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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

              [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Fiscal Year ended February 3, 2001

                       Commission file number 000-23515

                              GART SPORTS COMPANY
            (Exact name of registrant as specified in its charter)

                                   Delaware
        (State or other jurisdiction of incorporation or organization)

                                  84-1242802
                     (I.R.S. Employer Identification No.)

                                 1000 Broadway
                            Denver, Colorado 80203
               (Address of principal executive office)(Zip Code)

                                (303) 861-1122
             (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:
                                     None

          Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $.01 per share
                               (title of class)

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

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

  As of March 30, 2001, there were outstanding 7,366,150 shares of the
registrant's common stock, $.01 par value, and the aggregate market value of
the shares (based upon the closing price on that date of the shares on the
NASDAQ National Market) held by non-affiliates was approximately $21,000,000.

                      Documents Incorporated by Reference

  Part III of this Form 10-K is incorporated by reference from the
Registrant's 2001 definitive proxy statement to be filed with the Securities
and Exchange Commission no later than 120 days after the end of the
Registrant's fiscal year.

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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
 <C>            <S>                                                       <C>
 Part I.................................................................    1
  Items 1. & 2.  Business and Properties...............................     1
  Item 3.        Legal Proceedings.....................................    10
  Item 4.        Submission of Matters to a Vote of Security Holders...    10
 Part II................................................................   11
                 Market Price of Common Stock and Related Stockholder
  Item 5.        Matters...............................................    11
  Item 6.        Selected Consolidated Financial Data..................    11
  Item 7.        Management's Discussion and Analysis of Financial
                 Condition and Results of Operations...................    14
                 Quantitative and Qualitative Disclosures about Market
  Item 7a.       Risk..................................................    19
  Item 8.        Financial Statements and Supplementary Data...........    20
  Item 9.        Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure...................    20
 Part III...............................................................   21
  Item 10.       Directors and Executive Officers of the Registrant....    21
  Item 11.       Executive Compensation................................    23
                 Security Ownership of Certain Beneficial Owners and
  Item 12.       Management............................................    23
  Item 13.       Certain Relationships and Related Transactions........    23
 Part IV................................................................   24
                 Exhibits, Financial Statement Schedules, and Reports
  Item 14.       on Form 8-K...........................................    24
 Index to Consolidated Financial Statements.............................  F-1
</TABLE>

                  NOTE REGARDING FORWARD-LOOKING INFORMATION

  Certain statements contained in this Annual Report on Form 10-K, including
without limitation, statements containing the words "believes," "anticipates,"
"expects" and words of similar import, 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 involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Gart Sports Company and its subsidiaries (the "Company"), or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
factors include, but are not limited to, the effect of economic conditions
generally, and retail and sporting goods business conditions specifically, the
impact of competition in existing and future markets, the exercise of control
over the Company by certain stockholders and the conflicts of interest that
might arise among the Company, such stockholders and their affiliates, the
inherent uncertainties relating to the integration of Oshman's Sporting Goods,
Inc. (Oshman's) following the acquisition of Oshman's by the Company scheduled
to close in the second quarter of fiscal 2001, the Company's ability to
successfully anticipate merchandising and market trends and customers'
purchasing preferences, and the impact of seasonality and weather conditions.
These factors are discussed in more detail elsewhere in this report,
including, without limitation, under the captions "Business and Properties,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Relationships and Related Transactions." Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such forward-looking statements. The Company disclaims any obligation to
update any such factors or to publicly announce the result of any revisions to
any of the forward-looking statements contained herein to reflect future
events or developments.

                                  Trademarks

  Gart Sports(R), Gart Sports Superstore(R), Gart Bros. Sporting Goods
Company(R), Sportmart(R), Sniagrab(R), Sportscastle(R) and Gart Sports
Company(R) are federally registered trademarks of the Company. In addition,
the Company claims common law rights to its trademarks listed above and
various other trademarks and service marks. All other trademarks or registered
trademarks appearing in this Annual Report are trademarks or registered
trademarks of the respective companies that utilize them.
<PAGE>

                                    PART I

ITEM 1. and ITEM 2. Business and Properties

General

  Gart Sports Company and its subsidiaries (collectively, the "Company" or
"Gart Sports") is one of the leading sporting goods retailers in the midwest
and western United States and the leading full-line sporting goods retailer in
the Rocky Mountain region. The Company is the second largest, publicly traded,
full-line sporting goods retailer in the United States. The Company's business
strategy is to provide its customers with an extensive selection of high
quality, brand name merchandise at competitive prices with a high level of
customer service. The Company operated 120 sporting goods stores in 16 states
as of February 3, 2001, the end of its 2000 fiscal year. The Company's
executive offices are located at 1000 Broadway, Denver, Colorado 80203, and
its telephone number is (303) 861-1122.

  Founded in 1928, the Company operates under the Gart Sports and Sportmart
names in California, Colorado, Illinois, Utah, Washington, Idaho, Minnesota,
Wyoming, Ohio, Oregon, Wisconsin, Montana, New Mexico, Nevada, Indiana and
Iowa. The Company was incorporated in Delaware in 1993 and operates through
its wholly-owned subsidiaries, Gart Bros. Sporting Goods Company ("Gart
Bros.") and Sportmart, Inc. ("Sportmart").

  On February 22, 2001, Gart Sports announced it had signed a definitive
agreement to acquire Oshman's Sporting Goods. Inc. (AMEX: OSH). Gart Sports
has secured commitments from certain shareholders of Oshman's common stock to
vote their shares in favor of the proposed merger, bringing the total
beneficial owners committed to voting in favor of the proposed merger to
approximately 50.1%. Green Equity Investors, L.P., an affiliate of Leonard
Green & Partners, L.P., which beneficially owns approximately 64.0% of the
outstanding common stock of Gart Sports, has also agreed to vote its shares in
favor of the proposed merger. Upon completion of the acquisition of the 58
Oshman's stores, the Company will consist of 178 stores in 25 states. On a
pro-forma combined basis, Gart Sports and Oshman's generated revenue of
approximately $1.1 billion during the fiscal year ended February 3, 2001.

Industry Overview

  The retail sporting goods industry is comprised of five principal categories
of retailers: (i) large format sporting goods stores, which typically range
from 20,000 to 100,000 square feet in size and emphasize high sales volumes
and a large number of SKUs, (ii) traditional sporting goods stores, which
typically range in size from 5,000 to 20,000 square feet and carry a more
limited assortment of merchandise, (iii) specialty sporting goods stores,
generally specializing in one product category of sporting goods, (iv) mass
merchandisers, including discount retailers, warehouse clubs and department
stores, which although generally price competitive, have limited customer
service and a more limited selection of sporting goods, and (v) catalog and
internet based retailers, which sell a full line of products via catalogs and
the internet.

  The sporting goods industry in the United States is characterized by
fragmented competition, limited assortments from traditional sporting goods
retailers, customer preference for one-stop shopping convenience and the
growing importance of delivering value to the customer through selection,
service and price. The Company believes that these characteristics of the
sporting goods industry make the Company's superstore format particularly well
suited to grow and increase the Company's market share relative to traditional
sporting goods stores, specialty sporting goods retailers, mass merchandisers,
other large format sporting goods retailers, and catalog and internet based
retailers.

                                       1
<PAGE>

Business Strategy

  The Company's business strategy is to provide its customers with an
extensive selection of high quality, brand name merchandise at competitive
prices with a high level of customer service. The key elements of the
Company's business strategy are the following:

    Broad Assortment of Quality, Brand Name Products. The Company offers a
  wide selection of high-quality, brand name apparel and equipment at
  competitive prices designed to appeal to both the casual sporting goods
  customer and sports enthusiast for their sporting goods needs. The Company
  carries over 100,000 active SKUs, including popular brands such as Adidas,
  Coleman, Columbia, Easton, FootJoy, K2, New Balance, Nike, Rawlings,
  Reebok, Rollerblade, Rossignol, Russell, Salomon, Spalding, Speedo and
  Wilson. The Company's customer service, expert technicians and specialty
  store presentation enable it to purchase directly from manufacturers the
  full product lines typically available only in specialty stores and pro
  shops, such as Armour, Cleveland, Cobra, Taylor Made, and Titleist golf
  accessories, Diamondback bikes, The North Face apparel and accessories and
  Volkl and Volant ski equipment.

    Customer Service. The Company's objective is to provide a high level of
  customer service generally associated with specialty sporting goods stores
  and pro shops. The Company has committed increased resources to its
  customer service program in an effort to achieve these high standards. The
  Company will increase its use of an independent professional shopping
  service to monitor the stores' compliance with customer service initiatives
  and procedures. In addition, the Company offers its customers special
  services including special order capability, equipment rental, on site
  repair centers, discount ski lift tickets, and hunting and fishing
  licenses. The Company strives to provide the highest level of technical
  support.

    Attractive Shopping Environment. The Company seeks to offer an attractive
  shopping environment that showcases the breadth of the Company's product
  offerings and reinforces the Company's distinctive brand image. The
  Company's brightly lit stores are designed to project a clean, upscale
  atmosphere, with a user-friendly layout featuring wide aisles, well-
  organized merchandise displays and clearly defined departments arranged in
  a logical and convenient floor plan.

    Customized Merchandise Mix. The Company tailors its product mix to market
  demographics and lifestyles. Purchasing decisions are made on a regional,
  and sometimes a store by store basis and store operations work directly
  with the Company's buyers to revise the product mix in each store. Various
  factors typically influence the product mix in a particular market, such as
  disposable income, professional and amateur sports activities, and specific
  regional and seasonal activities.

    Promotional Advertising and Marketing. The Company uses a promotional
  pricing and advertising strategy focused on the creation of "events" to
  drive traffic and sales in its stores. Each event is based upon either a
  key shopping period such as the winter holidays, Father's Day and Back-to-
  School or a specific sales or promotional event, including the annual
  Sniagrab ("bargains" spelled backwards) sale, which the Company believes is
  the largest pre-season ski and snowboard sale in the United States. The
  Company's strategy of clustering stores in major markets enables it to
  employ an aggressive advertising strategy on a cost-effective basis,
  utilizing newspaper, radio and television.

Merchandising

  The Company offers its customers over 100,000 active SKUs of high quality,
brand name sporting goods and apparel. The Company believes that the quality
and breadth of its winter sports merchandise has contributed to its strong
reputation in the Rocky Mountain region. In addition, the Company believes
that its ability to manage the complex inventory requirements of the winter
product line, which is characterized by a short selling season, gives it an
important competitive advantage. The Company's merchandise is broadly
classified into one of two major categories, hardlines or softlines. Hardlines
includes such items as skis, golf equipment, bicycles, exercise equipment and
camping, hunting, and fishing gear. Softlines consist primarily of apparel,
footwear and outerwear.

                                       2
<PAGE>

  The following table sets forth the percentage of total net sales for each
major product category for each of the Company's last three fiscal years:

<TABLE>
<CAPTION>
                                                       Fiscal Years
                                             ----------------------------------
                                                2000        1999        1998
                                             ----------- ----------  ----------
                                             (Unaudited) (Unaudited) (Unaudited)
   <S>                                       <C>         <C>         <C>
   Hardlines...............................      51.5%      50.3%       47.9%
   Softlines:
     Apparel...............................      25.3       25.2        26.0
     Footwear..............................      23.2       24.5        26.1
                                                -----      -----       -----
       Subtotal............................      48.5       49.7        52.1
                                                -----      -----       -----
       Total...............................     100.0%     100.0%      100.0%
                                                =====      =====       =====
</TABLE>

 Winter Equipment and Apparel

  The Company believes that its stores offer the widest selection of ski and
snowboard merchandise in the Rocky Mountain region. This extensive selection
consists of winter sports apparel, accessories and equipment, including a
broad selection of apparel and equipment for Nordic (cross country) skiing.
Gart Sports has become a leader in the snowboard industry with its wide range
of snowboard-related products, including snowboards, boots, bindings and
apparel. The Company offers products from a wide variety of well-known winter
sports equipment and apparel suppliers, including Columbia, K2, Salomon,
Rossignol and Nordica.

  In addition to offering the most widely known and available popular brands,
the Company's stores also carry winter equipment and apparel from
manufacturers that are typically only available in specialty stores, such as
Volkl, Volant, The North Face and Bogner.

  Many of the Company's stores also rent winter sports equipment, including
skis, snowboards, boots and poles. The rental equipment ranges from entry-
level products designed for beginners to advanced products for more
accomplished skiers and snowboarders. Other services offered in these stores
include demo ski programs, custom boot fitting, complete ski and snowboard
repair facilities, each with specialized equipment, and the convenience of in-
store discounted lift ticket sales to area resorts.

 Footwear, In-line Skates and General Apparel

  The Company's stores carry a full line of athletic footwear, sportswear and
apparel designed for a wide variety of activities and performance levels.
Footwear is available for such diverse activities as basketball, baseball,
football, soccer, tennis, golf, aerobics, running, walking, cycling, hiking,
cross-training, wrestling and snow-shoeing. The Company's wide variety of
sportswear and apparel include a broad selection of licensed apparel for
professional and college teams. The Company is also a major retailer of in-
line skates and ice skates. Special services in this area include in-line
skate repair, bearing and wheel changes, and training and safety programs
designed to help new skate owners safely develop their in-line skating skills.
The Company's extensive variety of well-known apparel and footwear vendors
include Nike, Adidas, Reebok, New Balance, Timberland, Vans, Russell Athletic,
K2 and Rollerblade.

 Team Sports, Exercise and Outdoor Recreation

  Team Sports and Exercise. The Company offers a broad range of brand name
equipment for traditional team sports, including football, baseball, softball,
basketball, hockey, volleyball and soccer. The Company also carries a variety
of fitness equipment, including treadmills, stationary bicycles, stair
climbers, weight machines and free weights, and equipment for recreational
activities including table tennis, darts, badminton, croquet and horseshoes.
In addition, the Company offers home delivery and in-home set up of exercise
equipment and outdoor equipment (such as basketball hoops and trampolines).
The Company's stores carry brands such as Icon/Proform, Easton, Lifetime
Products, Rawlings, Wilson, Spalding and Bauer.

                                       3
<PAGE>

  Golf and Tennis. The Company maintains a wide assortment of golf and tennis
apparel and equipment to cater to every type of sporting goods customer,
ranging from the recreational athlete to the most avid sports enthusiast. Most
of the Company's stores have a tennis stringing and a re-gripping center and
several stores rent rackets. Many stores feature indoor putting greens and
driving cages, enabling customers to try out equipment prior to purchase. The
Company has access to products from a wide variety of well-known golf and
racquet sports equipment and apparel suppliers, including Taylor Made, Cobra,
Cleveland, Armour Golf, Titleist, Wilson, Prince and Head.

  Cycling. In most of its stores, the Company offers a selection of bicycles,
including mountain bikes, BMX and youth bikes, from such manufacturers as
Diamondback, Mongoose, Nishiki and Huffy. The Company's stores carry cycling
apparel, accessories and components from suppliers such as Bell, Descente,
Nike, Shimano, Giro and Thule. Most of the Company's stores have their own
bicycle repair facility where work can be performed on most makes and models
of bikes, including those purchased from other retailers. The Company's stores
also carry a selection of scooters from such manufacturers as Razor, K2, and
Airwalk.

  Water Sports. The Company carries a broad selection of products designed for
a variety of water sports, including recreational and competitive swimming,
water skiing, canoeing, knee boarding, wake boarding, body boarding and
surfing. Suppliers of these products include HO, O'Brien and O'Neill.
Swimsuits and accessories are available from Jansen, Mossimo, Nike,
Quiksilver, Sideout, Speedo and Tyr. In addition, the Company carries
snorkeling equipment and wet suits.

 Hunting, Fishing and Camping Apparel and Equipment

  Hunting. The Company carries a broad selection of hunting equipment and
accessories, including eye and ear protection, gun cabinets and safes. In
particular markets, our stores provide a complete selection of sporting arms,
scopes, clothing and hunting licenses. The Company carries such top brand
names as Remington, Beretta, Browning, Leupold, Weatherby and Smith & Wesson.

  Fishing. The Company's stores offer a broad range of freshwater and salt
water fishing equipment, accessories, and fishing licenses. In particular
markets, several stores offer instructional fishing courses on topics such as
fly tying and salt water fishing. The Company sells equipment and accessories
from widely known fishing equipment and accessory manufacturers including
Shimano, Shakespeare, Berkley, Scientific Angler and Daiwa.

  Camping. The Company's stores typically carry a wide selection of outdoor
products for most types of camping, back-packing, canoeing, kayaking, and
outdoor activities. In particular markets, the Company offers products from a
broad range of manufacturers, including Coleman, Jansport, Kelty, Slumberjack,
and Igloo.

The Company's Stores

 Store Design

  The Company creates a dynamic shopping atmosphere that appeals broadly to
both the casual sporting goods customer and the sports enthusiast. Based on
more than 70 years of experience in the sporting goods retail industry, the
Company has developed a superstore prototype designed to feature the quality
and variety of brand name merchandise offered in its stores. The Company's
superstores typically range in size from 30,000 to 45,000 square feet
depending on market demographics. The Company has determined that the
superstore format provides the best opportunity for growth. Generally, 80% of
store space is dedicated to selling while 20% is used for office and non-
retail functions.

  The Company performed various levels of remodeling in 29 stores during
fiscal 2000 and plans 27 additional store remodels in fiscal 2001. In certain
stores, the Company plans to improve the shopping environment with clearer
sight lines, more appealing flooring and color schemes and improved visual
design. In some instances, department size and adjacencies will be tailored to
regional and seasonal needs to improve the stores' shopability.

                                       4
<PAGE>

  The prototype superstore layout features a racetrack configuration with
apparel and specialty brand shops in the middle of the store and the specialty
hardlines departments along the outside of the racetrack. The lighting,
flooring and color scheme is designed to enhance the presentation of the
merchandise and avoid a warehouse-type atmosphere. In addition, many of the
Company's stores feature specialized brand shops for vendors such as Nike,
Columbia, and Adidas, which offer a broad array of vendor-specific products in
specialized, image-enhancing fixtures. The visibility of the branded apparel
and the feature shops emphasize the quality image and brand assortment of the
Company's stores.

  Specialty departments are located adjacent to other related departments and
apparel assortments to increase customer convenience and to stimulate cross-
purchasing. The specialty departments display merchandise on low racking to
allow customers easy access to products and to promote storewide visibility
and easy department identification. The specialty departments use the walls to
display merchandise in order to convey the depth and breadth of product
selection. Department layouts are adjusted periodically to make room for
seasonal products.

  The Company is in the process of rolling out an exciting new fixturing
program that will affect virtually every superstore in the chain. It will
utilize a set of apparel fixtures, accessories, signage and graphics that will
clearly define these categories and sub-categories to create a more customer
friendly environment. The Company is currently negotiating with apparel
vendors to use these same fixtures in developing vendor shop areas. This
coordinated effort will produce a completely integrated, flexible apparel
fixture program.

  The Company's 15 non-superstore freestanding and strip center stores more
closely resemble traditional sporting goods stores and range in size from
10,000 to 31,000 square feet. The Company's ten stores in enclosed shopping
malls average 15,000 square feet and carry a selection of merchandise that
appeals to the mall-oriented shopper, focusing on apparel and footwear. The
Company's five resort stores range in size from 15,000 to 27,000 square feet
and provide a broader merchandise selection and lower prices than typically
available in resort areas, while offering a high level of customer service.

Operations, Customer Service and Training

  Typically, the Company's superstores have 55 to 80 sales associates and
technicians, while its non-superstores employ a staff of approximately 20 to
25. Additional seasonal support is hired during Father's Day, Back-to-School,
Thanksgiving, Christmas and for the annual Sniagrab pre-season ski sale.

  The Company employs a Store Manager, a Sales Manager and a Merchandise
Manager in each store. The Store Manager reports to a District Manager who is
responsible for a number of stores within a limited geographic region. There
are currently 16 District Managers who report to two Regional Vice Presidents.

  The Company's objective is to provide the same high level of customer
service that is generally associated with specialty sporting goods stores and
pro shops. The Company has committed increased resources toward customer
service and training in an effort to achieve these high standards. Product
training clinics have been set-up to provide product knowledge training for
all associates in the serviceable areas of ski, snowboard, golf, tennis, bike,
baseball and home fitness. Customer service training has also been implemented
for all store associates and management teams to heighten the awareness of
customer service and improve the customer shopping experience in the Company's
stores. New customer service programs emphasizing add-on sales, customer
acknowledgement and exceeding customer expectations have been implemented in
the Company's stores to recognize and award exceptional service by both
individuals and overall store teams. The Company uses an independent
professional shopping service to monitor compliance with customer service
initiatives and procedures.

  The Company's stores are typically open seven days a week, from 9:00 a.m. to
9:00 p.m., Monday through Saturday; and 10:00 a.m. to 6:00 p.m. on Sunday.
Hours are adjusted for individual markets as necessary.

                                       5
<PAGE>

Site Selection and Location

  In choosing appropriate markets, the Company considers the demographic and
lifestyle characteristics of a market, including, among other factors, the
following: levels of disposable income; trade area; local buying patterns;
enthusiasm for outdoor recreation; popularity of collegiate and professional
sports teams; and regional sports activities.

  The following table sets forth the location, by state, of the Company's
stores, as of February 3, 2001:

<TABLE>
<CAPTION>
                                                                   Total Number
   State                    Superstores Resort Stores Other Stores  of Stores
   -----                    ----------- ------------- ------------ ------------
   <S>                      <C>         <C>           <C>          <C>
   California..............      30           --           --           30
   Colorado................      11            3            9           23
   Illinois................      15           --           --           15
   Utah....................       4            1            7           12
   Washington..............       9           --           --            9
   Idaho...................       1           --            6            7
   Minnesota...............       5           --           --            5
   Wyoming.................      --            1            3            4
   Ohio....................       3           --           --            3
   Oregon..................       3           --           --            3
   Wisconsin...............       2           --           --            2
   Montana.................       2           --           --            2
   New Mexico..............       2           --           --            2
   Nevada..................       1           --           --            1
   Indiana.................       1           --           --            1
   Iowa....................       1           --           --            1
                                ---          ---          ---          ---
     Total.................      90            5           25          120
                                ===          ===          ===          ===
</TABLE>

  The Company plans to open new stores primarily in existing markets to
further leverage the Company's fixed cost structure, advertising program and
distribution system. The Company intends to open eight to ten additional
stores in fiscal 2001.

Management Information Systems

  Over the last five years, the Company has installed sophisticated management
information systems which use JDA, E-3 Replenishment, and Arthur Planning
retail software operating on an IBM AS/400 platform. The Company utilizes IBM
4680 and 4690 point-of-sale systems that incorporate scanning, price look-up,
zone pricing support, and store level access to the Company's merchandise
information system. The Company's fully integrated management information
systems track purchasing, sales and inventory transfers down to the SKU level
and have allowed the Company to improve overall inventory management by
identifying individual SKU activity and projecting trends and replenishment
needs on a timely basis. These systems have enabled the Company to increase
margins by reducing inventory investment, strengthening in-stock positions,
reducing the Company's historical shrinkage levels, and creating store level
perpetual inventories and automatic inventory replenishment on basic items of
merchandise. The Company has implemented a state-of-the-art data warehouse
application that allows its merchandising staff to analyze product and pricing
strategies, its operations staff to optimize its investments in store labor,
and its executive staff to monitor all of the key business performance
indicators on a daily basis. The Company has implemented a fully integrated
merchandise planning and allocation system that optimizes the distribution of
most products to the stores through the integration of historical sales data
and forecasted data at an individual store and item level. This minimizes
markdowns taken on merchandise and improves sales on these products. Store
operations personnel in every location have online access to e-mail, product
signage, standard operating procedures, and advertising information through
the

                                       6
<PAGE>

Company's intranet. The Company has implemented Radio Frequency ("RF")
scanning for all of its stores and is continuing to roll out this technology
to its distribution centers this year. This technology allows the Company to
streamline its merchandise handling and inventory management. RF technology,
along with expansion of the Company's Electronic Data Interchange ("EDI")
initiatives, will result in lower overall cost of inventory ownership and
improved accuracy in merchandise requirements forecasting.

Advertising and Promotion

  The Company's comprehensive marketing program is designed to promote the
Company's extensive selection of brand name products at competitive prices.
The program is centered on extensive newspaper advertising supplemented by
television, radio and billboard ads. The advertising strategy is focused on
weekly newspaper advertising utilizing both four-page pre-printed flyer
inserts and standard run of press ("ROP") advertising, with additional
emphasis on key shopping periods, such as the winter holidays, Father's Day,
Back-to-School, and on specific sales and promotional events, including the
annual Sniagrab sale.

  The Company's strategy of clustering stores in major markets enables it to
employ an aggressive advertising strategy on a cost-effective basis through
the use of newspaper, radio and television advertising. The Company's goal is
to be one of the dominant sporting goods advertisers in each of its markets.
The Company advertises in major metropolitan newspapers as well as regional
newspapers circulated in areas surrounding its store locations. Newspaper
advertising typically consists of weekly promotional ads with three-color
inserts on a weekly basis. Television advertising is generally concentrated
three to four days prior to a promotional event or key shopping period. Radio
advertising is used primarily to publicize specific promotions in conjunction
with newspaper advertising or to announce a public relations promotion or
grand opening. Billboards emphasizing the Company's image and high quality
brand name merchandise are strategically located on high traffic thoroughfares
near store locations. Vendor payments under cooperative advertising
arrangements with the Company, as well as vendor buy-ins to sponsor sporting
events and programs, have significantly contributed to the Company's
advertising leverage.

  The Company's advertising is designed to create an "event" in the stores and
to drive customer traffic with advertisements promoting a wide variety of sale
priced merchandise appropriate for the current holiday or event. In addition
to holidays, the Company's events include the Sniagrab sale, celebrity
autograph sessions, events related to local sports teams, race sponsorships
and registrations, vendor demonstrations and other activities that attract
customers to its stores. The Company's marketing program is administered by an
in-house staff.

  The Company sponsors tournaments and amateur competitive events in an effort
to align itself with both the serious sports enthusiast and the recreational
athlete. The Company is also recognized as a major sponsor of professional
sports teams in some of its markets, including, from time to time, the Denver
Broncos, Colorado Rockies and Avalanche, and the Minnesota Wild.

Purchasing and Distribution

  The Company's Merchandise Purchasing Department has an average of
approximately 15 years of retail experience. In addition to merchandise
procurement, the buying staff is also responsible for determining initial
pricing, product marketing plans and working with the allocation and
replenishment groups to establish stock levels and product mix. The buying
staff also regularly communicates with store operations to monitor shifts in
consumer tastes and market trends.

  The Company's Planning, Replenishment, Allocation, and Merchandise Control
Department is responsible for merchandise distribution, inventory control, and
the E-3 Replenishment Purchasing and Allocation System. This group acts as the
central processing intermediary between the buying staff and the Company's
stores. The group also coordinates the inventory levels necessary for each
advertising promotion with the buying staff and Advertising Department,
tracking the effectiveness of each ad to allow the buying staff and
Advertising Department to determine the relative success of each promotional
program. In addition, the group's other duties

                                       7
<PAGE>

include implementation of price changes, creation of all vendor purchase
orders, and determination of the adequate amount of inventory for each store.

  The Company purchases merchandise from over 1,000 vendors and has no long-
term purchase commitments. During fiscal 2000, Nike, the Company's largest
vendor, represented approximately 11.7% of the Company's purchases. No other
vendor represented more than 10.0%.

  The Company utilizes a "hub and spoke" distribution system in which vendors
ship directly to central distribution centers serving regional stores.
Management believes that its distribution system has the following advantages
as compared to a direct delivery (i.e., drop shipping) system utilized by
other retailers: reduced individual store inventory investment; more timely
replenishment of store inventory needs, better use of store floor space;
reduced transportation costs, and easier returns to vendors.

  The Company has three regional distribution centers: (1) a 240,000 square
foot facility located in Denver, Colorado, (2) a 202,500 square foot facility
located in Fontana, California, and (3) a 141,000 square foot facility located
in Woodridge, Illinois. Inventory arriving at the distribution centers is
allocated directly to the stores or to the distribution center or to both. The
E-3 automated reorder system regularly replenishes the stores by allocating
merchandise from the distribution centers based on each store's sales.
Merchandise allocated by the E-3 system to the Company's stores accounts for
approximately 25% of the Company's total net sales. This system has
significantly reduced the need for back-stock in the stores. The Company plans
to continue adding SKUs to this automated reorder system.

  The Company operates tractor trailers for delivering merchandise from its
Denver distribution center to its Colorado stores, and contracts with common
carriers to deliver merchandise to its stores outside a 150-mile radius from
Denver and to its stores receiving merchandise from the Company's Fontana,
California and Woodridge, Illinois distribution centers. The Company is
currently evaluating its distribution system.

Competition

  The retail sporting goods industry is highly fragmented and intensely
competitive. While the Company's competition differs by market, there are five
general categories of sporting goods retailers with which the Company
competes: large format sporting goods stores, traditional sporting goods
stores, specialty sporting goods stores, mass merchandisers and catalog and
internet based retailers.

  Large Format Sporting Goods Stores. Stores in this category include Galyans,
The Sports Authority, Dick's Sporting Goods and Sport Chalet, typically range
from 20,000 to 100,000 square feet in size and tend to be destination
(freestanding or strip shopping center anchor) locations. Most large format
sporting goods stores emphasize high sales volumes and a large number of SKUs.

  Traditional Sporting Goods Stores. This category consists of traditional
sporting goods chains, such as Big 5 and Hibbett Sporting Goods, as well as
local independent sporting goods retailers. These stores typically range in
size from 5,000 to 20,000 square feet and are frequently located in regional
malls and strip shopping centers. Traditional chains and local sporting goods
stores often carry a more limited assortment of products.

  Specialty Sporting Goods Stores. This category consists of specialty stores
and pro shops specializing in certain categories of sporting goods. Examples
include such national retail chains as The Athlete's Foot, Champs, Finish
Line, Foot Locker, REI, Bass Pro Shops, Pro Golf Discount and Nevada Bob's.
These retailers are highly focused, selling generally only one product
category such as athletic footwear, ski or snowboard equipment, backpacking
and mountaineering, or golf and tennis equipment and apparel.

  Mass Merchandisers. Stores in this category include discount retailers such
as Target, Kmart and Wal-Mart, warehouse clubs such as Costco, and department
stores such as JC Penney and Sears. These stores range in size from
approximately 50,000 to 200,000 square feet and are primarily located in
regional malls and strip

                                       8
<PAGE>

shopping centers. Sporting goods merchandise and apparel represent a small
portion of the total merchandise in these stores and the selection is often
more limited than in other sporting goods retailers.

  Catalog and Internet Based Retailers. This category consists of catalog
retailers such as Cabela's and on-line internet retailers such as Global
Sports Interactive. These competitors sell a full line of sporting goods
products via catalogs and the internet.

  The Company believes that although it will continue to face competition from
retailers in each of these categories, the most significant competition is
expected to be from the large format sporting goods stores. The Company faces
direct competition from large format sporting goods stores, including Sport
Chalet in California; The Sports Authority in California, Illinois and
Washington; Dick's Sporting Goods in Wisconsin, Illinois and Ohio; and Galyans
in Colorado, Indiana, Illinois, Minnesota and Ohio. The principal competitive
factors include store location and image, product selection, quality and
price, and customer service. Increased competition in markets in which the
Company has stores, the adoption by competitors of innovative store formats
and retail sales methods or the entry of new competitors or the expansion of
operations by existing competitors in the Company's markets could have a
material adverse effect on the Company's business, financial condition and
operating results. In addition, certain of the Company's competitors have
substantially greater resources than the Company. The Company believes that
the principal strengths with which it competes are its broad selection and
competitive prices combined with high level customer service and brand names
typically available only in specialty stores and pro shops.

Properties

  The Company currently leases all of its store locations. Most leases provide
for the payment of minimum annual rent subject to periodic adjustments, plus
other charges, including a proportionate share of real estate taxes, insurance
and common area maintenance. Leases for ten of the Company's non-superstore
format stores have expired or are expiring by the end of fiscal 2001. Two of
such stores are occupied on a month-to-month basis, three of such stores are
closed and five stores are subject to leases with an option to renew or
relocate. The Company regularly evaluates whether to renew store leases in
existing locations or to strategically relocate some of the stores to better
locations and replace them with larger stores. The Company believes that at
store locations where it chooses to remain and renew expired leases, the
Company can do so on favorable terms. Leases for the Company's 90 Superstores
expire between 2001 and 2018, with three leases expiring in fiscal 2001 The
three expiring leases include options to renew. The Company anticipates that
all of its new stores will have long-term leases, typically 10-15 years, with
multiple five-year renewal options.

  Seven of the leases for the Company's stores are with partnerships, the
partners of which are certain former officers or directors of Sportmart
(including Messr. Larry Hochberg, currently a director of the Company) and
their family members (the "Hochberg Partnerships"). In addition, the Company
leases from Hochberg Partnerships three stores that the Company no longer
occupies but sublets. See "Certain Relationships and Related Transactions."

  In addition, as a result of the closing of Sportmart's Canadian subsidiary,
the Company remains secondarily liable for two leases the Company has assigned
in Canada and is contingently liable behind two other parties with respect to
a portion of a third location in Canada. The Company has sublet the former
Sportmart corporate offices in Wheeling, Illinois.

  The Company owns a vacant retail location in Edmonton, Alberta, Canada,
which is being marketed for sale.

  The Company also leases its three regional distribution centers. The lease
for the 240,000 square foot distribution center in Denver, Colorado, expires
in 2004 with a ten year renewal option. The lease for the 202,500 square foot
distribution center in Fontana, California expires in 2008, assuming all
options are exercised. The lease for the 141,000 square foot distribution
center in Woodridge, Illinois expires in 2007, assuming all options are
exercised. In addition, the Company leases a warehouse in Denver, Colorado.
The lease for the 76,000 square

                                       9
<PAGE>

foot warehouse expires in 2001 and will be replaced with a 100,000 square foot
warehouse in Denver, Colorado. The lease for the 100,000 square foot warehouse
will expire in 2007, assuming all options are exercised.

Employees

  At March 30, 2001, the Company employed approximately 5,100 individuals, 48%
of whom were employed on a full-time basis and 52% of whom were employed on a
part-time basis (less than 32 hours per week). Due to the seasonal nature of
the Company's business, total employment fluctuates during the year. The
Company considers its employee relations to be good. None of the Company's
employees are covered by a collective bargaining agreement.

Trademarks and Tradenames

  The Company uses the Gart Sports(R), Gart Sports Superstore(R), Gart Bros.
Sporting Goods Company(R), Sniagrab(R), Sportscastle(R) and Gart Sports
Company(R) trademarks and trade names, which have been registered with the
United States Patent and Trademark Office. Sportmart(R) and Sportmart's
corporate logo are federally registered trademarks of the Company. The Company
also owns numerous other trademarks and servicemarks which involve the
manufacturing of soft goods, advertising slogans, promotional event names and
store names used in its business.

ITEM 3. Legal Proceedings

  The Company is, from time to time, involved in various legal proceedings
incidental to the conduct of its business. The Company believes that the
outcome of all such pending legal proceedings to which it is a party will not,
in the aggregate, have a material adverse effect on the Company's business,
financial condition, or operating results.

  On July 24, 1997, the Internal Revenue System proposed adjustments to the
1992 and 1993 consolidated federal income tax returns of the Company and its
former parent company, now Thrifty PayLess Holdings, Inc., a subsidiary of
RiteAid Corporation, and the manner in which LIFO inventories were
characterized on such returns. See note 19 to the consolidated financial
statements.

  In June 2000, a former employee of Sportmart brought two class action
complaints in California against the Company, alleging certain wage and hour
claims in violation of the California Labor Code, California Business and
Professional Code section 17200 and other related matters. One complaint
alleges that the Company classified certain managers in its California stores
as exempt from overtime pay when they would have been classified as non-exempt
and paid overtime. The second complaint alleges that the Company failed to pay
hourly employees in its California stores for all hours worked. In March 2001,
a third class action complaint was filed in the same court in California
alleging the same wage and hour violations regarding classification of certain
managers as exempt from overtime pay. All the complaints seek compensatory
damages, punitive damages and penalties. The amount of damages sought is
unspecified. Although the court recently denied motions to dismiss the first
two complaints, the Company intends to vigorously defend these matters and at
this time, the Company has not ascertained the future liability, if any, as a
result of these complaints.

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

  No matters were put to a vote of security holders during the fourth quarter
of fiscal 2000.


                                      10
<PAGE>

                                    PART II

ITEM 5. Market Price of Common Stock and Related Stockholder Matters

  The Common Stock began trading on the Nasdaq National Market on January 9,
1998, under the symbol "GRTS." As of March 30, 2001, there were approximately
209 holders of record of Common Stock. The number of holders of Common Stock
does not include the beneficial owners of Common Stock whose shares are held
in the name of banks, brokers, nominees or other fiduciaries. The table below
sets forth the reported high and low closing sales prices of the Common Stock
on the Nasdaq National Market during fiscal 1999 and 2000:

<TABLE>
<CAPTION>
                                                                   High    Low
                                                                  ------- ------
   <S>                                                            <C>     <C>
   Fiscal Year 1999
     First quarter............................................... $ 8.125 $5.750
     Second quarter.............................................. $ 7.750 $5.625
     Third quarter............................................... $ 7.000 $4.500
     Fourth quarter.............................................. $ 6.750 $4.625
   Fiscal Year 2000
     First quarter............................................... $ 6.875 $5.000
     Second quarter.............................................. $ 9.250 $4.750
     Third quarter............................................... $13.500 $8.625
     Fourth quarter.............................................. $13.438 $9.125
</TABLE>

  The Company has never declared or paid any dividends on its Common Stock.
The Company plans to retain earnings to finance future growth and has no
current plans to pay cash dividends to stockholders. The payment of any future
cash dividends will be at the sole discretion of the Company's Board of
Directors and will depend upon, among other things, future earnings, capital
requirements, and the general financial condition of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources." In addition, the Company's
revolving line of credit limits the amount of dividends that may be declared
or paid on the Common Stock.

  During fiscal 1999, the Board of Directors authorized a discretionary
program to purchase up to $3,000,000 of its common stock, par value, $.01 per
share, from time to time, on the open market or in privately negotiated
transactions using the Company's currently available cash. The Company
purchased 156,200 shares of its stock in fiscal 1999 at a cost of
approximately $979,000 and 194,600 shares of its stock at a cost of
approximately $1,191,000 in fiscal 2000. The Company has not purchased any
shares of its stock since September 14, 2000. On March 5, 2001, the Board of
Directors authorized the Company to continue its discretionary share purchase
program and authorized the Company to purchase an additional $3,000,000 of its
stock.

ITEM 6. Selected Consolidated Financial Data

  The selected consolidated financial data presented below under the caption
"Statement of Operations Data" and "Net cash provided by (used in)" for each
of the fiscal years in the three-year period ended February 3, 2001 ("fiscal
2000"), and the "Balance Sheet Data" as of February 3, 2001 and January 29,
2000 are derived from the Company's audited consolidated financial statements.
This data should be read in conjunction with the consolidated financial
statements of the Company, the notes thereto and with Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
"Statement of Operations Data" and "Net cash provided by (used in)" for each
of the fiscal years in the two year period ended January 3, 1998 ("fiscal
1997"), and the 28 day period ended January 31, 1998 ("transition period") and
the "Balance Sheet Data" as of January 30, 1999, January 31, 1998, January 3,
1998 and January 4, 1997 are derived from audited consolidated financial
statements not included in this report.

  During 1995, the Company adopted an annual fiscal reporting period that ends
on the first Saturday in January. Accordingly, fiscal 1997 began on January 5,
1997 and ended on January 3, 1998 and included 52 weeks

                                      11
<PAGE>

of operations. Fiscal 1996 began on January 7, 1996 and ended on January 4,
1997 and included 52 weeks of operations. During 1998, the Company adopted an
annual fiscal reporting period that ends on the Saturday closest to the end of
January. Accordingly, fiscal 2000 began on January 30, 2000 and ended on
February 3, 2001 and included 53 weeks of operations. Fiscal 1999 began on
January 31, 1999 and ended on January 29, 2000 and included 52 weeks of
operations. Fiscal 1998 began on February 1, 1998 and ended on January 30,
1999 and included 52 weeks of operations.

  Management does not believe that the results of operations for the
transition period are indicative of future results, due to the effects of
seasonality and costs associated with the Sportmart acquisition. Therefore,
the results of operations for the transition period are not comparable to
other presented periods. The results for fiscal years 2000, 1999 and 1998 are
comparable to each other, but these results are not comparable to the
transition period ended January 31, 1998 or fiscal 1997 and 1996, which
represent the results of Gart Sports only, before the acquisition of
Sportmart.

<TABLE>
<CAPTION>
                                    Fiscal Years              28 days ended       Fiscal Years
                          ----------------------------------   January 31,    ----------------------
                             2000        1999        1998         1998           1997        1996
                          ----------  ----------  ----------  -------------   ----------  ----------
                               (Dollars in thousands, except share and per share amounts)
<S>                       <C>         <C>         <C>         <C>             <C>         <C>
STATEMENT OF OPERATIONS
 DATA:
Net sales...............  $  751,124  $  680,995  $  658,047   $   38,825     $  228,379  $  204,126
Cost of goods sold,
 buying, distribution
 and occupancy..........    (559,778)   (517,405)   (503,379)     (31,924)      (164,289)   (148,420)
                          ----------  ----------  ----------   ----------     ----------  ----------
Gross profit............     191,346     163,590     154,668        6,901         64,090      55,706
Operating expenses......    (164,830)   (150,985)   (148,348)     (11,360)       (52,721)    (47,604)
Merger integration
 costs..................         --          --       (2,923)      (3,377)          (395)        --
                          ----------  ----------  ----------   ----------     ----------  ----------
Operating income
 (loss).................      26,516      12,605       3,397       (7,836)        10,974       8,102
Interest expense........     (11,071)    (10,615)     (9,302)        (525)          (983)     (1,601)
Other income, net.......         246         779         302           38            776         637
                          ----------  ----------  ----------   ----------     ----------  ----------
Income (loss) before
 income taxes...........      15,691       2,769      (5,603)      (8,323)        10,767       7,138
Income tax benefit
 (expense)..............       7,405        (996)      2,185          318         (4,083)     (2,681)
                          ----------  ----------  ----------   ----------     ----------  ----------
Net income (loss).......  $   23,096  $    1,773  $   (3,418)  $   (8,005)    $    6,684  $    4,457
                          ----------  ----------  ----------   ----------     ----------  ----------
Basic earnings (loss)
 per share..............  $     3.13  $     0.23  $    (0.45)  $    (1.11)    $     1.21  $     0.81
                          ==========  ==========  ==========   ==========     ==========  ==========
Weighted average shares
 of common stock
 outstanding............   7,380,529   7,632,696   7,676,816    7,212,267(1)   5,501,673   5,512,886
                          ==========  ==========  ==========   ==========     ==========  ==========
Diluted earnings (loss)
 per share..............  $     2.99  $     0.23  $    (0.45)  $    (1.11)    $     1.19  $     0.81
                          ==========  ==========  ==========   ==========     ==========  ==========
Weighted average shares
 of common stock and
 common stock
 equivalents
 outstanding............   7,729,601   7,701,427   7,676,816    7,212,267      5,596,823   5,512,886
                          ==========  ==========  ==========   ==========     ==========  ==========
OTHER DATA:
Number of stores at
 beginning of period....         127         125         123           63             60          60
Number of stores opened
 or acquired............         --            7           6           60(2)           5           5
Number of stores
 closed.................          (7)         (5)         (4)         --              (2)         (5)
                          ----------  ----------  ----------   ----------     ----------  ----------
Number of stores at end
 of period..............         120         127         125          123             63          60
                          ==========  ==========  ==========   ==========     ==========  ==========
Total gross square feet
 at end of period.......   4,517,122   4,600,738   4,361,335    4,206,197      1,605,963   1,453,520
Comparable store sales
 increase
 (decrease)(3)..........        6.4%       (0.6%)      (4.5%)       10.0%           5.6%        4.4%
EBITDA(4)...............  $   41,538  $   27,577  $   15,043   $   (6,633)    $   15,040  $   12,396
NET CASH PROVIDED BY
 (USED IN):
 Operating activities...      24,053       1,326      16,289      (15,395)         7,838      21,416
 Investing activities...     (12,385)     (8,806)    (15,561)         483         (3,720)     (2,717)
 Financing activities...     (11,404)      4,544      (6,321)      18,326             40     (16,820)
BALANCE SHEET DATA (at
 end of period):
 Working capital........  $  113,324  $  104,853  $   94,439   $  108,844     $   39,886  $   34,133
 Total assets...........     335,128     344,085     335,119      319,435        121,291      96,435
 Long-term debt.........      95,900     105,900     100,000      105,600            --          --
 Redeemable common
  stock, net............         --          --          --           --           1,904         860
 Stockholders' equity...      88,886      65,894      63,466       68,757         42,613      36,883
</TABLE>

                                      12
<PAGE>

--------
(1) The Company acquired Sportmart, Inc. ("Sportmart") on January 9, 1998 in a
    transaction involving the issuance of 2,180,656 shares of the Company's
    Common Stock, par value $.01 (the "Common Stock"), in exchange for all the
    outstanding common stock of Sportmart.
(2)  Represents the 59 Sportmart stores acquired on January 9, 1998 and one
     new store opened in January 1998.
(3)  Stores enter the comparable store sales base at the beginning of their
     14th month of operation. The 59 Sportmart stores acquired on January 9,
     1998, are included in comparable store sales bases utilizing historical
     Sportmart comparable store data.
(4)  EBITDA is earnings (loss) before income taxes plus interest expense and
     other financing costs and depreciation and amortization. Gart Sports
     believes that, in addition to cash flows from operations and net income
     (loss), EBITDA is a useful financial performance measure for assessing
     operating performance as it provides an additional basis to evaluate the
     ability of Gart Sports to incur and service debt and to fund capital
     expenditures. In evaluating EBITDA, Gart Sports believes that
     consideration should be given, among other things, to the amount by which
     EBITDA exceeds interest costs for the period, how EBITDA compares to
     principal repayments on debt for the period and how EBITDA compares to
     capital expenditures for the period. To evaluate EBITDA, the components
     of EBITDA such as revenue and operating expenses and the variability of
     such components over time should also be considered. EBITDA should not be
     construed, however, as an alternative to operating income (loss) (as
     determined in accordance with accounting principles generally accepted in
     the United States of America ("GAAP")) as an indicator of Gart Sports'
     operating performance or to cash flows from operating activities (as
     determined in accordance with GAAP) as a measure of liquidity. Gart
     Sports' method of calculating EBITDA may differ from methods used by
     other companies, and as a result, EBITDA measures disclosed herein may
     not be comparable to other similarly titled measures used by other
     companies.


                                      13
<PAGE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the notes thereto and the Company's
consolidated financial statements and notes thereto, included elsewhere in
this report.

  In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure About Segments of an Enterprise and Related
Information", which establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its products,
services, major customers and the significant countries in which the entity
holds assets and reports revenue. The Company is a leading retailer of
sporting goods in the midwest and western United States. Given the economic
characteristics of the store formats, the similar nature of the products sold,
the type of customer and method of distribution, the operations of the Company
are aggregated in one reportable segment.

Results of Operations

  The following table sets forth for the periods indicated, certain income and
expense items expressed as a percentage of net sales and the number of stores
open at the end of each period (dollars rounded to millions):

<TABLE>
<CAPTION>
                                 Fiscal 2000    Fiscal 1999     Fiscal 1998
                                -------------  --------------  --------------
                                Dollars   %    Dollars    %    Dollars    %
                                ------- -----  -------  -----  -------  -----
<S>                             <C>     <C>    <C>      <C>    <C>      <C>
Net sales.....................  $751.1  100.0% $681.0   100.0% $658.0   100.0%
Cost of goods sold, buying,
 distribution and occupancy...   559.8   74.5   517.4    76.0   503.4    76.5
                                ------  -----  ------   -----  ------   -----
Gross profit..................   191.3   25.5   163.6    24.0   154.6    23.5
Operating expenses............   164.8   21.9   151.0    22.2   148.3    22.5
Merger integration costs......      --     --      --      --     2.9     0.4
                                ------  -----  ------   -----  ------   -----
Operating income..............    26.5    3.6    12.6     1.8     3.4     0.6
Interest expense..............    11.0    1.5    10.6     1.5     9.3     1.4
Other income, net.............     0.2     --     0.8     0.1     0.3      --
                                ------  -----  ------   -----  ------   -----
Income (loss) before income
 taxes........................    15.7    2.1     2.8     0.4    (5.6)   (0.8)
Income tax benefit (expense)..     7.4    1.0    (1.0)   (0.1)    2.2     0.3
                                ------  -----  ------   -----  ------   -----
Net income (loss).............  $ 23.1    3.1% $  1.8     0.3% $ (3.4)   (0.5)%
                                ======  =====  ======   =====  ======   =====
Number of stores at end of
 period.......................     120            127             125
</TABLE>

  The following table sets forth pro-forma fiscal year 2000 results excluding
the effect of the significant tax benefit and utilizing statutory tax rates
(dollars rounded to millions, except share and per share amounts):


                                     Pro-forma
                                    Fiscal 2000
                                ------------------
                                  Dollars       %
                                ----------    ----

Income before income taxes....  $     15.7     2.1%
Income tax expense............        (6.1)   (0.8)
                                ----------    ----
Net income....................  $      9.6     1.3%
                                ==========    ====
Earnings per share:
 Basic........................  $     1.30
                                ==========
 Diluted......................  $     1.24
                                ==========
Basic weighted average
 shares outstanding...........   7,380,529
                                ==========
Diluted weighted average
 shares outstanding...........   7,729,601
                                ==========


                                      14
<PAGE>

  Newly opened stores enter the comparable store sales base at the beginning
of their 14th month of operation. The 59 Sportmart stores acquired on January
9, 1998 are included in the comparable store sales base utilizing historical
Sportmart comparable store data.

  Inventories are stated at the lower of last-in, first-out ("LIFO") cost or
market. The Company considers cost of goods sold to include the direct costs
of merchandise, plus certain internal costs associated with procurement,
warehousing, handling and distribution. In addition to the full cost of
inventory, cost of goods sold includes related occupancy costs and
amortization and depreciation of leasehold improvements and rental equipment.
Operating expenses include controllable and non-controllable store expenses
(except occupancy), non-store expenses and depreciation and amortization not
associated with cost of goods sold.

Fiscal 2000 as compared to Fiscal 1999

  Net Sales. Net sales increased $70.1 million, or 10.3%, to $751.1 million in
fiscal 2000 compared to $681.0 million in fiscal 1999. Fiscal 2000 consisted
of 53 weeks compared to 52 weeks for fiscal 1999. After adjusting for $11.4
million of net sales contributed by the additional operating week in fiscal
2000, total revenues would have increased by 8.6% to $739.7 million on a 52-
week basis. Comparable store sales increased 6.4% for the comparable 52-week
period, primarily due to increased sales in all categories, particularly in
hardgoods, outdoor products, and apparel categories. Hardgoods sales increased
as a result of strong sales of bicycles and scooters, exercise fitness
equipment and athletic hardgoods. Sales of outdoor products were strong as a
result of a good winter snow season, which resulted in increased sales of skis
and snowboards. Apparel sales were driven by strong sales of ski apparel and
ladies activewear.

  Gross Profit. Gross profit for fiscal 2000 was $191.3 million or 25.5% of
net sales as compared to $163.6 million or 24.0% of net sales for fiscal 1999.
The increase is primarily due to increased merchandise margins in most
departments as a result of improved buying disciplines, more consistency in
the product offerings and increased utilization of the Company's automated
inventory replenishment purchasing and allocation system. Also, occupancy
costs decreased as a percent of sales principally due to the leveraging of the
fixed component of this expense category with higher net sales.

  Operating Expenses. Operating expenses in fiscal 2000 were $164.8 million,
or 21.9% of net sales compared to $151.0 million, or 22.2% of net sales for
fiscal 1999. As a percentage of sales, operating expenses decreased 0.3
percentage points compared to fiscal 1999 due to improved sales and continued
cost controls. The increase in dollars is primarily due to increased store
payroll in response to increased store traffic, an increase in bonuses earned
for fiscal 2000 and the additional expenses incurred due to the extra
operating week in fiscal 2000.

  Operating Income. As a result of the factors described above, operating
income for fiscal 2000 was $26.5 million or 3.6% of net sales compared to
$12.6 million or 1.8% of net sales in fiscal 1999.

  Interest Expense. Interest expense for fiscal 2000 increased to $11.0
million, or 1.5% of net sales, from $10.6 million, or 1.5% of net sales.
Interest expense was flat as a percentage of sales and increased only slightly
in dollars as a result of a higher effective interest rate for fiscal 2000 as
compared to fiscal 1999.

  Income Taxes. The Company's income tax benefit for fiscal 2000 was $7.4
million compared to an income tax expense of $1.0 million in fiscal 1999. The
income tax benefit in the current year reflects the reversal of valuation
allowances, which had offset previously generated deferred tax assets. The
Company's effective tax rate for fiscal 2000 was a benefit of 47.2% compared
to an expense of 36.0% in fiscal 1999.

Fiscal 1999 as compared to Fiscal 1998

  Net Sales. Net sales increased $23.0 million, or 3.5%, to $681.0 million in
fiscal 1999 compared to $658.0 million in fiscal 1998. The increase in net
sales is primarily attributed to the opening of seven new superstores
resulting in $22.2 million in net sales and $4.4 million of increased sales
from new stores opened late in fiscal

                                      15
<PAGE>

1998, which were not yet considered comparable, partially offset by $3.6
million in lost sales from the closing of five smaller format stores.
Comparable store sales decreased 0.6% for the same period, primarily due to
lower sales in licensed apparel, footwear, and in-line skates. The decrease in
licensed apparel is primarily due to the Denver Broncos not repeating as Super
Bowl champions. The footwear and in-line skate segments of the industry
continued to be very competitive in fiscal 1999. The decline in sales of these
items was partially offset by strong sales of outdoor products and hardgoods.

  Gross Profit. Gross profit for fiscal 1999 was $163.6 million or 24.0% of
net sales as compared to $154.6 million or 23.5% of net sales for fiscal 1998.
The increase in gross profit is primarily a result of the synergies realized
from the acquisition of Sportmart and improved assortment management and
buying disciplines. These increases were partially offset by higher occupancy
costs due to new stores opened in fiscal 1999.

  Operating Expenses and Merger Integration Costs. Operating expenses in
fiscal 1999 were $151.0 million, or 22.2% of net sales compared to $151.2
million, or 22.9% of net sales for fiscal 1998. There were no integration
costs in fiscal 1999. In fiscal 1998, the Company incurred $6.0 million of
merger integration costs. Of these costs, $2.9 million were recorded as a non-
recurring charge, and $3.1 million were included in other operating expenses.
These costs consist primarily of professional fees, stay bonuses to employees
at the Sportmart corporate headquarters, travel and moving expenses, costs
associated with re-ticketing merchandise in the Sportmart stores, and expenses
to keep the Sportmart corporate office open during the first part of fiscal
1998. Excluding integration costs from fiscal 1998, operating expenses
increased from $145.2 million or 22.1% of net sales in fiscal 1998 to $151.0
million or 22.2% of net sales in fiscal 1999. This increase is primarily due
to the increase in the number of superstores compared to the prior year and
bonuses earned in fiscal 1999.

  Operating Income. As a result of the factors described above, operating
income for fiscal 1999 was $12.6 million or 1.8% of net sales compared to $3.4
million or 0.6% of net sales in fiscal 1998.

  Interest Expense. Interest expense for fiscal 1999 increased to $10.6
million, or 1.5% of net sales, from $9.3 million, or 1.4% of net sales. The
increase from the prior year is primarily due to an increase in average
interest-bearing debt for the year attributable to new store inventories and
an increase in the effective borrowing rate as a result of rising interest
rates.

  Income Taxes. The Company's income tax expense for fiscal 1999 was $1.0
million compared to an income tax benefit of $2.2 million in fiscal 1998. The
Company's effective tax rate decreased to 36% in fiscal 1999, from 39% in
fiscal 1998, as a result of lower state taxes.

Liquidity and Capital Resources

  The Company's primary capital requirements are for inventory, capital
improvements, and pre-opening expenses to support the Company's expansion
plans, as well as for various investments in store remodeling, store fixtures
and ongoing infrastructure improvements.

                              Cash Flow Analysis
                     (dollars in thousands, except ratios)
<TABLE>
<CAPTION>
                                                  Fiscal    Fiscal    Fiscal
                                                   2000      1999      1998
                                                 --------  --------  --------
   <S>                                           <C>       <C>       <C>
   Cash provided by operating activities........ $ 24,053  $  1,326  $ 16,289
   Cash used in investing activities............  (12,385)   (8,806)  (15,561)
   Cash provided by (used in) financing
    activities..................................  (11,404)    4,544    (6,321)
   Capital expenditures......................... $ 12,550  $ 11,957  $ 14,331
   Long-term debt (at end of period)............   95,900   105,900   100,000
   Working capital (at end of period)...........  113,324   104,853    94,439
   Current ratio (at end of period).............     1.80      1.66      1.60
   Long-term debt to equity ratio (at end of
    period).....................................     1.08      1.61      1.58
</TABLE>

                                      16
<PAGE>

  Cash provided by operating activities in fiscal 2000 was primarily the
result of net income, adjusted for depreciation and amortization, deferred
income taxes, and decreases in inventory, partially offset by decreases in
accounts payable.

  Cash used in investing activities in fiscal 2000 was for capital
expenditures. These expenditures were primarily for the remodeling of existing
stores and the purchase or enhancement of certain information systems.

  Cash used in financing activities in fiscal 2000 represents net payments on
borrowings on the Company's revolving line of credit and purchases of treasury
stock.

  The Company's liquidity and capital needs have been met by cash from
operations and borrowings under a revolving line of credit (the "Credit
Agreement") with CIT/Business Credit, Inc. ("CIT"). The long term debt
currently consists of the Credit Agreement, which allows the Company to borrow
up to 70% of its eligible inventories (as defined in the Credit Agreement)
during the year and up to 75% of its eligible inventories for any consecutive
90 day period in a fiscal year. Borrowings are limited to the lesser of $175
million or the amount calculated in accordance with the borrowing base, and
are secured by substantially all trade receivables, inventories and intangible
assets. The lenders may not demand repayment of principal absent an occurrence
of default under the Credit Agreement prior to January 9, 2003. The Credit
Agreement contains certain covenants, including financial covenants that
require the Company to maintain a specified minimum level of net worth at all
times and restrict the Company's ability to pay dividends. Loan interest is
payable monthly at Chase Manhattan Bank's prime rate plus a margin rate that
cannot exceed 0.25% or, at the option of the Company, at Chase Manhattan
Bank's LIBOR rate plus a margin that cannot exceed 1.75%. The margin rates on
prime and LIBOR borrowings have been reduced since the first quarter of fiscal
2000, as certain earnings levels have been achieved, to 0.0% and 1.50%,
respectively. There was $119.5 million outstanding under the Credit Agreement
at March 3, 2001, and $36.4 million was available for borrowing. The increase
in long-term debt since fiscal year end 2000 is primarily attributable to
seasonal inventory purchases and decreases in accounts payable.

  The Internal Revenue Service has proposed adjustments to the 1992 and 1993
consolidated federal income tax returns of the Company and its former parent,
now Thrifty PayLess Holdings, Inc., a subsidiary of RiteAid Corporation, due
to the manner in which LIFO inventories were characterized on such returns.
Based on management's discussion with the Company's former parent, the Company
believes the potential accelerated tax liability, which could have a negative
effect on liquidity in the near term, ranges from approximately $2,500,000 to
$9,700,000. See note 19 to the consolidated financial statements.

  Capital expenditures, on a stand-alone basis, are projected to be
approximately $15 to $17 million in fiscal 2001. These capital expenditures
will be for new store openings, store remodeling, store fixtures, information
systems, and distribution center facilities. The Company leases all of its
store locations and intends to continue to finance its new stores with long-
term operating leases. Based upon historical data, newly constructed
superstores require a cash investment of approximately $1.8 million for a
40,000 square foot store and $1.5 million for a 33,000 square foot store.
Superstores constructed in existing retail space historically have required
additional capital investments of approximately $700,000 in leasehold
improvements per location. The level of capital improvements will be affected
by the mix of new construction versus renovation of existing retail space.

  The Company believes that on a stand alone basis cash generated from
operations, combined with funds available under the Credit Agreement, would be
sufficient to fund projected capital expenditures and other working capital
requirements through fiscal 2001. The Company intends to utilize the Credit
Agreement to meet seasonal fluctuations in cash flow requirements.

  In conjunction with the pending acquisition of Oshman's, the Company
received a commitment from CIT to increase its revolving line of credit from
$175 million to $300 million. The Company believes that the available
resources under the revised line of credit, combined with cash generated from
operations, will be sufficient to fund the combined entity, the costs incurred
to integrate Oshman's with the Company as well as non-recurring costs incurred
as a result of this transaction.

                                      17
<PAGE>

Foreign Currency and Interest Rate Risk Management

  In connection with the Sportmart acquisition, certain derivative financial
instruments were acquired. The instruments were utilized to reduce interest
rate and foreign currency exchange risks. The Company does not use derivatives
for speculative trading purposes.

  The assumed contracts consisted of one interest rate cap agreement and
various foreign currency option contracts. These agreements were transferred
from Sportmart's credit agreement to the Company's credit agreement. The
interest rate cap agreement was for a notional amount totaling $25.0 million,
placed an interest rate ceiling on LIBOR at 6.0% and expired in August 1999.

  In connection with its Canadian operations (which were closed in 1997),
Sportmart had entered into foreign currency contracts to hedge intercompany
loans and other commitments in currencies other than its Canadian subsidiary's
functional currency. All of these foreign currency contracts expired prior to
fiscal 1998.

Seasonality and Inflation

  The following table sets forth the Company's unaudited consolidated
quarterly results of operations for each of the quarters in fiscal 2000 and
1999. This information is unaudited, but is prepared on the same basis as the
annual financial information and, in the opinion of management, reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information for the periods presented. The results of
operations for any quarter are not necessarily indicative of the results for
any future period.

                                  Fiscal 2000
                             (dollars in millions)

<TABLE>
<CAPTION>
                                              First   Second    Third   Fourth
                                             Quarter  Quarter  Quarter  Quarter
                                             -------  -------  -------  -------
   <S>                                       <C>      <C>      <C>      <C>
   Net sales................................ $165.7   $187.6   $166.1   $231.7
   % of full year net sales.................   22.1%    25.0%    22.1%    30.8%
   Operating income......................... $  3.2   $  7.0   $  2.8   $ 13.5

                                  Fiscal 1999
                             (dollars in millions)

   Net sales................................ $151.9   $172.6   $155.5   $201.0
   % of full year net sales.................   22.3%    25.4%    22.8%    29.5%
   Operating income (loss).................. $  1.9   $  3.6   $ (1.5)  $  8.6
</TABLE>

  The fourth quarter has historically been the strongest quarter for the
Company. For fiscal 2000 and 1999 the fourth quarter contributed 30.8% and
29.5%, respectively, of net sales. Comparable store sales for the 13 weeks
ended January 27, 2001 increased 10.1% and 9.8% for the 14 week period ended
Februray 3, 2001. The Company believes that two primary factors contribute to
this seasonality: first, sales of cold weather sporting goods and ski and
snowboard merchandise during the fourth quarter are generally strong in
anticipation of the ski and snowboard season; second, holiday sales contribute
significantly to the Company's operating results. As a result of these
factors, inventory levels, which gradually increase beginning in April,
generally reach their peak in November and then decline to their lowest level
following the December holiday season. Any decrease in sales for the fourth
quarter, whether due to a slow holiday selling season, poor snowfall in ski
areas near the Company's markets or otherwise, could have a material adverse
effect on the Company's business, financial condition and operating results
for the entire fiscal year.

  Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation has a material impact
on the Company's results of operations. The Company believes that it is
generally able to pass along any inflationary increases in costs to its
customers.


                                      18
<PAGE>

Impact of Recent Accounting Pronouncements

  Beginning in fiscal 1999, the Company began expensing pre-opening costs in
the period in which they are incurred in conformity with Statement of Position
98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up Activities". SOP 98-5
broadly defines start-up activities as those one-time activities related to,
among other things, opening a new facility. Prior to fiscal 1999, the Company
capitalized such costs and amortized the balance over the fiscal year in which
it opened the new facility. The implementation of SOP 98-5 slightly affects
quarterly results; however on an annual basis, there is no financial impact.
Generally, the Company incurs approximately $125,000 of pre-opening costs per
new store.

  In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Statement became effective in the first quarter of fiscal
year 2001. The new statement requires that every derivative instrument be
recorded on the balance sheet as either an asset or liability, measured at its
fair value, and requires that changes in the derivative's fair value be
recognized currently in earnings, unless specific hedge accounting criteria
are met. The Company adopted this statement on February 4, 2001 and there was
not a material impact on results of operations or financial position.

  In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements". This staff accounting bulletin summarizes certain of the SEC's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. This statement was adopted by the Company
during the fourth quarter of fiscal 2000 and did not have a material impact on
results of operations or financial position.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

  The Company's primary interest rate risk exposure results from the Company's
long-term debt agreement. The Company's long-term debt bears interest at
variable rates that are tied to either the U.S. prime rate or LIBOR at the
time of the borrowing. At the end of each 90-day period, the interest rates on
the Company's outstanding borrowings are changed to reflect current prime or
LIBOR rates. Therefore, the Company's interest expense changes as prime or
LIBOR change.

  Historically, the Company has not relied upon derivative financial
instruments to mitigate the risk associated with changes in interest rates.
However, in connection with the Sportmart acquisition, the Company acquired
one interest rate cap agreement that Sportmart had used to reduce its interest
rate risk. The interest rate cap was used to lock in a maximum rate if
interest rates rose, but enabled the Company to otherwise pay lower market
rates. The cap agreement was for a notional amount totaling $25.0 million,
placed an interest rate ceiling on LIBOR of 6.0%, and expired in August 1999.

  Based on the Company's overall interest rate exposure at February 3, 2001, a
hypothetical instantaneous increase or decrease of one percentage point in
interest rates applied to all financial instruments would change the Company's
after-tax earnings by approximately $585,000 over a 12-month period.

  The Company's exposure to foreign currency exchange rates is limited because
the Company does not operate any stores outside of the United States. In
connection with the acquisition of Sportmart, the Company acquired one store
in Canada, which Sportmart had closed prior to the acquisition. The Company is
currently attempting to sell this store (see Item 2 -- Properties discussion).
The Company does not consider the market risk exposure relating to foreign
currency exchange to be material. Foreign currency fluctuations did not have a
material impact on the Company during fiscal 2000, 1999, or 1998.

  The fair value of the Company's investments in marketable equity securities
at February 3, 2001 was $274,000. The fair value of these investments will
fluctuate as the quoted market prices of such securities fluctuate. Based on
the Company's marketable equity securities portfolio and quoted market prices
at February 3, 2001, a 50% increase or decrease in the market price of such
securities would result in an increase or decrease of approximately $137,000
in the fair value of the marketable equity securities portfolio. Although
changes in

                                      19
<PAGE>

quoted market prices may affect the fair value of the marketable equities
securities portfolio and cause unrealized gains or losses, such gains or
losses would not be realized unless the investments are sold or determined to
have a decline in value which is other than temporary.

  As of February 3, 2001, the fair value of the Company's investments in
marketable equity securities was $226,000 less than the adjusted basis of
those investments. Such unrealized holding loss has not been recognized in the
Company's consolidated statement of operations, but rather has been recorded
as a component of stockholders' equity in other comprehensive loss. The actual
gain or loss that the Company will realize when such investments are sold will
depend on the fair value of such securities at the time of sale.

ITEM 8. Financial Statements and Supplementary Data

  The financial statements and supplementary financial information required by
this Item and included in this report are listed in the Index to Consolidated
Financial Statements appearing on page F-1.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

  The Company filed a Current Report on Form 8-K with the Commission dated May
16, 2000 to report, under Item 4, that the registrant engaged Deloitte &
Touche LLP as its independent auditor for the fiscal year ended February 3,
2001. The decision to engage Deloitte & Touche LLP was approved by the
Registrant's Audit Committee. The Registrant dismissed its former independent
auditor, KPMG LLP ("KPMG") effective upon the appointment of Deloitte & Touche
LLP.

  KPMG's report on the Registrant's financial statements for the fiscal years
ended January 29, 2000 and January 30, 1999 did not contain an adverse opinion
or a disclaimer of opinion, nor was the report modified as to uncertainty,
audit scope or accounting principles. For the past two fiscal years and during
the subsequent interim period preceding the date of the change in independent
auditor there were no disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure that would have caused KPMG to make reference in their report to
such disagreements.

                                      20
<PAGE>

                                   PART III

ITEM 10. Directors and Executive Officers of the Registrant

  The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
       Name              Age                            Position
       ----              ---                            --------
<S>                      <C> <C>
John Douglas Morton.....  50 President, Chief Executive Officer and Chairman of the Board
Thomas T. Hendrickson...  46 Executive Vice President, Chief Financial Officer and Treasurer
Greg Waters.............  40 Senior Vice President -- Store Operations
Arthur S. Hagan.........  62 Senior Vice President -- Merchandising
James M. Van Alstyne....  40 Senior Vice President -- Merchandising
Michael McCaghren.......  41 Senior Vice President -- Chief Information Officer
Nesa E. Hassanein.......  48 Senior Vice President -- General Counsel and Secretary
Anthony Forde...........  45 Senior Vice President -- Merchandise Allocation and Marketing
Jonathan D. Sokoloff....  43 Director
Jonathan A. Seiffer.....  29 Director
Gordon D. Barker........  55 Director
Peter R. Formanek.......  57 Director
Larry J. Hochberg.......  63 Director
</TABLE>

  John Douglas Morton. Mr. Morton became President, Chief Executive Officer
and Chairman of the Board in May 1995. Mr. Morton joined Gart Sports in 1986
as Division Manager of Gart Sports' Utah region. In 1988 he was promoted to
Division Vice President of that region and in 1990 to Vice President of
Operations for Gart Sports. In 1994 Mr. Morton was promoted to Executive Vice
President of Gart Sports with responsibility for Stores, Distribution and
Marketing. Prior to joining Gart Sports he served in various positions with
Wolfe's Sporting Goods (a seven-store sporting goods retailer) from 1972 to
1980 including Merchandise Manager -- Ski, Camping, Golf and Tennis, Store
Manager, and Operations Manager. From 1980 until joining Gart Sports he served
as a District Manager for Malone and Hyde's sporting goods division (a 40-
store retail sporting goods retailer). Mr. Morton has worked for over 30 years
in the sporting goods retail industry.

  Thomas T. Hendrickson. Mr. Hendrickson became Executive Vice President,
Chief Financial Officer and Treasurer of the Company in January 1998. Mr.
Hendrickson previously served as the Executive Vice President and Chief
Financial Officer of Sportmart which position he held since September 1996. He
joined Sportmart in January 1993 as Vice President -- Financial Operations. In
March 1993 he was named Chief Financial Officer of Sportmart and in March 1995
he was named Senior Vice President and Chief Financial Officer of Sportmart.
From 1987 until joining Sportmart, Mr. Hendrickson was employed as the Vice
President and Controller of Millers Outpost Stores.

  Greg Waters. Mr. Waters joined the Company in April 1998 as Senior Vice
President -- Store Operations. Prior to joining the Company, Mr. Waters served
as the western Regional Vice President for The Sports Authority since 1994 and
as a District Manager for The Sports Authority since 1991. Mr. Waters was
employed by Herman's World of Sporting Goods from 1983 until 1991, most
recently as a District Manager.

  Arthur S. Hagan. Mr. Hagan became Senior Vice President -- Merchandising in
January 1998. Mr. Hagan joined the Company in 1988 as the Company's Division
Merchandise Manager for Golf, Tennis, Ski Clothing/Equipment and Garden
Furniture and was promoted to Vice President Store Operations in 1995 and to
Senior Vice President -- Store Operations in May 1997. He was President and
owner of Hagan Sports Ltd. (a six-store sporting goods retailer acquired by
the Company in 1987) and President and Chief Executive Officer of Aspen Leaf
of Colorado, Inc. (a 12-store ski equipment and apparel retailer). Mr. Hagan
has over 30 years retailing experience.

  James M. Van Alstyne. Mr. Van Alstyne became Senior Vice President --
 Merchandising in April 2000. Mr. Van Alstyne joined the Company in 1986 as a
Buyer and held that position until 1993. Mr. Van Alstyne

                                      21
<PAGE>

returned to the Company in 1998 as Vice President Merchandising -- Hardlines
and held that position until April 2000. Prior to rejoining the Company, Mr.
Van Alstyne served as Western Regional Sales Manager, National Sales Manager
and then Vice President of Sales for the U.S., Latin America and Australia for
Easton Sports, Inc. from 1993 to 1998.

  Michael McCaghren. Mr. McCaghren became Senior Vice President -- Chief
Information Officer of the Company in March 1999. Prior to joining the
Company, he was most recently Senior Vice President -- Systems, Merchandise
Planning, Allocation and Replenishment, Logistics and Corporate Administration
at Jumbo Sports (a sporting goods retailer) where he was employed from 1997 to
1999. Before joining Jumbo Sports, for approximately one year, Mr. McCaghren
was National Director at GSI Outsourcing Inc., an information systems
outsourcing subsidiary of ADP, Inc. From 1991 to 1996, he was Senior Vice
President and Chief Information Officer of Eli Witt Company, a grocery
wholesaler.

  Nesa E. Hassanein. Ms. Hassanein became Senior Vice President and General
Counsel in June 2000. Ms. Hassanein joined Gart Sports in July 1998 as Vice
President and Corporate Counsel. Prior to joining Gart Sports, Ms. Hassanein
served as Senior Vice President and General Counsel for Atlas Air Inc. during
1997. Ms. Hassanein previously served as a partner with Morrison & Foerster,
LLP from 1995 to 1997, a shareholder with Brownstein Hyatt Farber &
Strickland, PC from 1992 to 1995 and as an associate with Skadden, Arps,
Slate, Meagher & Flom from 1982 to 1991.

  Anthony Forde. Mr. Forde became Senior Vice President -- Marketing &
Merchandise Allocations in June of 2000. He joined Gart Sports in January of
1998 as Vice President -- Merchandise Allocations. Prior to joining Gart
Sports, Mr. Forde was Vice President -- Merchandising Allocations for Thrifty
Payless. Since 1980, he served as store manager, district manager, category
manager and visual director for Phar Mor and Giant Eagle. Mr. Forde has over
25 years of retail experience.

  Jonathan D. Sokoloff. Mr. Sokoloff became a Director of the Company in April
1993. Mr. Sokoloff has been a partner of Leonard Green & Associates, L.P.
("LGA"), a merchant banking firm and the general partner of Green Equity
Investors, L.P. ("GEI"), the holder of approximately 64.0% of the outstanding
Common Stock, since 1990, and was employed at Drexel Burnham Lambert
Incorporated from 1985 through 1990, most recently as a managing director. He
has been an executive officer and equity owner of Leonard Green & Partners,
L.P. ("LGP"), a merchant banking firm affiliated with LGA, since its formation
in 1994, and is also a director of Twinlab Corporation (a manufacturer and
marketer of nutritional supplements), RiteAid Corporation (a national drug
store chain) and several private companies.

  Jonathan A. Seiffer. Mr. Seiffer became a Director of the Company in
December 1998. Since January 1999, Mr. Seiffer has been a partner of LGP. From
December 1997 to January 1999, Mr. Seiffer was a Vice President of LGP. From
October 1994 until December 1997, Mr. Seiffer was an associate at LGP. Prior
to October 1994, Mr. Seiffer was a member of the corporate finance department
of Donaldson, Lufkin & Jenrette Securities Corporation. He is also a director
of several private companies.

  Gordon D. Barker. Mr. Barker became a Director of the Company in April 1998.
Mr. Barker was the Chief Executive Officer and a Director of Thrifty Payless
Holdings, Inc. ("Thrifty Payless"), a subsidiary of RiteAid Corporation, from
1996 until its acquisition by RiteAid Corporation in 1997. He previously
served in various capacities at Thrifty Payless since 1968, including as Chief
Operating Officer from 1994 to 1996 and as President from 1994 to 1997. Mr.
Barker is also a director of United Natural Foods (a distributor of natural
food products) listed under the NASDAQ Exchange symbol UNFI. Mr. Barker also
currently serves as C.E.O. of Snyder Drug Stores, a mid-western chain of
approximately 150 corporate and affiliate drug stores.

  Peter R. Formanek. Mr. Formanek became a Director of the Company in April
1998. Mr. Formanek was co-founder of AutoZone Inc., a retailer of aftermarket
automotive parts, and served as President and Chief
Operating Officer of AutoZone, Inc. from 1986 until his retirement in 1994. He
currently is a director of The

                                      22
<PAGE>

Perrigo Company, a manufacturer of store brand over-the-counter drug products
and vitamins, and Borders Group, Inc., the second largest operator of book
superstores and the largest operator of mall-based bookstores in the United
States.

  Larry J. Hochberg. Mr. Hochberg became a Director of the Company in April
1998. Mr. Hochberg served as a Director of Sportmart from the time he co-
founded it in 1970 until Sportmart's acquisition by Gart Sports in January
1998. Mr. Hochberg also co-founded Children's Bargain Town (now part of Toys
"R" Us) which he sold in 1969. Mr. Hochberg is a graduate of Northwestern
University School of Law. He served on the Executive Committee and the Board
of Directors of the International Mass Retailing Association from 1993 to
1998. Mr. Hochberg currently is a member of the executive committee of the
Jewish Federation of Metropolitan Chicago.

  The remaining information required by this Item 10 is incorporated herein by
reference, when filed, to the Company's Proxy Statement for its 2001 Annual
Meeting of Stockholders expected to be filed no later than June 4, 2001.

ITEM 11. Executive Compensation

  Information required to be set forth in Item 11 has been omitted and will be
incorporated herein by reference, when filed, to the Company's Proxy Statement
for its 2001 Annual Meeting of Stockholders expected to be filed no later than
June 4, 2001.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

  Information required to be set forth in Item 12 has been omitted and will be
incorporated herein by reference, when filed, to the Company's Proxy Statement
for its 2001 Annual Meeting of Stockholders expected to be filed no later than
June 4, 2001.

ITEM 13. Certain Relationships and Related Transactions

  Information required to be set forth in Item 13 has been omitted and will be
incorporated herein by reference, when filed, to the Company's Proxy Statement
for its 2001 Annual Meeting of Stockholders expected to be filed no later than
June 4, 2001.


                                      23
<PAGE>

                                    PART IV

ITEM 14. Exhibits, Financial Statement Schedules, And Reports on Form 8-K

(a) 1. Financial Statements:

  See Index to Consolidated Financial Statements on page F-1 hereof.

  2. Financial Statement Schedules:

  All schedules are omitted because of the absence of conditions under which
they are required or because the required information is presented in the
consolidated financial statements or notes thereto.

  3. Exhibits:

<TABLE>
<CAPTION>
     Exhibit
     Number                              Description
     -------                             -----------
     <C>     <S>
       2.1   -- Agreement and Plan of Merger, dated as of February 21, 2001, by
               and among Gart Sports Company, GSC Acquisition Corp. and
               Oshman's Sporting Goods, Inc. (incorporated by reference to the
               Registrant's Report on Form 8-K filed March 1, 2001)

       3.1   -- Amended and Restated Certificate of Incorporation of Registrant
               (incorporated by reference to the Registrant's Registration
               Statement, File No. 333-42355)

       3.2   -- Amended and Restated Bylaws of Registrant (incorporated by
               reference to the Registrant's Registration Statement, File No.
               333-42355)

       4.1   -- Form of Common Stock Certificate (incorporated by reference to
               the Registrant's Registration Statement, File No. 333-42355)

      10.1   -- Financing Agreement between The CIT Group/Business Credit, Inc.
               (as Agent and a Lender) and Gart Bros Sporting Goods Company and
               Sportmart, Inc., dated January 9, 1998 (incorporated by
               reference to the Registrant's Report on Form 8-K filed
               January 13, 1998)

      10.2   -- Registration Rights Agreement between Registrant and certain
               former shareholders of Sportmart, Inc. (incorporated by
               reference to the Registrant's Registration Statement, File No.
               333-42355)

      10.3   -- Registration Rights Agreement between Registrant and Green
               Equity Investors, L.P. (incorporated by reference to the
               Registrant's Report on Form 8-K filed January 13, 1998)

      10.4   -- Gart Sports 1994 Management Equity Plan (incorporated by
               reference to the Registrant's Registration Statement, File No.
               333-42355)

      10.4a  -- Amendment to Gart Sports Management Equity Plan (incorporated
               by reference to the Registrant's Form 14-A filed May 7, 1999)

      10.5   -- Gart Sports Employee Benefit Plan (incorporated by reference to
               the Registrant's Registration Statement, File No. 333-42355)

      10.6   -- Form of Executive Severance Agreements (incorporated by
               reference to the Registrant's Report on Form 10-K for the period
               ended January 30, 1999, File No. 000-23515)

      10.7   -- Consulting Agreements between Registrant and Larry J. Hochberg
               and Andrew S. Hochberg (incorporated by reference to the
               Registrant's Registration Statement, File
               No. 333-42355)
</TABLE>


                                      24
<PAGE>

<TABLE>
<CAPTION>
     Exhibit
     Number                              Description
     -------                             -----------
     <C>     <S>
      10.8   -- Management Services Agreement among Registrant, Gart Bros.
               Sporting Goods Company and Leonard Green & Associates, L.P.
               (incorporated by reference to the Registrant's Registration
               Statement, File No. 333-42355)

      10.9   -- Tax Indemnity Agreement dated as of September 25, 1992 among
               Pacific Enterprises, TCH Corporation, Thrifty Corporation and
               Big 5 Holdings, Inc. (incorporated by reference to the
               Registrant's Registration Statement, File No. 33-69118)

      10.10  -- Tax Sharing Agreement dated as of September 25, 1992 among TCH
               Corporation and its then subsidiaries, including the Registrant
               (incorporated by reference to the Registrant's Registration
               Statement, File No. 333-42355)

      10.11  -- Indemnification Allocation Agreement dated April 20, 1994 among
               Thrifty Payless Holdings, Inc., the Registrant and MC Sports
               Company (incorporated by reference to the Registrant's
               Registration Statement, File No. 333-42355)

      10.12  -- Indemnification and Reimbursement Agreement dated April 20,
               1994 among Thrifty Payless Holdings, Inc., and its then
               subsidiaries, including the Registrant (incorporated by
               reference to the Registrant's Registration Statement, File No.
               333-42355)

      10.13  -- Sportmart, Inc. 1996 Restricted Stock Plan (as amended and
               restated) (incorporated by reference to Sportmart, Inc.'s Report
               on Form 10-Q for the quarter ended July 28, 1996, File No. 000-
               20672)

      10.14  -- Sportmart, Inc. Stock Option Plan, as amended (incorporated by
               reference to Sportmart, Inc.'s Registration Statement, File No.
               33-50726)

      10.15  -- Lease between Sportmart, Inc. and American National Bank and
               Trust Company, as Trustee under Trust No. 32490 for the
               Sportmart store in Calumet City, Illinois, as amended
               (incorporated by reference to Sportmart, Inc.'s Registration
               Statement, File
               No. 33-50726)

      10.16  -- Lease between Sportmart, Inc. and American National Bank and
               Trust Company, as Trustee under Trust No. 54277 for the
               Sportmart store in Chicago (Lakeview), Illinois, as amended
               (incorporated by reference to Sportmart, Inc.'s Registration
               Statement, File No. 33-50726)

      10.17  -- Lease between Sportmart, Inc. and American National Bank and
               Trust Company, as Trustee under Trust No. 56691 for the
               Sportmart store in Wheeling, Illinois, as amended (incorporated
               by reference to Sportmart, Inc.'s Registration Statement, File
               No. 33-50726)

      10.18  -- Lease between Sportmart, Inc. and Lake County Trust Company, as
               Trustee under Trust No. 3737 for the Sportmart store in
               Merrillville, Indiana, as amended (incorporated by Reference to
               Sportmart, Inc.'s Registration Statement, File No. 33-50726)

      10.19  -- Lease between Sportmart, Inc. and North Riverside Limited
               Partnership for the facility in North Riverside, Illinois, as
               amended (incorporated by reference to Sportmart, Inc.'s
               Registration Statement, File No. 33-50726)

      10.20  -- Lease between Sportmart, Inc. No Contest division and North
               County Associates, L.P. for the Sportmart No Contest store in
               Ferguson, Missouri, as amended (incorporated by reference to
               Sportmart, Inc.'s Registration Statement, File No. 33-50726)
</TABLE>


                                       25
<PAGE>

<TABLE>
<CAPTION>
     Exhibit
     Number                              Description
     -------                             -----------
     <C>     <S>
     10.21   -- Agency Agreement between Registrant and Hilco/Great American
               Group, Inc. (incorporated by reference to Sportmart, Inc.'s
               Report on Form 10-K for the year ended February 2, 1997, File
               No. 000-20672)

     10.22   -- First Amendment to Lease between Sportmart, Inc. and Roosevelt
               Associated Limited Partnership for the Sportmart store at
               Lombard, Illinois (incorporated by reference to Sportmart,
               Inc.'s Report on Form 10-K for the year ended February 2, 1997,
               File
               No. 000-20672)

     10.23   -- Lease between Sportmart, Inc. and American National Bank and
               Trust Company of Chicago as Trustee under Trust No. 42371 for
               the Sportmart store in Schaumburg, Illinois (incorporated by
               reference to Sportmart, Inc.'s Report on Form 10-K for the year
               ended February 2, 1997, File No. 000-20672)

     10.23a  -- Amendment to Lease between Sportmart, Inc. and American
               National Bank and Trust Company, as Trustee under Trust No.
               42371 for the Sportmart store in Schaumburg, Illinois, as
               amended (incorporated by reference to the Registrant's Report on
               Form 10-K for the period ended January 29, 2000, File No. 000-
               23515)

     10.24   -- Lease between Sportmart, Inc. and H-C Developers, as Agent for
               American National Bank and Trust Company of Chicago, as Trustee
               under Trust No. 30426 for the Sportmart store in Niles, Illinois
               (incorporated by reference to Sportmart, Inc.'s Report on Form
               10-K for the year ended February 2, 1997, File No. 000-20672)

     10.25   -- First Amendment to lease between Sportmart, Inc. and
               Merrillville Partners Limited Partnership for the Sportmart
               store in Merrillville, Illinois (incorporated by reference to
               Sportmart, Inc.'s Report on Form 10-K for the year ended
               February 2, 1997, File
               No. 000-20672)

     10.26   -- Second Amendment to Lease between Sportmart, Inc. and North
               Riverside Associates Limited Partnership for the Sportmart store
               in North Riverside, Illinois (incorporated by reference to
               Sportmart, Inc.'s Report on Form 10-K for the year ended
               February 2, 1997, File No. 000-20672)

     10.27   -- Third Amendment to Lease between Sportmart, Inc. and Torrence
               Properties for the Sportmart store in Calumet City, Illinois
               (incorporated by reference to Sportmart, Inc.'s Report on Form
               10-K for the year ended February 2, 1997, File No. 000-20672)

     10.28   -- Third Amendment to Lease between Sportmart, Inc. and North
               Riverside Associates Limited Partnership for the Sportmart store
               in North Riverside, Illinois (incorporated by reference to
               Sportmart, Inc.'s Report on Form 10-K for the year ended
               February 2, 1997, File No. 000-20672)

     10.29   -- Post-Employment Medical Benefits Plan for Larry Hochberg
               (incorporated by reference Sportmart, Inc.'s Report on Form 10-K
               for the year ended February 2, 1997, File No. 000-20672)

     10.30   -- Deferred Compensation Plan of Gart Bros. Sporting Goods
               Company, dated January 1, 1999 (incorporated by reference to the
               Registrant's Report on Form 10-K for the period ended January
               29, 2000, File No. 000-23515)

     16.1    -- Letter from KPMG LLP regarding Change in Certifying Accountants
               (incorporated by reference to the Registrant's Report on Form 8-
               K filed May 23, 2000)

     21.1    -- Subsidiaries of Registrant (incorporated by reference to the
               Registrant's Report on
               Form 10-K for the transition period ended January 31, 1998, File
               No. 000-23515)
</TABLE>


                                       26
<PAGE>

<TABLE>
<CAPTION>
     Exhibit
     Number                              Description
     -------                             -----------
     <C>     <S>
      23.1   -- Consent of Deloitte & Touche LLP

      23.2   -- Consent of KPMG LLP

      99.1   -- Voting Agreement, dated as of February 21, 2001 by and among
               Gart Sports Company, GSC Acquisition Corp. and Marilyn Oshman,
               individually and as a trustee (incorporated by reference to the
               Registrant's Schedule 13D filed March 5, 2001)

      99.2   -- Voting Agreement, dated as of February 21, 2001 by and among
               Gart Sports Company, GSC Acquisition Corp. and Alvin Lubetkin
               (incorporated by reference to the Registrant's Schedule 13D
               filed March 5, 2001)

      99.3   -- Voting Agreement, dated as of February 21, 2001 by and among
               Gart Sports Company, GSC Acquisition Corp. and Karen Desenberg,
               individually, as a custodian and as a trustee, and Jay Douglas
               Desenberg (incorporated by reference to the Registrant's
               Schedule 13D filed March 5, 2001)

      99.4   -- Voting Agreement, dated as of February 21, 2001 by and among
               Gart Sports Company, GSC Acquisition Corp. and Judy O. Margolis,
               individually, as a custodian and as a trustee (incorporated by
               reference to the Registrant's Schedule 13D filed March 5, 2001)

      99.5   -- Voting Agreement, dated as of February 21, 2001 by and among
               Gart Sports Company, GSC Acquisition Corp. and Barry M. Lewis,
               as a trustee (incorporated by reference to the Registrant's
               Schedule 13D filed March 5, 2001)

      99.6   -- Voting Agreement, dated as of February 21, 2001 by and among
               Gart Sports Company, GSC Acquisition Corp. and Edward C. Stanton
               III, as a trustee (incorporated by reference to the Registrant's
               Schedule 13D filed March 5, 2001)

      99.7   -- Joint Filing Agreement, dated as of March 2, 2001 by and
               between Gart Sports Company and GSC Acquisition Corp.
               (incorporated by reference to the Registrant's Schedule 13D
               filed March 5, 2001)
</TABLE>

(b) Reports on Form 8-K

  The Company filed a Current Report on Form 8-K with the Commission dated May
16, 2000 to report, under Item 4, that the registrant engaged Deloitte &
Touche LLP as its independent auditor for the fiscal year ended February 3,
2001 and concurrently dismissed its former independent auditor, KPMG LLP.

  The Company also filed a Current Report on Form 8-K with the Commission
dated February 22, 2001, to report under Item 5 that the registrant had
entered into a definitive agreement to acquire Oshman's Sporting Goods, Inc.
("Oshman's"). Pursuant to the terms of the agreement, Oshman's shareholders
will receive $7.00 in cash and 0.55 shares of the Company's common stock for
each share of Oshman's common stock, subject to adjustment in the event the
Company's common stock, as reported on NASDAQ, is less than $9.50 per share on
the date of the closing. The Company has secured commitments from certain
shareholders of Oshman's common stock to vote their shares in favor of the
proposed merger, bringing the total beneficial owners voting in favor of the
proposed merger to approximately 50.1%. Green Equity Investors, L.P., an
affiliate of Leonard Green & Partners, L.P., which beneficially owns
approximately 64.0% of the outstanding common stock of the Company, has also
agreed to vote its shares in favor of the proposed merger. Completion of the
transaction is subject to customary conditions, including the approval of the
Oshman's shareholders and the effectiveness of a registration statement for
the Gart shares to be issued.

                                      27
<PAGE>

                              GART SPORTS COMPANY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Independent Auditors' Reports............................................  F-2

Consolidated Balance Sheets as of February 3, 2001 and January 29, 2000..  F-4

Consolidated Statements of Operations for the 53 weeks ended February 3,
 2001 and the 52 weeks ended January 29, 2000 and January 30, 1999.......  F-5

Consolidated Statements of Stockholders' Equity and Comprehensive Income
 (Loss) for the 53 weeks ended February 3, 2001 and the 52 weeks ended
 January 29, 2000 and January 30, 1999...................................  F-6

Consolidated Statements of Cash Flows for the 53 weeks ended February 3,
 2001 and the 52 weeks ended January 29, 2000 and January 30, 1999.......  F-7

Notes to Consolidated Financial Statements...............................  F-8
</TABLE>

                                      F-1
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Gart Sports Company:

  We have audited the accompanying consolidated balance sheet of Gart Sports
Company and subsidiaries (the "Company") as of February 3, 2001 and the
related consolidated statements of operations, stockholders' equity and
comprehensive income and of cash flows for the 53 weeks ended February 3,
2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

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

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of February 3, 2001 and the results of its operations and its cash
flows for the 53 weeks ended February 3, 2001, in conformity with accounting
principles generally accepted in the United States of America.

Deloitte & Touche LLP

Denver, Colorado
March 7, 2001

                                      F-2
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Gart Sports Company:

  We have audited the accompanying consolidated balance sheet of Gart Sports
Company and subsidiaries (Company) as of January 29, 2000 and the related
consolidated statements of operations, stockholders' equity and comprehensive
income (loss) and cash flows for the 52 weeks ended January 29, 2000 and
January 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Gart
Sports Company and subsidiaries as of January 29, 2000 and the results of
their operations and their cash flows for the 52 weeks ended January 29, 2000
and January 30, 1999, in conformity with generally accepted accounting
principles.

KPMG LLP

Denver, Colorado
March 14, 2000

                                      F-3
<PAGE>

                              GART SPORTS COMPANY
                                AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
           (Dollars in Thousands, Except Share and Per Share Amounts)

<TABLE>
<CAPTION>
                                                         February 3, January 29,
                                                            2001        2000
                                                         ----------- -----------
<S>                                                      <C>         <C>
                        ASSETS
Current assets:
 Cash and cash equivalents.............................   $  8,107    $  7,843
 Accounts receivable, net of allowance for doubtful
  accounts of $606 and $429, respectively..............      6,273       6,708
 Note receivable.......................................        181         165
 Inventories...........................................    230,800     240,891
 Prepaid expenses and other assets.....................      7,474       6,722
 Deferred income taxes.................................      2,033       1,533
                                                          --------    --------
   Total current assets................................    254,868     263,862
Property and equipment, net............................     59,298      59,694
Favorable leases acquired, net of accumulated
 amortization of $4,891 at January 29, 2000............         --      12,536
Assets held for sale...................................      1,671       1,729
Deferred income taxes..................................     13,208          --
Other assets, net of accumulated amortization of $2,912
 and $1,953, respectively..............................      6,083       6,264
                                                          --------    --------
   Total assets........................................   $335,128    $344,085
                                                          ========    ========
         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable......................................   $105,395    $127,247
 Current portion of capital lease obligations..........        470         417
 Accrued expenses......................................     35,679      31,345
                                                          --------    --------
   Total current liabilities...........................    141,544     159,009
Long-term debt.........................................     95,900     105,900
Capital lease obligations, less current portion........      1,805       2,276
Deferred rent and other long-term liabilities..........      6,993       5,292
Deferred income taxes..................................         --       5,714
                                                          --------    --------
   Total liabilities...................................    246,242     278,191
                                                          --------    --------
Commitments and contingencies
Stockholders' equity:
 Preferred stock, $.01 par value. 3,000,000 shares
  authorized at February 3, 2001 and January 29, 2000;
  none issued..........................................         --          --
 Common stock, $.01 par value. 22,000,000 shares
  authorized at February 3, 2001 and January 29, 2000;
  7,739,203 and 7,694,617 shares issued and 7,357,064
  and 7,507,078 shares outstanding, respectively.......         77          77
 Additional paid-in capital............................     57,014      55,990
 Unamortized restricted stock compensation.............     (2,055)     (1,770)
 Accumulated other comprehensive loss..................       (226)       (574)
 Retained earnings.....................................     36,489      13,393
                                                          --------    --------
                                                            91,299      67,116
Treasury stock, 382,139 and 187,539 common shares,
 respectively, at cost.................................     (2,413)     (1,222)
                                                          --------    --------
   Total stockholders' equity..........................     88,886      65,894
                                                          --------    --------
   Total liabilities and stockholders' equity..........   $335,128    $344,085
                                                          ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                              GART SPORTS COMPANY
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
           (Dollars in Thousands, Except Share and Per Share Amounts)

<TABLE>
<CAPTION>
                                            53 weeks    52 weeks    52 weeks
                                             ended       ended       ended
                                            February    January     January
                                            3, 2001     29, 2000    30, 1999
                                           ----------  ----------  ----------
<S>                                        <C>         <C>         <C>
Net sales................................. $  751,124  $  680,995  $  658,047
Cost of goods sold, buying, distribution
 and occupancy............................    559,778     517,405     503,379
                                           ----------  ----------  ----------
    Gross profit..........................    191,346     163,590     154,668
Operating expenses........................    164,830     150,985     148,348
Merger integration costs..................         --          --       2,923
                                           ----------  ----------  ----------
    Operating income......................     26,516      12,605       3,397
                                           ----------  ----------  ----------
Nonoperating income (expense):
 Interest expense.........................    (11,071)    (10,615)     (9,302)
 Other income, net........................        246         779         302
                                           ----------  ----------  ----------
                                              (10,825)     (9,836)     (9,000)
                                           ----------  ----------  ----------
    Income (loss) before income taxes.....     15,691       2,769      (5,603)
Income tax benefit (expense)..............      7,405        (996)      2,185
                                           ----------  ----------  ----------
    Net income (loss)..................... $   23,096  $    1,773  $   (3,418)
                                           ==========  ==========  ==========
Earnings (loss) per share:
 Basic.................................... $     3.13  $     0.23  $    (0.45)
                                           ==========  ==========  ==========
 Diluted.................................. $     2.99  $     0.23  $    (0.45)
                                           ==========  ==========  ==========
Weighted average shares of common stock
 outstanding..............................  7,380,529   7,632,696   7,676,816
                                           ==========  ==========  ==========
Weighted average shares of common stock
 and common stock equivalents
 outstanding..............................  7,729,601   7,701,427   7,676,816
                                           ==========  ==========  ==========
</TABLE>



          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                              GART SPORTS COMPANY
                                AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
                          COMPREHENSIVE INCOME (LOSS)
                  (Dollars in Thousands, Except Share Amounts)

<TABLE>
<CAPTION>
                                                       Accumu-
                                           Unamortized  lated                                  Notes
                                           restricted   other             Compre-            receivable  Total
                                Additional    stock    Compre-            hensive               from     stock-
                         Common  paid-in     compen-   hensive  Retained   income  Treasury    stock-   holders'
                         stock   capital     sation     loss    earnings   (loss)   stock     holders    equity
                         ------ ---------- ----------- -------  --------  -------  --------  ---------- --------
<S>                      <C>    <C>        <C>         <C>      <C>       <C>      <C>       <C>        <C>
Balances at January 31,
 1998...................  $80    $55,651     $   (80)  $   --   $15,038            $(1,865)     $(67)   $68,757
Net loss................   --         --          --       --    (3,418)  $(3,418)      --        --     (3,418)
Net unrealized loss on
 equity securities......   --         --          --   (1,762)       --    (1,762)      --        --     (1,762)
                                                                          -------
Comprehensive loss......                                                  $(5,180)
                                                                          =======
Purchase of 31,339
 shares of treasury
 stock..................   --         --          --       --        --               (243)       --       (243)
Receipts on notes
 receivable.............   --         --          --       --        --                 --        39         39
Exercise of stock
 options for 4,553
 shares.................   --         34          --       --        --                 --        --         34
Amortization of
 restricted stock.......   --         --          59       --        --                 --        --         59
                          ---    -------     -------   ------   -------            -------      ----    -------
Balances at January 30,
 1999...................   80     55,685         (21)  (1,762)   11,620             (2,108)      (28)    63,466
Net income..............   --         --          --       --     1,773   $ 1,773       --        --      1,773
Unrealized gain on
 equity securities, net
 of reclassification
 adjustment for realized
 gain...................   --         --          --    1,188        --     1,188       --        --      1,188
                                                                          -------
Comprehensive income....                                                  $ 2,961
                                                                          =======
Purchase of 156,200
 shares of treasury
 stock..................   --         --          --       --        --               (979)       --       (979)
Retirement of treasury
 stock..................   (3)    (1,862)         --       --        --              1,865        --         --
Issuance of common
 stock..................   --         72          --       --        --                 --        --         72
Receipts on notes
 receivable.............   --         --          --       --        --                 --        28         28
Issuance of restricted
 stock..................   --      2,252      (2,252)      --        --                 --        --         --
Cancellation of
 restricted stock.......   --       (157)        157       --        --                 --        --         --
Amortization of
 restricted stock.......   --         --         346       --        --                 --        --        346
                          ---    -------     -------   ------   -------            -------      ----    -------
Balances at January 29,
 2000...................   77     55,990      (1,770)    (574)   13,393             (1,222)       --     65,894
Net income..............   --         --          --       --    23,096   $23,096       --        --     23,096
Unrealized gain on
 equity securities and
 reclassification
 adjustment for realized
 loss...................   --         --          --      348        --       348       --        --        348
                                                                          -------
Comprehensive income....                                                  $23,444
                                                                          =======
Purchase of 194,600
 shares of treasury
 stock..................   --         --          --       --        --             (1,191)       --     (1,191)
Exercise of stock
 options for 38,200
 shares.................   --        205          --       --        --                 --        --        205
Issuance of common
 stock..................   --         47          --       --        --                 --        --         47
Issuance of restricted
 stock..................   --        921        (921)      --        --                 --        --         --
Cancellation of
 restricted stock.......   --       (149)        149       --        --                 --        --         --
Amortization of
 restricted stock.......   --         --         487       --        --                 --        --        487
                          ---    -------     -------   ------   -------            -------      ----    -------
Balances at February 3,
 2001...................  $77    $57,014     $(2,055)  $ (226)  $36,489            $(2,413)     $ --    $88,886
                          ===    =======     =======   ======   =======            =======      ====    =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                              GART SPORTS COMPANY
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                             53 weeks    52 weeks    52 weeks
                                               ended       ended       ended
                                            February 3, January 29, January 30,
                                               2001        2000        1999
                                            ----------- ----------- -----------
<S>                                         <C>         <C>         <C>
Cash flows from operating activities:
 Net income (loss).........................  $ 23,096    $  1,773    $ (3,418)
 Adjustments to reconcile net income (loss)
  to net cash provided by operating
  activities:
  Depreciation and amortization............    14,776      14,193      11,826
  Deferred income taxes....................    (7,405)        996      (1,626)
  Loss (gain) on disposition of assets.....       383        (156)     (1,525)
  Increase in deferred rent................     1,523       1,524       1,391
  Deferred compensation....................        47          97          --
  Changes in operating assets and
   liabilities:
   Accounts receivables, net...............       435       1,668      (3,755)
   Inventories.............................    10,091     (17,054)     (9,023)
   Prepaid expenses........................      (673)         84      (3,859)
   Other assets............................      (702)     (3,317)       (889)
   Accounts payable........................   (21,852)        769      46,670
   Accrued expenses and other current
    liabilities............................     4,334         749     (19,503)
                                             --------    --------    --------
    Net cash provided by operating
     activities............................    24,053       1,326      16,289
                                             --------    --------    --------
Cash flows from investing activities:
 Sale (purchase) of marketable securities..        --       2,979      (3,529)
 Purchases of property and equipment.......   (12,550)    (11,957)    (14,331)
 Proceeds from sale of property and
  equipment................................        --          --       2,118
 Receipts on notes receivable..............       165         172         181
                                             --------    --------    --------
    Net cash used in investing activities..   (12,385)     (8,806)    (15,561)
                                             --------    --------    --------
Cash flows from financing activities:
 Proceeds from long-term debt..............   221,470     206,350     171,943
 Principal payments on long-term debt......  (231,470)   (200,450)   (177,543)
 Principal payments on capital lease
  obligations..............................      (418)       (377)       (340)
 Purchase of treasury stock................    (1,191)       (979)       (243)
 Proceeds from the sale of common stock
  under option plans.......................       205          --          34
 Payment of financing fees.................        --          --        (172)
                                             --------    --------    --------
    Net cash (used in) provided by
     financing activities..................   (11,404)      4,544      (6,321)
                                             --------    --------    --------
    Increase (decrease) in cash and cash
     equivalents...........................       264      (2,936)     (5,593)
Cash and cash equivalents at beginning of
 period....................................     7,843      10,779      16,372
                                             --------    --------    --------
Cash and cash equivalents at end of
 period....................................  $  8,107    $  7,843    $ 10,779
                                             ========    ========    ========
Supplemental disclosure of cash flow
 information:
 Cash paid during the period for interest,
  net......................................  $ 11,795    $ 10,067    $  9,075
                                             ========    ========    ========
 Cash (received) paid during the period for
  income taxes.............................  $   (194)   $   (494)   $     52
                                             ========    ========    ========
Supplemental disclosure of non-cash
 financing activities:
 Issuance of restricted stock..............  $    921    $  2,252    $     --
                                             ========    ========    ========
 Retirement of treasury stock..............  $     --    $  1,865    $     --
                                             ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     February 3, 2001 and January 29, 2000

(1) Description of Business

  Gart Sports Company ("Company"), a Delaware corporation, operates in one
business segment through its wholly owned subsidiary, Gart Bros. Sporting
Goods Company ("Gart Bros."), which owns 100% of the outstanding stock of
Sportmart, Inc. ("Sportmart"). As of February 3, 2001 the Company operated,
through its wholly owned subsidiaries, 120 retail sporting goods stores in 16
states in the Midwest, Rocky Mountain, and Western United States.

(2) Summary of Significant Accounting Policies

 (a) Consolidation

  The consolidated financial statements present the financial position,
results of operations and cash flows of Gart Sports Company and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.

 (b) Fiscal Year

  The Company has a 52-53 week fiscal reporting year ending on the Saturday
closest to the end of January. The fiscal years referred to in these
consolidated financial statements are the 53 weeks ended February 3, 2001
("fiscal 2000"), the 52 weeks ended January 29, 2000 ("fiscal 1999") and the
52 weeks ended January 30, 1999 ("fiscal 1998").

 (c) Cash and Cash Equivalents

  The Company considers cash on hand in stores, bank deposits and highly
liquid investments as cash and cash equivalents.

 (d) Marketable Securities

  The Company's marketable equity securities are classified as "available-for-
sale", carried at fair value and are included in prepaid expenses and other
assets in the accompanying consolidated balance sheet. Fair values are
determined using publicly available pricing information. Unrealized holding
gains and losses on such securities are included in other comprehensive income
or loss and are shown as a component of stockholders' equity as of the end of
each period. At February 3, 2001 and January 29, 2000 these available-for-sale
marketable securities had carrying amounts of $274,000 and $195,000
respectively.

  During fiscal 2000, the Company realized a loss of approximately $300,000
due to a writedown of its marketable securities as a result of an other than
temporary decline in the value of the securities. Approximately $100,000 of
unrealized holding gains arose, after the adjustment for the realized loss
included in income before taxes.

  During fiscal 1999, the Company sold certain marketable securities,
resulting in a realized gain of approximately $220,000, before taxes, which
has been recognized as other income. The Company utilized the specific
identification method to determine the cost basis of the securities sold.
During fiscal 1999, approximately $1.4 million of unrealized holding gains
arose, before the reclassification adjustment of the realized gain included in
income before taxes.

  In fiscal 1998, the increase in other comprehensive loss and the
corresponding decrease in marketable securities totaled $1,762,000.

                                      F-8
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


 (e) Inventories

  The Company accounts for inventories at the lower of cost or market. Cost is
determined using the average cost of items purchased and applying the dollar
value last-in, first-out ("LIFO") inventory method. The Company's dollar value
LIFO pools are computed using the Inventory Price Index Computation ("IPIC")
method. If the first-in, first-out ("FIFO") method of inventory valuation at
the lower of cost or market had been used instead of the LIFO method,
inventories would have been $2,174,000 higher at February 3, 2001 and
$2,097,000 higher at January 29, 2000.

 (f) Property and Equipment

  Property and equipment are recorded at cost. Property under capital leases
is stated at the present value of future minimum lease payments. Depreciation
is provided on the straight-line method over the estimated useful lives of the
assets, which range from three to nine years for furniture, fixtures and
equipment. Property held under capital leases and leasehold improvements is
amortized on the straight-line method over the shorter of the lease term or
estimated useful life of the asset. Maintenance and repairs which do not
extend the useful life of the respective assets are charged to expense as
incurred.

  The Company capitalizes the costs of major, purchased and internally
developed software systems and the external costs associated with customizing
those systems; related training costs are expensed as incurred. Depreciation
of purchased and internally developed software systems is calculated using the
straight-line method over the estimated useful lives of the software, which
range from three to five years.

  In the first quarter of 1998, the AICPA's Accounting Standards Executive
Committee issued Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use." This SOP
requires that entities capitalize certain internal-use software costs once
specific criteria are met. The Company adopted SOP 98-1 in 1998 resulting in
$690,000, $549,000 and $680,000 of capitalized costs for fiscal years 2000,
1999 and 1998, respectively.

 (g) Accounting for Long-Lived Assets and Long-Lived Assets to Be Disposed Of

  The Company reviews long-lived tangible and intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets. The Company did not record a charge for asset impairment in fiscal
2000, 1999, or 1998. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.

 (h) Other Assets

  Other assets are amortized using the interest method. Loan origination costs
are amortized over the term of the related debt.

 (i) Revenue Recognition

  Revenue from merchandise sales is recognized when merchandise is sold.
Revenue from service sales is recognized when the services are performed. In
consideration of guidance issued by the Securities and Exchange Commission
under Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB

                                      F-9
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

101"), the Company changed its method of accounting for layaway sales during
the fourth quarter of fiscal 2000. The accounting change did not have a
material impact on annual or quarterly results of operations or financial
position.

 (j) Pre-Opening Expenses

  Beginning in fiscal 1999, the Company expenses pre-opening costs in the
period in which they are incurred in conformity with Statement of Position 98-
5 ("SOP 98-5") "Reporting on the Costs of Start-Up Activities. SOP 98-5
broadly defines start-up activities as those one-time activities related to,
among other things, opening a new facility. Prior to fiscal 1999, the Company
capitalized such costs and amortized the balance over the fiscal year in which
it opened the new facility. The implementation of SOP 98-5 slightly affects
quarterly results; however on an annual basis, there is no financial impact.
Generally, the Company incurs approximately $125,000 of pre-opening costs per
new store.

 (k) Advertising Costs

  Advertising costs are expensed in the period in which the advertising
occurs. The Company participates in various advertising and marketing
cooperative programs with its vendors, who, under these programs, reimburse
the Company for certain costs incurred. A receivable for cooperative
advertising to be reimbursed is recorded as a decrease to expense as the
advertising costs are expensed. Net advertising costs, which are included in
operating expenses, were $17,284,000 for fiscal 2000, $17,019,000 for fiscal
1999, and $19,306,000 for fiscal 1998.

 (l) Income Taxes

  The Company files a consolidated U.S. federal income tax return using a tax
year ending on the Saturday closest to the end of September. Income taxes are
accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in operations in the period that includes the enactment date.

 (m) Earnings (Loss) Per Share

  Basic earnings (loss) per share ("EPS") is computed by dividing earnings
(loss) available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution of securities that could share in earnings. In loss periods,
including common stock equivalents would be anti-dilutive and, accordingly, no
impact is provided for common stock equivalents.

 (n) Stock Option Plans

  The Company uses the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB No. 25"), and related
interpretations. As such, for fixed plans, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeds the exercise price. As required by the Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"), the Company has provided pro forma net income (loss) disclosures
for employee stock option grants as if the fair-value-based method defined in
SFAS No. 123 had been applied.

                                     F-10
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


 (o) Fair Value of Financial Instruments

  The Company's financial instruments' carrying values approximate their fair
values.

 (p) Comprehensive Income

  Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which requires
the Company to report the change in its net assets from non-owner sources.
Accumulated other comprehensive loss is comprised of unrealized holding gains
(losses) on the Company's marketable securities.

 (q) Use of Estimates

  The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of sales and
expenses during the reporting period. Actual results could differ
significantly from those estimates.

 (r) New Accounting Pronouncement

  In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Statement became effective in the first quarter of fiscal
year 2001. The new statement requires that every derivative instrument be
recorded on the balance sheet as either an asset or liability, measured at its
fair value, and requires that changes in the derivative's fair value be
recognized currently in earnings, unless specific hedge accounting criteria
are met. The Company adopted this statement on February 4, 2001 and there was
not a material impact on results of operations or financial position.

 (s) Reclassifications

  Certain prior year amounts have been reclassified to conform to the current
year presentation.

(3) Accounts Receivable

  Activity in the allowance for doubtful accounts is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                        Fiscal Fiscal  Fiscal
                                                         2000   1999    1998
                                                        ------ ------  ------
   <S>                                                  <C>    <C>     <C>
   Allowance for doubtful accounts at beginning of
    period.............................................  $429  $ 122   $ 345
   Additions...........................................   177    711      --
   Amounts charged against the allowance...............    --   (417)   (247)
   Recoveries of amounts previously charged............    --     13      24
                                                         ----  -----   -----
   Allowance for doubtful accounts at end of period....  $606  $ 429   $ 122
                                                         ====  =====   =====
</TABLE>

                                     F-11
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


(4) Note Receivable

  The Company has a note receivable from the landlord of the Northridge,
California Sportmart store, with an annual interest rate of 10.5%. Principal
and interest are due in monthly installments through July 1, 2005. The
agreement contains a right of offset provision.

(5) Assets Held for Sale

  At the effective date of the acquisition of Sportmart on January 9, 1998,
the Company acquired certain assets classified as Held for Sale. Assets held
for sale relate to discontinued Canadian operations and consist of land and
buildings in Edmonton, Alberta, Canada currently being marketed for sale. This
asset is classified as long-term at February 3, 2001 as it is uncertain if a
sale will occur within a year.

(6) Property and Equipment

  Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                        February 3, January 29,
                                                           2001        2000
                                                        ----------- -----------
   <S>                                                  <C>         <C>
   Buildings and leasehold improvements ...............  $ 40,032    $ 38,474
   Capitalized lease property..........................     1,936       1,936
   Data processing equipment and software .............    12,262       9,370
   Furniture, fixtures and office equipment ...........    45,606      38,383
   Less accumulated depreciation and amortization .....   (40,538)    (28,469)
                                                         --------    --------
     Property and equipment, net ......................  $ 59,298    $ 59,694
                                                         ========    ========
</TABLE>

(7) Favorable Leases

  Favorable leases acquired in the Sportmart acquisition were primarily the
result of net current market rents of Sportmart store locations exceeding the
contractual lease rates. The Company originally recorded $19,261,000 of
favorable leases in connection with the purchase, based upon independent
appraisals. The Company was amortizing the identified intangible amounts over
the existing terms of the leases on a straight-line basis. Amortization
expense was $519,000 for fiscal 2000, $2,388,000 for fiscal 1999, and
$2,220,000 for fiscal 1998. The Company closed one of these stores during
fiscal 1998 and wrote off the associated remaining unfavorable lease balance
of $1,755,000 against the related store closing reserve. During fiscal 2000
and fiscal 1999, the Company reduced its valuation allowance for deferred tax
assets related to pre-acquisition operating losses of Sportmart (see note 12
to the consolidated financial statements). This revaluation resulted in the
favorable leases originally recorded in connection with the Sportmart
acquisition being reduced to $0 in fiscal 2000, after an initial reduction to
the favorable leases of $4,183,000 recorded in fiscal 1999.

                                     F-12
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


(8) Accrued Expenses

  Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                         February 3, January 29,
                                                            2001        2000
                                                         ----------- -----------
   <S>                                                   <C>         <C>
   Accrued compensation and benefits....................   $13,530     $ 8,426
   Accrued sales and property taxes.....................     8,827      11,019
   Accrued advertising..................................     3,949       2,603
   Accrued store closing reserve........................       945         897
   Other................................................     8,428       8,400
                                                           -------     -------
     Accrued expenses ..................................   $35,679     $31,345
                                                           =======     =======
</TABLE>

(9) Long-Term Debt

  On January 9, 1998, the Company entered into a financing agreement with a
commercial finance company. The agreement includes a line of credit feature
that allows the Company to borrow up to $175,000,000 limited to an amount
equal to 70% of eligible inventory (as defined in the agreement). The maximum
percentage may be increased, upon election by the Company, to 75% of eligible
inventory for one consecutive 90-day period each fiscal year. Borrowings are
secured by substantially all accounts receivables, inventories and intangible
assets. The commercial finance company may not demand repayment of principal,
absent an occurrence of default under the agreement, prior to January 9, 2003.
Interest is payable monthly at prime (8.50% at February 3, 2001) plus .25% or
LIBOR (5.62% at February 3, 2001) plus 1.75%, per annum. Beginning February 1,
1999, if earnings before income taxes, depreciation and amortization is
greater than $25 million for the prior four fiscal quarters, interest is
payable monthly at the prime rate or LIBOR plus 1.50%. These earnings levels
have been attained since the end of fiscal 1999, and as a result, the margin
rates on prime and LIBOR borrowings have been reduced to 0.0% and 1.50%,
respectively, since that time. The terms of the agreement provide for an
annual collateral management fee of $100,000 and for a line of credit fee,
payable monthly, of .375% per annum on the unused portion of the line of
credit. The agreement contains certain covenants, including financial
covenants which require the Company to maintain a specified level of minimum
net worth at all times and limits the payment of dividends on common stock. At
February 3, 2001, $95.9 million was outstanding under the agreement and
$57.0 million was available for borrowing, as calculated using 70% of eligible
inventory. The Company's policy is to classify borrowings under revolving
credit facilities as long-term debt since the Company has the ability, and the
intent, to maintain these obligations for longer than one year.

  The Company paid a one time fee of $875,000 to secure the credit facility,
and is amortizing the amount over the life of the contract on the interest
method.

  In conjunction with the pending acquisition of Oshman's Sporting Goods, Inc.
("Oshman's") (see note 22 to the consolidated financial statements), the
Company has received a commitment letter from CIT/Business Credit, Inc.
("CIT") to increase the Company's credit line to $300 million.

(10) Store Closing Activities

  The Company records a provision for store closing when the decision to close
a store is made. The provision consists of the incremental costs which are
expected to be incurred, including future net lease obligations, utilities and
property taxes, employee costs and other expenses directly related to the
store closing.

                                     F-13
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


  In connection with the acquisition of Sportmart, the Company acquired
certain discontinued operations that had been previously reserved for,
including Sportmart's Canadian subsidiary and four stores in the United States
leased from related parties.

  Activity in the provision for closed stores is as follows (in thousands):

<TABLE>
<CAPTION>
                                                           Fiscal years
                                                       ----------------------
                                                       2000    1999    1998
                                                       -----  ------  -------
   <S>                                                 <C>    <C>     <C>
   Provision for closed stores at beginning of period  $ 897  $1,355  $ 5,789
   Additions..........................................   366      --    1,242
   Decreases..........................................  (318)   (458)  (5,676)
                                                       -----  ------  -------
   Provision for closed stores at end of period....... $ 945  $  897  $ 1,355
                                                       =====  ======  =======
</TABLE>

(11) Financial Instruments and Risk Management

  In connection with the Sportmart acquisition, certain derivative financial
instruments were acquired. The instruments were utilized to reduce interest
rate and foreign currency exchange risks. The Company does not use derivatives
for speculative trading purposes.

  The assumed contracts consisted of one interest rate cap agreement and
various foreign currency option contracts. These agreements were transferred
from Sportmart's credit agreement to the Company's credit agreement. The
interest rate cap agreement was for a notional amount totaling $25.0 million,
placed an interest rate ceiling on LIBOR at 6.0% and expired in August 1999.

(12) Income Taxes

  Prior to April 21, 1994, the Company's financial results were included in
the consolidated U.S. federal income tax returns of its former parent.
Pursuant to the tax sharing agreement between the Company and its former
parent, which was effective from September 25, 1992 up to and including April
20, 1994, the Company recorded income taxes assuming the Company filed a
separate income tax return. The tax sharing agreement also provided for the
treatment of tax loss carrybacks, indemnifications, resolution of disputes,
and other matters that may arise as a result of its former parent's pending
Internal Revenue Service ("IRS") examination.

                                     F-14
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


  Income tax benefit (expense) consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  Fiscal
                                                            --------------------
                                                             2000  1999    1998
                                                            ------ -----  ------
   <S>                                                      <C>    <C>    <C>
   Current:
     Federal .............................................. $   -- $  --  $  469
     State.................................................     --    --      90
                                                            ------ -----  ------
                                                                --    --     559
   Deferred:
     Federal...............................................  5,968  (803)  1,292
     State.................................................  1,437  (193)    334
                                                            ------ -----  ------
                                                             7,405  (996)  1,626
                                                            ------ -----  ------
                                                            $7,405 $(996) $2,185
                                                            ====== =====  ======
</TABLE>

  The effective income tax rate on income (loss) before income taxes differs
from the U.S. federal statutory rate for the following reasons:

<TABLE>
<CAPTION>
                                                                 Fiscal
                                                          ---------------------
                                                           2000    1999   1998
                                                          ------  ------ ------
   <S>                                                    <C>    <C>    <C>
   U.S. federal statutory rate .........................    34.0%  34.0%  34.0%
   Increase (decrease) resulting from:
     State and local taxes, net of federal benefit......     5.0%   5.0%   5.0%
     Change in valuation allowance .....................   (86.6%)   --    2.0%
     Change in state rate apportionment factors.........      --   (5.2%)   --
     Other, net ........................................     0.4%   2.2%  (2.0%)
                                                           -----   ----   ----
                                                           (47.2%) 36.0%  39.0%
                                                           =====   ====   ====
</TABLE>

                                     F-15
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


  The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are presented
below (in thousands):

<TABLE>
<CAPTION>
                                                         February 3, January 29,
                                                            2001        2000
                                                         ----------- -----------
   <S>                                                   <C>         <C>
   Assets:
   Accounts receivable .................................  $    421    $    182
   Tax credit carry forwards............................     2,043       2,043
   Net operating loss carryforwards.....................    18,992      22,435
   Accrued compensation and benefits....................     1,268       1,196
   Accrued occupancy....................................     1,710       1,116
   Other accrued expenses...............................     1,251       1,277
   Property and equipment...............................     1,670         --
                                                          --------    --------
                                                            27,355      28,249
                                                          --------    --------
   Liabilities:
   Property and equipment...............................       --       (2,803)
   Inventories..........................................   (11,088)     (9,667)
   Prepaid expenses.....................................    (1,026)       (680)
                                                          --------    --------
                                                           (12,114)    (13,150)
                                                          --------    --------
   Total net asset before valuation allowance ..........    15,241      15,099
   Less valuation allowance ............................       --      (19,280)
                                                          --------    --------
   Net deferred tax asset (liability) ..................  $ 15,241    $ (4,181)
                                                          ========    ========
</TABLE>

  The noncurrent deferred tax asset (liability) consists primarily of basis
differences in property and equipment and differences between the tax and book
basis of LIFO inventories acquired in the business combination, net of
applicable alternative minimum tax credit carryforwards. The LIFO basis
difference is classified as noncurrent as this inventory is not expected to be
liquidated or replaced within one year.

  The Company established a valuation allowance of $21,230,000 in connection
with the acquisition of Sportmart on January 9, 1998. In the transition
period, the Company incurred a loss, primarily relating to Sportmart
operations and established an additional valuation allowance of $2,492,000.
The valuation allowance was decreased $4,329,000 during fiscal 1999. Based
upon the Company's fiscal 2000 performance, current tax planning strategies
and management estimates of future taxable income, management believes it is
more likely than not that all of the pre-acquisition operating losses will be
utilized. As such, the remaining valuation allowance established in prior
years was reduced to zero in fiscal 2000.

  The Company utilized approximately $8,830,000 and $6,873,000 of its net
operating loss carryforwards, in fiscal 2000 and 1999 respectively, to reduce
taxable income. The Company has available at February 3, 2001, net operating
loss carryforwards of approximately $48,897,000 of which $3,674,000 will
expire in 2012, $28,300,000 will expire in 2013, and $16,923,000 will expire
in 2019. In addition, the Company also has tax credit carryforwards of
$2,043,000 at February 3, 2001, which have no expiration date.

(13) Leases

  The Company is obligated for two leased properties which are classified as
capital leases for financial reporting purposes. Both capital leases are with
partnerships substantially owned by a certain director of the

                                     F-16
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Company and his family members. The lease terms range from 15 to 18 years and
provide for minimum annual rental payments plus contingent rentals based upon
a percentage of sales in excess of stipulated amounts. The gross amount of
capitalized lease property and related accumulated amortization recorded under
capital leases is included in Property and Equipment.

  The Company has noncancelable operating leases primarily for stores,
distribution facilities and equipment, expiring at various dates from 2001 to
2018. These leases generally contain renewal options for periods ranging from
three to ten years and require the Company to pay all executory costs such as
real estate taxes, maintenance and insurance. Certain leases include
contingent rentals based upon a percentage of sales in excess of a specified
amount. Eight of the leases, three of which relate to closed store locations,
are with partnerships, the partner of which is a director of the Company and
his family members. The Company also subleases all or parts of certain
properties it currently leases. Minimum rentals include noncash rent expense
related to the amortization of deferred rent totaling $1,523,000 in fiscal
2000, $1,524,000 in fiscal 1999, and $1,391,000 in fiscal 1998.

  Total rent expense under these lease agreements was as follows (in
thousands):

<TABLE>
<CAPTION>
                                                              Fiscal
                                                      -------------------------
                                                       2000     1999     1998
                                                      -------  -------  -------
   <S>                                                <C>      <C>      <C>
   Base rentals ..................................... $50,855  $48,222  $42,408
   Contingent rentals ...............................     280      195       97
   Sublease rental income ...........................     (22)     (37)     (40)
                                                      -------  -------  -------
                                                      $51,113  $48,380  $42,465
                                                      =======  =======  =======
</TABLE>

  At February 3, 2001, future minimum lease payments under noncancelable
leases, with initial or remaining lease terms in excess of one year, were as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                         Amounts
                                                                          to be
                                                                         paid to
                                              Capital Operating          related
   Fiscal Years                               leases   leases    Total   parties
   ------------                               ------- --------- -------- -------
   <S>                                        <C>     <C>       <C>      <C>
   2001.....................................  $  673  $ 47,934  $ 48,607 $ 2,613
   2002.....................................     685    46,474    47,159   2,649
   2003.....................................     648    44,802    45,450   2,612
   2004.....................................     235    42,228    42,463   2,199
   2005 ....................................     235    39,979    40,214   1,812
   Thereafter ..............................     372   260,993   261,365   5,919
                                              ------  --------  -------- -------
     Total minimum lease payments ..........  $2,848  $482,410  $485,258 $17,804
                                                      ========  ======== =======
     Less imputed interest (at rates ranging
      from 9.0% to 10.75%)..................     573
                                              ------
     Present value of future minimum rentals
      of which $470 is included in current
      liabilities, at February 3, 2001......  $2,275
                                              ======
</TABLE>

  The total future minimum lease payments include amounts to be paid to
related parties and are shown net of $5,458,000 of noncancellable sublease
payments and exclude estimated executory costs, which are principally real
estate taxes, maintenance, and insurance (See note 18 to the consolidated
financial statements).

                                     F-17
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


  In connection with the transfer of certain leased stores to a former
affiliate in 1991, the Company remains liable as assignor on one lease. The
former affiliate has agreed to indemnify the Company for any losses it may
incur as assignor, however, such indemnification is unsecured. In addition,
the Company remains liable as assignor on three leases as a result of the
Sportmart acquisition. The remaining future minimum lease payments on these
leases, exclusive of any variable rent or cost reimbursement that might be
required, were as follows at February 3, 2001 (in thousands):

<TABLE>
<CAPTION>
   Fiscal Years
   ------------
   <S>                                                                  <C>
   2001................................................................ $ 1,500
   2002................................................................   1,500
   2003................................................................   1,500
   2004................................................................   1,438
   2005 ...............................................................   1,184
   Thereafter .........................................................   7,251
                                                                        -------
     Total minimum lease payments ..................................... $14,373
                                                                        =======
</TABLE>

  In the event of default on the lease obligations, and failure by the
assignee to indemnify the Company, the Company would incur a loss to the
extent of any remaining obligations, less any obligation mitigated by the
lessor re-leasing the property.

(14) Employee Benefit Plans

 Profit Sharing Plan

  During 1995, the Company amended its qualified defined contribution profit
sharing plan to include a 401(k) plan feature for all eligible employees. The
amended plan provides for tax deferred contributions by eligible employees and
for discretionary matching contributions by the Company. Participants vest in
the Company's contributions at a rate of 20% per year after the first year of
service. The plan provides for discretionary contributions, if any, by the
Company in amounts determined annually by the Board of Directors. The Company
contributed in the form of matching contributions, $357,000 in fiscal 2000,
$300,000 in fiscal 1999, and $277,000 in fiscal 1998.

 Sportmart, Inc. Restricted Stock Plan

  In July 1996, the Board of Directors of Sportmart and its stockholders
adopted the 1996 Restricted Stock Plan. At the acquisition date, pursuant to
the Change in Control provisions of the plan, 250,000 shares of Sportmart
common stock reserved for four participants were converted to 41,252 shares of
Gart Sports' common stock. Of this amount, 28,876 shares were issued to former
Sportmart senior management who are no longer employed by the Company, and
therefore became fully vested with no restrictions on resale. The balance of
12,376 shares was issued to one individual who remained with the Company and
continued to vest under the terms of the plan. The Company recorded
approximately $80,000 of unamortized compensation as a reduction to
stockholders' equity. This amount was amortized to compensation expense on a
straight-line basis over the remaining vesting period. The shares were fully
vested on August 1, 1999.

(15) Deferred Compensation Plan

  During fiscal 1999, the Company began a nonqualified Deferred Compensation
Plan (the "DCP") for certain members of management. Eligible employees may
contribute a portion of base salary or bonuses to the

                                     F-18
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

plan annually. The DCP provides for additional matching contributions by the
Company, with limitations similar to the Company's 401(k) plan, as well as
discretionary contributions in an amount determined by the Company prior to
the end of each plan year. The Company made no matching contributions to the
DCP during fiscal 2000 or 1999.

(16) Stock Option Plans

 Management Equity Plan

  The Company adopted a management equity plan (the "Management Equity Plan")
which authorizes the issuance of common stock plus grants of options to
purchase shares of authorized but unissued common stock up to 1,500,000
combined shares and options. The plan was amended by a vote of the
stockholders at the annual meeting of stockholders held on June 16, 1999. The
stockholders voted to amend the Management Equity Plan to increase the number
of shares and options authorized to be granted from 1,500,000 to 1,750,000
shares and options. As of February 3, 2001, 147,600 purchased shares of common
stock, 1,199,650 options, and 469,208 shares of restricted stock have been
issued and remain outstanding under the Management Equity Plan. Stock awards
issued in excess of 1,750,000 shares are subject to approval by the
shareholders of an increase in the number of shares available under the
Management Equity Plan. The purchased shares were paid for with a combination
of cash and notes that bore interest at 8% per annum, and were secured by the
common stock purchased. The notes were due October 17, 1999 and were paid in
full at that time. Stock options are granted with an exercise price equal to
the estimated fair value of the underlying stock, at the date of grant. All
stock options have a ten-year term and vest 20% per year over five years from
the date of grant. Restricted stock was granted to certain employees of the
Company and has a cliff vesting after five years from the grant date. The
Company recorded approximately $0.9 and $2.3 million of unamortized
compensation as a reduction to stockholders' equity in fiscal 2000 and 1999,
respectively. These amounts are being amortized to compensation expense on a
straight-line basis over the vesting period.

 Substitute Company Options

  In connection with the acquisition of Sportmart, options outstanding under
the 1992 Sportmart, Inc. Stock Option Plans were assumed by the Company. The
substitute options were modified to Company options utilizing the same
conversion ratio of .165014 to one as the common stock and dividing the
exercise price of the previous options by the conversion ratio.

  The holders of the substitute options continue with the same vesting periods
as the original grants, except that those holders whose employment with
Sportmart terminated within six months of the acquisition date had accelerated
vesting. All such persons had immediately vested options upon termination, and
had one year to exercise such options. As of January 9, 1998, 1,153,573
Sportmart options were exchanged for 190,457 Company substitute options.

  On March 9, 1998 the Compensation Committee of the Board of Directors
revalued certain substitute options issued in conjunction with the
acquisition. All options to purchase shares for those employees remaining with
the Company, after the acquisition, with exercise prices greater than $14.00
were revalued to $14.00, the closing price of the Company's common stock on
that date.

                                     F-19
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


  Stock option activity during the periods indicated for both of the Company's
plans was as follows:

<TABLE>
<CAPTION>
                                                            Weighted
                                                            average
                                                 Number of  exercise   Options
                                                  options    price   exercisable
                                                 ---------  -------- -----------
   <S>                                           <C>        <C>      <C>
   Balance at January 31, 1998..................   773,757   $13.60    310,894
     Granted....................................   342,975    13.39
     Exercised..................................    (4,553)    5.80
     Canceled...................................  (177,730)   27.25
                                                 ---------
   Balance at January 30, 1999..................   934,449    10.97    372,361
     Granted....................................   233,000     6.64
     Exercised..................................        --       --
     Canceled...................................  (145,518)   16.73
                                                 ---------
   Balance at January 29, 2000.................. 1,021,931     9.07    451,520
     Granted....................................   382,500     6.42
     Exercised .................................   (38,200)    5.36
     Canceled...................................  (123,560)    8.75
                                                 ---------
   Balance at February 3, 2001.................. 1,242,671   $ 8.40    510,459
                                                 =========
</TABLE>

  Canceled options are a result of employee terminations.

  At February 3, 2001, January 29, 2000 and January 30, 1999, the weighted-
average remaining contractual lives of outstanding options were 7.2, 6.8 and
7.0 years, respectively.

  The per share weighted-average fair value of stock options granted during
fiscal years 2000, 1999, and 1998 was $4.61, $4.16, and $10.06, respectively,
on the date of grant or exchange using the Black Scholes option-pricing model
(which incorporates a present value calculation).

  The following weighted-average assumptions were used for grants issued in
fiscal year 1998:

<TABLE>
   <S>                                                             <C>
   Expected volatility............................................           54%
   Risk free interest rates.......................................         5.68%
   Expected life of options....................................... 6 to 10 years
   Expected dividend yield........................................            0%


  The following weighted-average assumptions were used for grants issued in
fiscal year 1999:


   Expected volatility............................................         73.4%
   Risk free interest rate........................................          5.5%
   Expected life of options.......................................       6 years
   Expected dividend yield........................................            0%


  The following weighted-average assumptions were used for grants issued in
fiscal year 2000:


   Expected volatility............................................         73.2%
   Risk free interest rate........................................          5.5%
   Expected life of options.......................................       6 years
   Expected dividend yield........................................            0%
</TABLE>

                                     F-20
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


  The following table summarizes the status of outstanding stock options as of
February 3, 2001:

<TABLE>
<CAPTION>
                           Options outstanding          Options exercisable
                     -------------------------------- ------------------------
                                  Remaining  Weighted             Weighted
                      Number of  contractual average   Number of  average
   Range of            options    life (in   exercise   options   exercise
   exercise prices   outstanding   years)     price   exercisable  price
   ---------------   ----------- ----------- -------- ----------- --------
   <S>               <C>         <C>         <C>      <C>         <C>      <C>
   $5.13 -  6.00...     617,400      7.0      $ 5.61    254,860    $ 5.13
    6.625- 8.625...     202,500      8.2        6.78     46,500      6.67
    9.00 - 11.25...      90,000      8.4        9.47     24,000      9.00
    14.00- 15.63...     332,771      6.5       14.28    185,099     14.20
                      ---------                         -------
   $ 5.13- 15.63...   1,242,671      7.2      $ 8.40    510,459    $ 8.74
                      =========                         =======
</TABLE>

  The Company applies APB No. 25 in accounting for the Management Equity Plan
and Substitute Option Plan and grants its options at fair value, accordingly,
no compensation cost has been recognized for its stock options in the
consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under
SFAS No. 123, the Company's consolidated net income would have been reduced or
loss increased, to the pro forma amounts indicated below (in thousands, except
share amounts):

<TABLE>
<CAPTION>
                                                                Fiscal
                                                        ----------------------
                                                         2000    1999   1998
                                                        ------- ------ -------
   <S>                                                  <C>     <C>    <C>
   Net income (loss), as reported...................... $23,096 $1,773 $(3,418)
                                                        ======= ====== =======
   Net income (loss), pro forma........................ $22,321 $1,072 $(4,209)
                                                        ======= ====== =======
   Earnings (loss) per share, pro forma:...............
     Basic............................................. $  3.02 $ 0.14 $ (0.55)
                                                        ======= ====== =======
     Diluted........................................... $  2.89 $ 0.14 $ (0.55)
                                                        ======= ====== =======
</TABLE>

  The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net income (loss) amounts
presented above because compensation cost is reflected over the options'
vesting period of five years and compensation cost for options granted prior
to January 1, 1995 is not considered.

(17) Enterprise-Wide Operating Information

  In Fiscal 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure About Segments of an Enterprise and Related
Information," which establishes annual and interim reporting standards for an
enterprise's operating segments and related disclosures about its products,
services, major customers and the material countries in which the entity holds
assets and reports revenues.

  The Company is a retailer of sporting goods in the Midwest, Rocky Mountain
and Western United States. Given the economic characteristics of the store
formats, the similar nature of the products sold, the type of customer and
method of distribution, the operations of the Company are aggregated into one
reportable segment.

  Prior to the acquisition of Sportmart by the Company, Sportmart operated
certain stores in Canada. Sportmart discontinued such Canadian operations
prior to the Company's acquisition of Sportmart. Therefore, net sales per the
accompanying consolidated statements of operations do not include any amounts
from stores located outside of the United States.

                                     F-21
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


(18) Related Party Transactions

  Green Equity Investors, whose general partner is Leonard Green & Associates,
LP ("LGA") owns approximately 64.0% of the outstanding common stock of the
Company. The Company has a management services agreement with LGA whereby LGA
receives an annual retainer fee plus reasonable expenses for providing certain
management, consulting and financial planning services. The management
services agreement also provides that LGA may receive reasonable and customary
fees and reasonable expenses from time to time for providing financial
advisory and investment banking services in connection with major financial
transactions that may be undertaken in the future. The management services
agreement terminates April 20, 2004. The minimum management fee is $500,000
per year for the remaining term of the agreement. The Company paid a
management fee to LGA of $500,000 for each of fiscal 2000, 1999 and 1998.

  During 1998, the Company had noncancelable consulting agreements with
certain former Sportmart executives, who are or were Directors of the Company.
The Company paid a fee equal to 50% of their base salary as in effect at
September 26, 1997 and reasonable expenses for a period of one year. The
consultants agreed to be available, from time to time, to advise the Company
on strategic issues, planning, merchandising and operational issues related to
the acquisition of Sportmart. In addition, the Company paid a severance
benefit in equal installments over eighteen months equal to 100% of the base
salary as of September 26, 1997, commencing on January 9, 1998.

  The Company leases certain properties from related parties. Rent expense
under these lease agreements was as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   Fiscal
                                                            --------------------
                                                             2000   1999   1998
                                                            ------ ------ ------
   <S>                                                      <C>    <C>    <C>
   Base rentals............................................ $1,787 $1,732 $1,808
   Contingent rentals......................................     80     39     50
                                                            ------ ------ ------
                                                            $1,867 $1,771 $1,858
                                                            ====== ====== ======
</TABLE>


  As of February 3, 2001, there were no payments due to LGA or other related
parties.

(19) Contingencies

 Tax Contingency

  Under the terms of the Company's tax sharing agreement with its former
parent, the Company is responsible for its share, on a separate return basis,
of any tax payments associated with proposed deficiencies or adjustments, and
related interest and penalties charged to the controlled group which may arise
as a result of an assessment by the IRS.

  On July 24, 1997, the IRS proposed adjustments to the Company's and former
parent's 1992 and 1993 federal income tax returns in conjunction with the
former parent's IRS examination. The proposed adjustments related to the
manner in which LIFO inventories were characterized on such returns. The
Company recorded approximately $9,700,000 as a long-term net deferred tax
liability for the tax effect of the LIFO inventory basis difference. The IRS
has asserted that this basis difference should be reflected in taxable income
in 1992 and 1993. The Company has taken the position that the inventory
acquired in connection with the acquisition of its former parent was
appropriately allocated to its inventory pools. The IRS has asserted the
inventory was acquired at a bargain purchase price and should be allocated to
a separate pool and liquidated as inventory turns.

                                     F-22
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


  Based on management's discussions with the Company's former parent, the
Company believes the potential accelerated tax liability, which could have a
negative effect on liquidity in the near term, ranges from approximately
$2,500,000 to $9,700,000. The range of loss from possible assessed interest
charges resulting from the proposed adjustments range from approximately
$580,000 to $3,300,000. The Company has accrued approximately $1.2 million for
potential interest charges in its consolidated financial statements. No
penalties are expected to be assessed relating to this matter. At February 3,
2001, the LIFO inventory and other associated temporary differences continue
to be classified as long-term net deferred tax liabilities.

  The Company has reviewed the various matters that are under consideration
and believes that it has adequately provided for any liability that may result
from this matter. In the opinion of management, any additional liability
beyond the amounts recorded that may arise as a result of the IRS examination
will not have a material adverse effect on the Company's consolidated
financial condition, results of operations, or liquidity.

  In addition, the Company is currently under examination for the fiscal tax
years ended September 1997 and 1998. No adjustments have been proposed at this
time.

 Legal Proceedings

  The Company is, from time to time, involved in various legal proceedings and
claims arising in the ordinary course of business. Management believes that
the ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial condition, results of
operations or liquidity.

  In June 2000, a former employee of Sportmart brought two class action
complaints in California against the Company, alleging certain wage and hour
claims in violation of the California Labor Code, California Business and
Professional Code section 17200 and other related matters. One complaint
alleges that the Company classified certain managers in its California stores
as exempt from overtime pay when they would have been classified as non-exempt
and paid overtime. The second complaint alleges that the Company failed to pay
hourly employees in its California stores for all hours worked. In March 2001,
a third class action complaint was filed in the same court in California
alleging the same wage and hour violations regarding classification of certain
managers as exempt from overtime pay. All the complaints seek compensatory
damages, punitive damages and penalties. The amount of damages sought is
unspecified. Although the court recently denied motions to dismiss the first
two complaints, the Company intends to vigorously defend these matters and at
this time, the Company has not ascertained the future liability, if any, as a
result of these complaints.


                                     F-23
<PAGE>

                              GART SPORTS COMPANY
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


(20) Earnings (Loss) Per Share

  The following table sets forth the computations of basic and diluted earnings
(loss) per share.

<TABLE>
<CAPTION>
                                              Fiscal      Fiscal     Fiscal
                                               2000        1999       1998
                                            ----------- ---------- -----------
   <S>                                      <C>         <C>        <C>
   Net income (loss) .....................  $23,096,000 $1,773,000 $(3,418,000)
   Weighted average shares of common stock
    outstanding...........................    7,380,529  7,632,696   7,676,816
                                            ----------- ---------- -----------
   Basic earnings (loss) per share........  $      3.13 $     0.23 $     (0.45)
                                            =========== ========== ===========
   Number of shares used for diluted
    earnings (loss) per share:
     Weighted average shares of common
      stock outstanding...................    7,380,529  7,632,696   7,676,816
     Dilutive securities--stock options ..      349,072     68,731          --
                                            ----------- ---------- -----------
   Weighted average shares of common stock
    and common stock equivalents
    outstanding ..........................    7,729,601  7,701,427   7,676,816
                                            ----------- ---------- -----------
   Diluted earnings (loss) per share .....  $      2.99 $     0.23 $     (0.45)
                                            =========== ========== ===========
</TABLE>

  All of the Company's stock options were excluded from the computation of
diluted loss per share for fiscal 1998 since their effect was anti-dilutive.

(21) Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
                                  First     Second   Third     Fourth
                                 quarter   quarter  quarter   quarter   Annual
                                 --------  -------- --------  -------- --------
                                   (in thousands, except per share amounts)
   <S>                           <C>       <C>      <C>       <C>      <C>
   Fiscal 2000
   Net sales...................  $165,749  $166,128 $187,600  $231,647 $751,124
   Gross profit................    39,310    47,205   41,222    63,609  191,346
   Net income..................       410    10,765      233    11,688   23,096
   Basic earnings per share....      0.05      1.46     0.03      1.59     3.13
   Diluted earnings per share..      0.05      1.44     0.03      1.48     2.99
   Fiscal 1999
   Net sales...................  $151,933  $172,562 $155,495  $201,005 $680,995
   Gross profit................    35,804    40,611   34,340    52,835  163,590
   Net income (loss)...........      (110)      514   (2,512)    3,881    1,773
   Basic earnings (loss) per
    share......................     (0.01)     0.07    (0.33)     0.51     0.23
   Diluted earnings (loss) per
    share......................     (0.01)     0.07    (0.33)     0.51     0.23
</TABLE>

                                      F-24
<PAGE>

                              GART SPORTS COMPANY
                               AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)


(22) Subsequent Events

  On February 22, 2001, the Company announced it had signed a definitive
agreement to acquire Oshman's Sporting Goods. Inc. The Company has secured
commitments from certain shareholders of Oshman's common stock to vote their
shares in favor of the proposed merger, bringing the total beneficial owners
voting in favor of the proposed merger to approximately 50.1%. Green Equity
Investors, L.P., an affiliate of Leonard Green & Partners, L.P., which
beneficially owns approximately 64.0% of the outstanding common stock of the
Company, has also agreed to vote its shares in favor of the proposed merger.
Completion of the transaction is subject to customary conditions, including
the approval of the Oshman's shareholders and the effectiveness of a
registration statement for the Gart shares to be issued. Oshman's currently
operates 58 sporting goods specialty stores, including 43 SuperSports USA
stores and 15 traditional stores. Oshman's SuperSports USA stores are located
primarily in medium to large metropolitan areas across the United States,
offering high quality name brand and private label equipment and sportswear.
Oshman's SuperSports USA stores utilize interactional merchandising by
offering sports test-play areas, including basketball courts, batting cages,
golf simulators and tennis courts. Upon completion of the acquisition of the
58 Oshman's stores, the Company will consist of 178 stores in 25 states. On a
pro-forma combined basis, the Company and Oshman's generated revenue of
approximately $1.1 billion during the fiscal year ended February 3, 2001.

                                     F-25
<PAGE>

                                  SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on April 10, 2001 on its behalf by the undersigned, thereunto duly authorized.

                                          GART SPORTS COMPANY

                                                  /s/ JOHN DOUGLAS MORTON
                                          By: _________________________________
                                                    John Douglas Morton
                                               President and Chief Executive
                                                          Officer

                               POWER OF ATTORNEY

  KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers or directors
of the Registrant, by virtue of their signatures to this report, appearing
below, hereby constitute and appoint John Douglas Morton and Thomas T.
Hendrickson, or any one of them, with full power of substitution, as
attorneys-in-fact in their names, places and stead to execute any and all
amendments to this report in the capacities set forth opposite their names and
hereby ratify all that said attorneys-in-fact do by virtue hereof.

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on April 10, 2001.

<TABLE>
<CAPTION>
                 Signature                                      Title
                 ---------                                      -----

<S>                                         <C>
          /s/ JOHN DOUGLAS MORTON           Chairman, President and Chief Executive
___________________________________________  Officer (Principal Executive Officer)
            John Douglas Morton
         /s/ THOMAS T. HENDRICKSON          Executive Vice President, Chief Financial
___________________________________________  Officer and Treasurer (Principal Financial
           Thomas T. Hendrickson             and Accounting Officer)
         /s/ JONATHAN D. SOKOLOFF           Director
___________________________________________
           Jonathan D. Sokoloff
           /s/ JONATHAN SEIFFER             Director
___________________________________________
             Jonathan Seiffer
           /s/ GORDON D. BARKER             Director
___________________________________________
             Gordon D. Barker
           /s/ PETER R. FORMANEK            Director
___________________________________________
             Peter R. Formanek
           /s/ LARRY J. HOCHBERG            Director
___________________________________________
             Larry J. Hochberg
</TABLE>