruption to this distribution center due to fire, earthquake or
any other cause could damage a significant portion of the Companys inventory
and could materially impair both the Companys ability to adequately stock its
stores and the Companys net sales and profitability.

Expansion Plan.The Companys continued growth depends on a strategy of
opening new, profitable stores in existing markets and in new regional markets.
The ability to successfully implement this growth strategy could be negatively
affected by any of the following:



| |  |  | suitable sites may not be available for leasing;                                                   
| | - |  | ---------------------------------------------------------------------------------------------------
|
| |  |  | the Company may not be able to negotiate acceptable lease terms;                                   
|
| |  |  | the Company might not be able to hire and retain qualified store personnel; and                    
|
| |  |  | the Company might not have the financial resources necessary to
fund the Companys expansion plans.

In addition, the Companys expansion in new and existing markets may
present competitive, distribution and merchandising challenges that differ from
the current challenges. These potential new challenges include competition
among the Companys stores, added strain on the Companys distribution center,
additional information to be processed by the Companys information systems and
diversion of management attention from ongoing operations. The Company faces
additional challenges in entering new markets, including consumers lack of
awareness of the Company, difficulties in hiring personnel and problems due to
the Companys unfamiliarity with local real estate markets and demographics.
New markets may also have different competitive conditions, consumer tastes and
discretionary spending patterns than the Companys existing markets. To the
extent that the Company is not able to meet these new challenges, net sales
could decrease and operating costs could increase. Furthermore, a decline in
the Companys overall financial performance, increased rents or any other
adverse effects arising from the commercial real estate market in the Companys
markets may adversely affect the Companys current growth plan. There can be
no assurance that the Company will possess sufficient funds to finance the
expenditures related to its planned growth, that new stores can be opened on a
timely basis, that such new stores can be operated on a profitable basis, or
that such growth will be manageable.

13



---



##### Table of Contents



Future Capital Requirements.The Company may not be able to fund its
future growth or react to competitive pressures if it lacks sufficient funds.
Unexpected conditions could cause the Company to be in violation of its
Lenders operating covenants. Currently, the Company feels it has sufficient
cash available through its bank credit facilities and cash from operations to
fund existing operations for the foreseeable future. The Company cannot be
certain that additional financing will be available in the future if necessary.

Management of Growth.Since its inception, the Company has experienced
periods of rapid growth. No assurance can be given that the Company will be
successful in maintaining or increasing its sales in the future. Any future
growth in sales will require additional working capital and may place a
significant strain on the Companys management, information systems, inventory
management and distribution facilities. Any failure to timely enhance the
Companys operating systems, or unexpected difficulties in implementing such
enhancements, could have a material adverse effect on the Companys results of
operations.

Dependence on Key Personnel.The Company depends on the continued service
of its senior management. The loss of the services of any key employee could
hurt the business. Also, the future success of the Company depends on its
ability to identify, attract, hire, train and motivate other highly skilled
personnel. Failure to do so may adversely affect future results.

Seasonality.The Companys sales volume increases significantly during
the Holiday season as is typical with other sporting goods retailers. In
addition, the Companys product mix has historically emphasized cold weather
sporting goods increasing the seasonality of the Companys business. In recent
years the months of November, December and January represent between 31% and
33%, of the Companys total net sales, while winter-related products ranged
from 15% to 19% of total net sales. The operating results historically have
been influenced by the amount and timing of snowfall at the resorts frequented
by those living in Southern California. An early snowfall often has influenced
sales because it generally extends the demand for winter apparel and equipment,
while a late snowfall may have the opposite effect. Suppliers in the ski and
snowboard industry require the Company to make commitments for purchases of
apparel and equipment by April for fall delivery, and only limited quantities
of merchandise can be reordered during the fall. Consequently, the Company
places its orders in the spring anticipating snowfall in the winter. If the
snowfall does not at least provide an adequate base or occurs late in the
season, or if sales do not meet projections, the Company may be required to
mark down its winter apparel and equipment.

Variability of Quarterly Results.The Company has experienced, and
expects to continue to experience, a substantial variation in its net sales and
operating results from quarter to quarter. The Company believes that the
factors which influence this variability of quarterly results include general
economic and industry conditions that affect consumer spending, changing
consumer demands, the timing of the Companys introduction of new products, the
level of consumer acceptance of each new product, the seasonality of the
markets in which the Company participates, the weather and actions of
competitors. Accordingly, a comparison of the Companys results of operations
from period to period is not necessarily meaningful, and the Companys results
of operations for any period are not necessarily indicative of future
performance.

Closely Controlled Stock.At October 30, 2003, Norbert Olberz, the
Companys founder, Chairman Emeritus, director and principal stockholder, owned
approximately 66% of the Companys outstanding Common Stock. Mr. Olberz
effectively has the ability to control the outcome on all matters requiring
stockholder approval, including, but not limited to, the election and removal
of directors, and

14



---



##### Table of Contents



any merger, consolidation or sale of all or substantially all of the
Companys assets, and to control the Companys management and affairs.

Information Systems are Vulnerable.The Companys success, in particular
the Companys ability to successfully manage inventory levels and its
centralized distribution system, largely depends upon the efficient operation
of the Companys computer hardware and software systems. The Company uses
information systems to track inventory information at the store level,
replenish inventory from the Companys warehouse, and aggregate daily sales
information among other things. These systems and the Companys operations are
vulnerable to damage or interruption from:



| |  |  | earthquake, fire, flood and other natural disasters;                                                                                                                                                                                
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | power loss, computer systems failures, internet and
telecommunications or data network failure, operator negligence,
improper operation by or supervision of employees, physical and
electronic loss of data and similar events; and
|
| |  |  | computer viruses, penetration by hackers seeking to disrupt
operations or misappropriate information and other breaches of
security.                                                                                                

The Company seeks to minimize these risks by the use of backup facilities
and redundant systems. Nevertheless any failure that causes an interruption in
the Companys operations or a decrease in inventory tracking could result in
reduced net sales.

Anticipating Consumer Tastes.If the Company fails to anticipate changes
in consumer preferences, it may experience lower net sales, higher inventory
markdowns and lower margins. Products must appeal to a broad range of
consumers whose preferences cannot be predicted with certainty. These
preferences are also subject to change. Sporting goods are often subject to
short-lived trends, such as the short-lived popularity of in-line scooters.
Outdoor wear is significantly influenced by fashion. The Companys success
depends upon the ability to anticipate and respond in a timely manner to trends
in sporting goods merchandise and consumers participation in sports. Failure
to identify and respond to these changes may cause net sales to decline. In
addition, because the Company generally makes commitments to purchase products
from vendors up to six months in advance of the proposed delivery, misjudging
the market may over-stock unpopular products and force inventory markdowns that
could have a negative impact on profitability, or have insufficient inventory
of a popular item that can be sold at full markup.

Stock Price.The Companys Common Stock is thinly traded making it
difficult to sell large amounts. The market price of the Companys Common
Stock is likely to be volatile and could be subject to significant fluctuations
in response to factors such as quarterly variations in operating results,
operating results which vary from the expectations of securities analyst and
investors, changes in financial estimates, changes in market valuations of
competitors, announcements by the Company or its competitors of a material
nature, additions or departures of key personnel, future sales of Common Stock
and stock volume fluctuations. Also, general political and economic conditions
such as a recession or interest rate fluctuations may adversely affect the
market price of the Companys Common Stock.

15



---



##### Table of Contents






Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Companys exposure to interest rate risk consists primarily of
borrowings under its credit facility, which bears interest at floating rates
(primarily LIBOR rates). The impact on earnings or cash flows during the next
fiscal year from a change of 100 basis points in the interest rate would not be
significant.




Item 4. Controls and Procedures.

The Chief Executive Officer and the Chief Financial Officer of the
Company, with the participation of the Companys management, carried out an
evaluation of the effectiveness of the Companys disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that
evaluation, the Chief Executive Officer and the Chief Financial Officer believe
that, as of the end of the period covered by this report, the Companys
disclosure controls and procedures are effective in making known to them
material information relating to the Company (including its consolidated
subsidiaries) required to be included in this report.

Disclosure controls and procedures, no matter how well designed and
implemented, can provide only reasonable assurance of achieving an entitys
disclosure objectives. The likelihood of achieving such objections is affected
by limitations inherent in disclosure controls and procedures. These include
the fact that human judgment in decision-making can be faulty and that
breakdowns in internal control can occur because of human failures such as
simple errors or mistakes or intentional circumvention of the established
process.

There were no changes in the Companys internal control over financial
reporting, known to the Chief Executive Officer or the Chief Financial Officer
that occurred during the period covered by this report that has materially
affected, or is likely to materially affect, the Companys internal control
over financial reporting.

16



---



##### Table of Contents






Part II  OTHER INFORMATION




Item 1. Legal Proceedings.

The Company is involved in various routine legal proceedings incidental to
the conduct of its business. Management does not believe that any of these
legal proceedings will have a material adverse impact on the business,
financial condition or results of operations of the Company, either due to the
nature of the claims, or because management believes that such claims should
not exceed the limits of the Companys insurance coverage.




Item 2. Changes in Securities and Use of Proceeds.

Not Applicable




Item 3. Defaults Upon Senior Securities.

Not Applicable




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

At the annual meeting of stockholders on August 1, 2003, the two Class 2
directors, John Attwood and Craig Levra, were re-elected to the Companys Board
of Directors. There were 6,548,577, and 6,452,212 votes for and 18,825, and
115,490 votes withheld, respectively, for each of John Attwood and Craig Levra.
The Companys Class 1 directors, Al McCready, Eric Olberz and Fredrick
Schneider, and Class 3 directors, Norbert Olberz and Kenneth Olsen, continue to
serve on the Board. The terms of the Class 1, 2 and 3 directors presently
expire at the annual meeting of stockholders in 2005, 2006 and 2004,
respectively.

17



---



##### Table of Contents






Item 5. Other Information.

Stockholder Proposals

Under certain circumstances, stockholders are entitled to present
proposals at stockholders meetings. Any such proposal to be included in the
proxy statement for the Companys 2004 annual meeting of stockholders must be
submitted by a stockholder prior to February 22, 2004 in a form that complies
with applicable regulations. In the event a stockholder proposal is not
submitted to the Company prior to May 7, 2004, the proxies solicited by the
Board of Directors for the 2004 annual meeting of the stockholders will confer
authority on the holders of the proxy to vote the shares in accordance with
their best judgment and discretion if the proposal is presented at the 2004
annual meeting of stockholders without any discussion of the proposal in the
proxy statement for such meeting.




Item 6. Exhibits and Reports on Form 8-K.



| | (a) |  | Exhibits:
| | --- |  | ---------

| |  |  |      |  |  |                                                                                                                        
| |  |  | ---- |  |  | -----------------------------------------------------------------------------------------------------------------------
| |  |  | 10.1 |  |  | Amendment No. 5 to Loan Agreement, dated
as of September 25, 2003, between Bank of America, N.A.
and Sport Chalet, Inc.
| |  |  |      |  |  |                                                                                                                        
| |  |  | 31.1 |  |  | Certification Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002                                                
| |  |  |      |  |  |                                                                                                                        
| |  |  | 31.2 |  |  | Certification Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002                                                
| |  |  |      |  |  |                                                                                                                        
| |  |  | 32.1 |  |  | Certification Pursuant to 18 U.S.C.
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002  



| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------
|
| |     |  | None                

18



---



##### Table of Contents






SIGNATURE

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

|                       |  |                                             |  | 
|---------------------- |  | ------------------------------------------- |  | 
|                       |  | SPORT CHALET, INC.                         
|                       |  |                                             |  | 
|DATE: November 5, 2003 |  | By: /s/ Howard K. Kaminsky                  |  | 
|                       |  |                                             | 
|                       |  | Howard K. Kaminsky                          |  | 
|                       |  | Executive Vice President-Finance,           |  | 
|                       |  | Chief Financial Officer and Secretary       |  | 
|                       |  | (On behalf of the Registrant and as         |  | 
|                       |  | Principal Financial and Accounting Officer) |  | 

19