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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter Ended:
May 31, 2001
Commission File No.:
0-16442

FIRST TEAM SPORTS, INC.
(Exact name of Registrant as specified in its charter)

Minnesota (State or other jurisdiction of incorporation or organization)	41-1545748 (I.R.S. Employer Identification No.)
1201 Lund Boulevard Anoka, Minnesota 55303 (Address of principal executive offices) Registrant's telephone number, including area code: (763) 576-3500

    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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 5,917,231 shares of Common Stock, $.01 par value per share, outstanding as of July 10, 2001.

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST TEAM SPORTS, INC.
CONSOLIDATED BALANCE SHEETS
May 31, 2001 and February 28, 2001

			May 31, 2001		February 28, 2001
			(Unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents		$	885,058	$	317,978
	Receivables:
		Trade, less allowance for doubtful accounts of $803,000 at May 31, 2001 and $948,000 at February 28, 2001		10,408,032		11,848,775
	Inventories			13,623,164		13,120,398
	Prepaid expenses			977,847		948,923
	Deferred income taxes			1,277,000		1,619,000
		Total current assets		27,171,101		27,855,074
PROPERTY AND EQUIPMENT,
	Land			600,000		600,000
	Building			4,997,840		4,997,840
	Production equipment			2,133,167		2,140,423
	Office furniture and equipment			2,034,276		2,061,527
	Warehouse equipment			982,740		982,740
	Vehicles			89,942		94,211
				10,837,965		10,876,741
	Less accumulated depreciation			4,852,849		4,716,737
				5,985,116		6,160,004
DEFERRED INCOME TAXES				1,821,000		1,525,500
OTHER ASSETS
	License agreements, less accumulated amortization of $4,450,000 at May 31, 2001 and $4,385,000 at February 28, 2001			915,994		981,424
	Goodwill, less accummulated amortization of $611,000 at May 31, 2001 and $578,000 at February 28, 2001			810,378		842,994
	Other			54,390		66,472
				1,780,762		1,890,890
			$	36,757,979	$	37,431,468

See accompanying notes.

		May 31, 2001			February 28, 2001
		(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
	Notes payable to bank	$	4,152,459		$	1,140,095
	Current maturities of long-term debt		523,949			520,240
	Accounts payable, trade		3,286,278			5,347,605
	Accrued expenses		1,329,740			1,746,552
	Total current liabilities		9,292,426			8,754,492
LONG-TERM DEBT,
	less current maturities		5,041,064			5,173,456
Deferred income taxes			60,000			60,000
DEFERRED REVENUE			503,800			507,640
SHAREHOLDERS' EQUITY
	Common Stock, par value $.01 per share; authorized 10,000,000 shares; issued and outstanding 5,917,231 shares at May 31, 2001, and 5,912,342 at February 28, 2001		59,173			59,124
	Additional paid-in capital		10,015,882			10,011,482
	Retained earnings		12,189,168			13,072,531
	Accumulated other comprehensive loss		(403,534	)		(207,257	)
			21,860,689			22,935,880
		$	36,757,979		$	37,431,468

See accompanying notes.

FIRST TEAM SPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three months ended May 31,
		2001			2000
Net sales		$	8,122,750		$	15,871,401
Cost of goods sold			5,857,277			10,776,006
	Gross profit		2,265,473			5,095,395
Operating expenses:
	Selling		1,049,909			1,435,922
	General and administrative		1,843,669			1,988,117
			2,893,578			3,424,039
	Operating (loss)/income		(628,105	)		1,671,356
	Interest expense		(269,399	)		(308,243	)
	(Loss)/Income before income tax expense/(benefit)		(897,504	)		1,363,113
Income tax expense/(benefit)			14,141			(470,287	)
	Net (loss)/income for the period	$	(883,363	)	$	892,826
Net (loss)/income per share:
	Basic	$	(0.15	)	$	0.15
	Diluted	$	(0.15	)	$	0.15
Shares used in computation of net (loss)/income per share:
	Basic		5,912,408			5,861,457
	Diluted		5,912,408			6,041,686

See accompanying notes

FIRST TEAM SPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Three Months Ended May 31, 2001 and 2000

(Unaudited)

			May 31, 2001			May 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
	Net (loss) income		$	(883,363	)	$	892,826
	Adjustments required to reconcile net (loss) income to net cash (used in) provided by operating activities:
		Depreciation		196,953			220,676
		Amortization		109,269			145,644
		Deferred income taxes		46,500			550,000
		Deferred revenue		(3,840	)		(3,840	)
		Change in assets and liabilities:
		Receivables		1,335,703			(1,526,731	)
		Inventories		(569,749	)		672,677
		Prepaid expenses		(29,892	)		158,276
		Accounts payable		(2,060,958	)		(243,408	)
		Accrued expenses		(399,897	)		(600,544	)
		Net cash (used in) provided by operating activities		(2,259,274	)		265,576
CASH FLOWS FROM INVESTING ACTIVITIES
		Purchase of property and equipment		(24,716	)		(213,911	)
		Net cash used in investing activities		(24,716	)		(213,911	)
CASH FLOWS FROM FINANCING ACTIVITIES
		Net proceeds on short-term borrowings		3,012,364			1,411,074
		Principal payments on long-term borrowings		(128,683	)		(361,865	)
		Net proceeds from exercise of stock options		4,449			2,437
		Net cash provided by financing activities		2,888,130			1,051,646
		Increase in cash and cash equvalents		604,140			1,103,311
		Effect of foreign currency translation		(37,060	)		(24,656	)
Cash and cash equivalents:
	Beginning			317,978			860,671
	Ending		$	885,058		$	1,939,326

See accompanying notes

FIRST TEAM SPORTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.

    The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. The operating results for the period ended May 31, 2001 are not necessarily indicative of the operating results to be expected for the full fiscal year.

    For further information, refer to the financial statements and footnotes thereto included in the Company's annual report or Form 10-K for the year ended February 28, 2001.

NOTE 2.

    During the quarters ended May 31, 2001 and 2000, total comprehensive (loss)/income amounted to ($1,079,639) and $729,454 respectively.

NOTE 3.

	Basic EPS					Diluted EPS
	2001			2000		2001			2000
	(in thousands, except per share data)
Three Months Ended May 31
Net (loss)/Income	$	(883	)	$	893	$	(883	)	$	893
Weighted average common
shares outstanding		5,912			5,861		5,912			5,861
Stock options		—			—		—			181
Total common equivalent
shares outstanding		5,912			5,861		5,912			6,042
Net (loss)/Income per share	$	(.15	)	$	.15	$	(.15	)	$	.15

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

    First Team Sports, Inc. (the "Company") is a leading manufacturer, designer and marketer of brand name sporting goods. The Company's product groups consist of in-line skates, in-line accessories and parts (primarily protective wear and replacement wheels and bearings), ice hockey sticks and ice hockey protective wear and accessories. Within the product groups, the Company maintains UltraWheels® and Skate Attack® in-line product lines and a Hespeler® ice hockey line. The UltraWheels line consists of higher quality and higher priced products that are targeted for specialty and sporting goods chain store customers. The Skate Attack line consists of lower priced products for the mass merchant customers. The Hespeler ice hockey line consists of high quality products that are targeted primarily for the specialty and sporting goods chain stores.

RESULTS OF OPERATIONS

    Net Sales.  Net sales were $8.1 million in the first quarter of fiscal 2002, a decrease of 49% compared to net sales of $15.9 million in the first quarter of fiscal 2001. Decreases in unit sales of in-line skates, ice hockey sticks and protective wear were the principal factors in the Company's net sales decrease in the first quarter of fiscal 2002.

A breakdown and analysis of the Company's main product lines is as follows:

	First Quarter
	Fiscal 2002				Fiscal 2001
	Amount		%		Amount		%		Change
	(dollar amounts in millions)
In-line Skates	$	6.2	76.5	%	$	12.1	76.1	%	(48.8	%)
In-line Accessories and Parts		1.0	12.3	%		1.5	9.4	%	(33.3	%)
Ice Hockey Sticks		0.3	3.7	%		0.7	4.4	%	(57.1	%)
Ice Hockey Protective and Access.		0.6	7.5	%		1.6	10.1	%	(62.5	%)
Total Net Sales	$	8.1	100.0	%	$	15.9	100.0	%	(49.1	%)

    The Company currently distributes products to numerous countries worldwide. A geographic breakdown of the Company's net sales for the first quarter is as follows:

	Fiscal 2002				Fiscal 2001
	Amount		%		Amount		%		Change
	(dollar amounts in millions)
Domestic	$	5.2	64.2	%	$	11.1	69.8	%	(53.2	%)
Canada	$	1.9	23.5	%		3.6	22.6	%	(47.2	%)
Europe	$	0.7	8.6	%		0.8	5.1	%	(12.5	%)
Other International	$	0.3	3.7	%		0.4	2.5	%	(25.0	%)
Total Net Sales	$	8.1	100.0	%	$	15.9	100.0	%	(49.1	%)

    Several factors contributed to the Company's sales performance in the first quarter of fiscal 2002. The decrease in the domestic and Canadian sales was the result of a slow-down in consumer spending throughout North America, a large carryover of retail inventory after the Holiday season and poor Spring weather throughout North America and Europe, which resulted in reductions and/or cancellation of Spring orders by some major customers.

    Gross Margin.  As a percentage of net sales, the Company's gross margin was 28% in the first quarter of fiscal 2002 and 32% in fiscal 2001. The decrease in gross margin as a percentage of net sales in the first quarter of fiscal 2002 was primarily due to the national and international markets that continue to be very competitive and are under extreme price competition.

    The Company's UltraWheels brand accounted for 85% of total net sales in the first quarter of fiscal 2002 compared to 80% in the first quarter of fiscal 2001. The Company's Skate Attack brand accounted for 4% of total sales in the first quarter of fiscal 2002 compared to 6% in the first quarter of fiscal 2001. The Hespeler brand accounted for 11% of total net sales in the first quarter of fiscal 2002 compared to 14% in the first quarter of fiscal 2001.

    Operating Expenses.  Selling expenses were $1.0 million (or 13% of total net sales) in the first quarter of fiscal 2002 compared to $1.4 million (or 9%) in the first quarter of fiscal 2001. The decrease in the absolute dollar amount of selling expenses in fiscal 2001 is primarily the result of a decrease in commissions associated with the decreased sales volume.

    General and administrative expenses were $1.8 million (or 23% of total net sales) in the first quarter of fiscal 2002 compared to $2.0 million (or 13%) in the first quarter of fiscal 2001. The decrease in the absolute dollar amount of general and administrative expenses was primarily related to decreased personnel costs associated with revenue reductions.

    Other Income and Expense.  Interest expense was $269,000 in the first quarter of fiscal 2002 compared to $308,000 in the first quarter of fiscal 2001. The decrease in interest expense for fiscal 2002 was primarily due to decreased usage of the Company's line of credit facility and a decrease in the bank's prime rate. The decreased rates affected both the Company's revolving line of credit facility and its term loan.

    Provision for Income Taxes.  The Company's effective tax rate was 1.6% in the first quarter of fiscal 2002 compared to 34.5% in the first quarter of fiscal 2001. The decrease in fiscal 2002 is primarily due to the valuation allowance against deferred tax assets and the effect of state and foreign tax rates.

    Net (Loss)/Income.  The Company had a net loss of ($883,000), or ($.15) per share, in the first quarter of fiscal 2002 compared to net income of $893,000 or $.15 per share, in fiscal 2001.

LIQUIDITY AND CAPITAL RESOURCES

    In the first quarter of fiscal 2002, the Company's operations used $2.3 million of cash compared to providing $266,000 of cash in the first quarter of fiscal 2001. The cash used by operations in the current year was primarily due to a decrease in payables.

    Net cash used in investing activities was $25,000 in the first quarter of fiscal 2002 compared to $214,000 in the first quarter of fiscal 2001. The use of cash for investing activities was attributable to equipment purchases.

    Net cash provided by financing activities was $2.9 million in the first quarter of fiscal 2002 compared to $1.1 million in the first quarter of fiscal 2001. The net cash provided by bank financing activities in both fiscal 2002 and 2001 was primarily for funding the normal day to day operations of the Company.

    The Company's debt to worth ratio was .7 to 1 as of May 31, 2001, .6 to 1 as of February 28, 2001 and .8 to 1 as of May 31, 2000. The Company's long-term debt, which consists primarily of a term note secured by a mortgage on the Company's headquarters and warehouse building and obligations under endorsement license agreements, less current maturities of $500,000, was $5.0 million as of May 31, 2001.

    The Company's primary financing facility is a $10 million revolving credit line, which expires February 28, 2004, bears interest at the bank's prime rate and is subject to a borrowing base that is calculated monthly and updated periodically during each month. The borrowing base is based on a percentage of eligible receivables and inventories. As of May 31, 2001, the borrowing base limitation was $10 million, of which $4.2 million was outstanding.

    In connection with this revolving credit facility, the Company has agreed, among other things, to maintain certain minimum financial ratio and income levels. The Company is in compliance with all covenants.

    The Company believes its current cash position, funds available under existing bank arrangements, and cash generated from operations will be sufficient to finance the Company's operating requirements through fiscal 2002.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    Market Risk.  The Company's sales and results of operations are subject to foreign currency fluctuations. The Company's foreign operations are in countries with fairly stable currencies; therefore, the effect of foreign currencies has not been significant. The Company attempts to limit its exposure to translation gains and losses by maintaining and controlling its foreign cash flows when possible, thus reducing such exposure.

    Interest Rate Risk.  The Company's interest rate risk exposure results from the floating prime rate on the Company's revolving credit line and term loan. The impact of an increase in interest rates by 100 basis points (1%) would not have a material effect on the Company's financial statement.

PART II
OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits. See Exhibit Index immediately following the signature page of this Form 10-Q.



(b)

Reports on Form 8-K. No reports on Form 8-K were filed by the Registrant during the quarter to which this Form 10-Q relates.

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 its behalf by the undersigned thereunto duly authorized.

	FIRST TEAM SPORTS, INC.
	By:	/s/ JOHN J. EGART  John J. Egart   President and CEO
	and By:	/s/ KENT A. BRUNNER  Kent A. Brunner   Vice President and CFO
Dated:  July 13, 2001

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

EXHIBIT INDEX TO FORM 10-Q

For Quarter Ended:
May 31, 2001
Commission File No.:
0-16422

FIRST TEAM SPORTS, INC.

Exhibit Number	Description
3.1	Restated Articles of Incorporation—incorporated by reference to Exhibit 3.1 to the Company's Form 10-K for the year ended February 28, 1997
3.2	Bylaws—incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-18 Reg. No. 33-16345C
4.1	Specimen of Common Stock Certificate—incorporated by reference to 4.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 28, 1991
4.2	Certificate of Designations of Series A Preferred Stock (included in Restated Articles of Incorporation—see Exhibit 3.1)
4.3	Rights Agreement dated as of March 15, 1996 between the Company and Norwest Bank Minnesota, N.A. as Rights Agent—incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form 8-A, Reg. No. 0-16422
4.4	Form of Right Certificate—incorporated by reference to Exhibit 2.2 to the Company's Registration Statement on Form 8-A, Reg. No. 0-16422
4.5	Summary of Rights to Purchase Share of Series A Preferred Stock-incorporated by reference to Exhibit 2.3 to the Company's Registration Statement of Form 8-A, Reg. No. 0-16422

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS May 31, 2001 and February 28, 2001
FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Three Months Ended May 31, 2001 and 2000 (Unaudited)
FIRST TEAM SPORTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1.
NOTE 2.
NOTE 3.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk

PART II OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES
EXHIBIT INDEX TO FORM 10-Q
FIRST TEAM SPORTS, INC.