-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CqfEsMMFm80BnskOy6qPzY+qGr/+Sx80J7cUkGyo+kzqNvgLB2sU+F8jFM++AgMk Wiwgrtnd9h+DKDokqrRxsw== 0000914190-95-000038.txt : 19951013 0000914190-95-000038.hdr.sgml : 19951013 ACCESSION NUMBER: 0000914190-95-000038 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951010 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST TEAM SPORTS INC CENTRAL INDEX KEY: 0000820242 STANDARD INDUSTRIAL CLASSIFICATION: 3949 IRS NUMBER: 411545748 STATE OF INCORPORATION: MN FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16442 FILM NUMBER: 95579610 BUSINESS ADDRESS: STREET 1: 2274 WOODALE DR CITY: MOUNDS VIEW STATE: MN ZIP: 55112 BUSINESS PHONE: 6127804454 MAIL ADDRESS: STREET 1: 2274 WOODALE DRIVE CITY: MOUNDS VIEW STATE: MN ZIP: 55112 10-Q 1 FORM 10-Q FOR 2ND QUARTER 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: Commission File No.: August 31, 1995 0-16442 FIRST TEAM SPORTS, INC. (Exact name of Registrant as specified in its charter) Minnesota 41-1545748 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2274 Woodale Drive Mounds View, Minnesota 55112 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 780-4454 -------------------------------------- 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: 5,718,479 shares of Common Stock, $.01 par value per share, outstanding as of October 9, 1995. PART I FINANCIAL INFORMATION Item 1. Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS August 31, 1995 and February 28, 1995
August 31, February 28, 1995 1995 ----------- ------------ ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 1,429,873 $ 601,394 Receivables: Trade, less allowance for doubtful accounts of $595,000 at August 31, 1995 and $562,000 at February 28, 1995 18,279,243 16,854,825 Refundable income taxes 45,146 46,146 Inventory (finished goods) 15,780,090 15,187,283 Inventory (unfinished goods) 5,673,359 5,650,888 Prepaid expenses 609,689 888,734 Deferred income taxes 712,000 501,000 ------------ ------------ Total current assets $ 42,529,400 $ 39,730,270 EQUIPMENT AND LEASEHOLD IMPROVEMENTS at cost Vehicles $ 63,582 $ 62,306 Office furniture and equipment 810,470 650,479 Warehouse equipment 149,821 118,898 Production equipment 3,004,168 2,558,748 Leasehold improvements 162,685 155,738 Building construction in process 535,995 -- ------------ ------------ $ 4,726,721 $ 3,546,169 Less accumulated depreciation 1,241,284 926,284 ------------ ------------ $ 3,485,437 $ 2,619,885 ------------ ------------ OTHER ASSETS License agreements, less accumulated amortization of $2,137,000 at August 31, 1995 and $1,807,000 at February 28, 1995 $ 2,967,072 $ 3,296,830 Other 273,983 216,768 ------------ ------------ $ 3,241,055 $ 3,513,598 ------------ ------------ $ 49,255,892 $ 45,863,753 ============ ============
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) August 31, 1995 and February 28, 1995
August 31, February 28, 1995 1995 ----------- ----------- (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to bank $ 8,482,000 $ 9,064,000 Current maturities of long-term debt 795,698 936,644 Accounts payable, trade 8,567,232 9,015,376 Accrued expenses 2,291,555 2,605,160 Income taxes -- -- ----------- ----------- Total current liabilities $20,136,485 $21,621,180 ----------- ----------- LONG-TERM DEBT, less current maturities $ 2,567,549 $ 3,053,494 ----------- ----------- DEFERRED INCOME TAXES $ 400,000 $ 339,000 ----------- ----------- SHAREHOLDERS' EQUITY Common Stock, par value $.01 per share; authorized 10,000,000 shares; issued and outstanding 5,718,522 shares at August 31, 1995, 5,628,184 shares at February 28, 1995 $ 57,185 $ 56,282 Additional paid-in capital 8,695,412 8,228,843 Retained earnings 17,399,261 12,564,954 ----------- ----------- $26,151,858 $20,850,079 ----------- ----------- $49,255,892 $45,863,753 =========== ===========
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Six months ended August 31, August 31, 1995 1994 1995 1994 ----------- ------------ ------------ -------- Net sales $ 23,229,805 $ 21,172,760 $ 54,006,268 $ 41.864,943 Cost of goods sold 15,867,635 14,903,468 37,019,215 29,587,148 ------------- ------------- ------------- ------------- Gross profit $ 7,362,170 $ 6,269,292 $ 16,987,053 $ 12,277,795 ------------- ------------- ------------- ------------- Operating expenses: Selling $ 2,183,890 $ 1,917,148 $ 4,777,096 $ 3,354,003 General and administrative 1,990,809 1,855,702 4,141,321 3,725,446 ------------- ------------- ------------- ------------- $ 4,174,699 $ 3,772,850 $ 8,918,417 $ 7,079,449 ------------- ------------- ------------- ------------- Operating income $ 3,187,471 $ 2,496,442 $ 8,068,636 $ 5,198,346 Other income (expense): Interest income 0 149 0 149 Interest expense (195,370) (144,035) (459,329) (305,669) Other 0 4,373 0 (33,991) ------------- ------------- ------------- ------------- Income before income taxes $ 2,992,101 $ 2,356,929 $ 7,609,307 $ 4,858,835 Income taxes 1,040,000 873,006 2,775,000 1,815,256 ------------- ------------- ------------- ------------- Net income for the period $ 1,952,101 $ 1,483,923 $ 4,834,307 $ 3,043,579 ============= ============= ============= ============= Net income per common share: Primary $ 0.32 $ 0.26 $ 0.80 $ 0.55 Fully diluted $ 0.32 $ 0.26 $ 0.80 $ 0.55 ============= ============= ============= ============= Weighted average number of common shares outstanding including Common Share equivalents Primary 6,089,271 5,616,920 6,062,450 5,551,212 Fully diluted 6,047,530 5,703,800 6,037,780 5,526,705 ============= ============= ============= =============
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Six Months Ended August 31, 1995 and 1994 (Unaudited)
August 31, August 31, 1995 1994 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 4,834,307 $ 3,043,579 Adjustments required to reconcile net income to net cash provided by (used in) operating activities: Depreciation 315,000 406,128 Amortization 351,358 -- Loss on retirement of equipment -- 45,004 Deferred income taxes (150,000) -- Change in assets and liabilities: Receivables (1,424,418) (4,297,304) Inventories (615,278) (2,102,221) Prepaid expense 279,045 180,204 Accounts payable (448,144) 3,383,463 Accrued expenses (313,605) 710,183 Income taxes 1,000 489,632 ------------ ------------ Net cash provided by operating activities $ 2,829,265 $ 1,858,668 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ($ 1,180,552) ($ 229,724) Other (78,815) (8,939) ------------ ------------ Net cash used in investing activities ($ 1,259,367) ($ 238,663) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds (payments) on short-term borrowings ($ 582,000) ($ 1,499,000) Principal payments on long-term borrowings (626,891) (357,647) Net proceeds from issuances of common stock 1995; 90,338 shares, 1994; 5,541 shares 467,472 28,140 ------------ ------------ Net cash used in financing activities ($ 741,419) ($ 1,828,507) ------------ ------------ Increase (decrease) in cash and cash equivalents $ 828,479 ($ 208,502) Cash and cash equivalents: Beginning $ 601,394 $ 417,987 ------------ ------------ Ending $ 1,429,873 $ 209,485 ============ ============
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. The consolidated condensed balance sheet as of August 31, 1995, and the consolidated statements of operations for the three-month and six-month periods ended August 31, 1995 and August 31, 1994 and the consolidated statements of cash flows for the six-month periods then ended have been prepared by the Company without audit. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated financial position, results of operations and cash flows at August 31, 1995 and August 31, 1994 and for all periods presented have been made. The operating results for the period ended August 31, 1995 are not necessarily indicative of the operating results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in consolidated financial statements in accordance with generally accepted accounting principles have been condensed or omitted. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS Net Sales. The Company's net sales for the second quarter of fiscal 1996 (the quarter ended August 31, 1995) were $23,229,805, an increase of 10% over the comparable quarter of fiscal 1995 when net sales were $21,172,760. Net sales for the first six-months of fiscal 1996 were $54,006,268, compared to $41,864,943 for the first six-months of fiscal 1995, an increase of 29%. Net export sales were $7,444,220, or 32% of total sales, in the second quarter of fiscal 1996 compared to $3,375,793, or 16% of total sales, in the second quarter of fiscal 1995. The net export sales for the second quarter of fiscal 1996 and 1995 consisted of Canadian net sales of $2,779,678 and $1,660,324 and net sales outside of North America of $4,664,542 and $1,715,469 respectively. In-line skate sales accounted for approximately 82% of total sales in the second quarter of fiscal 1996 and fiscal 1995. Accessories, street hockey equipment, and ice skate sales accounted for approximately 11%, 4%, 3%, and, 7%, 11% and less then 1% of total sales in the second quarter of fiscal 1996 and fiscal 1995 respectively. Sales to the Company's ten largest accounts accounted for approximately 55% of the Company's sales in the second quarter of fiscal 1996, and fiscal 1995. The total backlog orders as of October 9, 1995 were approximately $16,201,738, compared to $18,663,000 as of October 12, 1994. Included in the Company's current backlog are orders in the amount of $14,027,922 for future ship dates. Several factors contributed to the increase in the Company's sales in the second quarter and the first six-months of fiscal 1996. The Company's new Disc Braking System (DBS(TM)) has been well-accepted by the industry. The Company's in-line skates which have the DBS accounted for approximately 13% of total second quarter and the first six-months of fiscal 1996 net sales. Management also believes that the Company has been able to capitalize on the continued growth of the industry, particularly the growth in the foreign markets. The Company's net export sales increased 348% in the second quarter and 187% in the first six-months of fiscal 1996 compared to the second quarter and first six-months of fiscal 1995. Gross Margin. In the second quarter of fiscal 1996, the Company's gross margin was 32% of net sales compared to a gross margin of 30% in the second quarter of fiscal 1995. This increase was due primarily to the increased sales of the Company's made-in-USA products, which accounted for approximately 60% of the Company's skate sales and improved margins on the Company's international sales. The Company's gross margin on its foreign sales was 31% for the second quarter of fiscal 1996 compared to 28% for the second quarter of fiscal 1995, which is a result of the increased demand for the Company's Ultra-Wheels products. Operating Expenses. The Company's operating expenses, (consisting of selling expenses and general and administrative expenses), for the second quarter of fiscal 1996 were $4,174,699, or 18% of net sales, compared to $3,772,850, or 18% of net sales, in the second quarter of fiscal 1995. Selling expenses were $2,183,890, or 9% of net sales in the second quarter of fiscal 1996, compared to $1,917,148, or 9% of net sales, in the second quarter of fiscal 1995. Selling expenses increased $226,742 (or 14%) in the second quarter of fiscal 1996, compared to the second quarter of fiscal 1995. This increase can be attributed to additional royalty, and promotional expenses associated with the increased sales volume. General and administrative expenses were $1,990,809 in the second quarter of fiscal 1996, a 7% increase from the second quarter of fiscal 1995. The increase can be attributed to increased personnel and occupancy expenses incurred to manage the increased sales volume. General and administrative expenses as a percentage of net sales were 9% for the second quarter of fiscal 1996 compared to 9% for the second quarter of fiscal 1995. Net Income. The Company had net income of $1,952,101 or $.32 per share, in the second quarter of fiscal 1996, compared to $1,483,923, or $.26 per share in the second quarter of fiscal 1995. This represents an increase of $468,178 (or 32%) in total earnings and an increase of $.06 (or 23%) in earnings per share. This increase can be attributed to the increase in sales and gross margins and the continued efforts of the company to control operating expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $1,429,873 as of August 31, 1995, compared to $601,394 as of February 28, 1995. This increase in cash and cash equivalents is a result of $2,829,265 of cash provided by operating activities being partially offset by $1,259,367 of cash used in investing activities and $741,419 of cash used in financing activities. The net cash provided by operating activities for the first six-months of fiscal 1996 resulted primarily from the net earnings and the net effect of the change in receivables, and inventories. The net cash used in investing activities was primarily used for the purchase of capital assets. The net cash used in financing activities was primarily used for the net payments on the company's line of credit and long-term borrowings. The Company had net working capital of $22,392,915 as of August 31, 1995, compared to $18,109,090 as of February 28, 1995. The Company's current ratio at August 31, 1995 was 2.1 to 1 compared to 1.8 to 1 at February 28, 1995. The improvement in the Company's net working capital and current ratio was primarily attributable to an increase in the Company's cash and receivables and a decrease in the balance outstanding under the Company's line of credit. The Company's debt-to-worth ratio was .9 to 1 on August 31, 1995, compared to 1.2 to 1 on February 28, 1995. The Company's long-term debt, which primarily consists of obligations under endorsement license agreements and equipment notes, less current maturities, was $2,567,549 as of August 31, 1995. As of August 31, 1995, the Company had a revolving line of credit established with a bank that provides for borrowings of up to $15,000.000 and is limited by the level of its eligible receivables. As of August 31, 1995, the Company's eligible receivables would have permitted the Company to borrow up to $12,305,000 under the line of credit, of which $7,885,000 was outstanding. In addition, the Company has a lease line of credit established with the bank providing for borrowings of up to $1,000,000 for the purchase of equipment and leasehold improvements. As of August 31, 1995, $326,664 was outstanding on this credit facility. The Company has entered into a development agreement and construction contract to build an office and warehouse facility at a projected cost of approximately $5,500,000. The projected occupancy date for the new facility is January 1, 1996. The Company anticipates financing the new facility through a conventional real estate mortgage. The Company believes that its current cash position, funds available under existing bank arrangements and cash generated from profitable operations will be sufficient to finance the cash flows for operating activities at projected levels of sales through fiscal 1996. PART II OTHER INFORMATION Item 1. Exhibits and Reports on Form 8-K (a) Exhibits. 27. Financial Data Schedule (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/ Robert L. Lenius, Jr. Robert L. Lenius, Jr. Vice President-Finance (Chief Financial Officer) Dated: October 7, 1995 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBIT INDEX TO FORM 10-Q For Quarter Ended: Commission File No.: 0-16422 August 31, 1995 FIRST TEAM SPORTS, INC. Exhibit 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(1) 10.1 Office/Warehouse Lease Agreement between the Company and Everest Investments Limited Partnership dated June 28, 1991 regarding the Company's facilities at 2274 Woodale Drive, Mounds View, Minnesota(1) 10.2 The Company's 1987 Stock Option Plan, as amended by resolutions dated May 25, 1989 -- incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended February 28, 1991(1)(2) 10.3 Amendment dated April 22, 1992 to the Company's 1987 Stock Option Plan -- incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended February 29, 1992(1)(2) 10.4 Form of Incentive Stock Option Agreement under 1987 Stock Option Plan -- incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-18, Reg. No. 33-16345C(1)(2) 10.5 Form of Nonqualified Stock Option Agreement under 1987 Stock Option Plan -- incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-18, Reg. No. 33-16345C(1)(2) 10.6 Lease Agreement between the Company and B.D.I. Partnership dated February 1, 1988 regarding the Company's former facility at 2141 - 108th Lane N.E., Minneapolis, Minnesota -- incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended February 29, 1988(1) 10.7 Amendment to Lease between the Company and B.D.I. Partnership dated July 1, 1990 regarding the Company's former facility at 2141 - 108th Lane N.E., Minneapolis, Minnesota -- incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended February 28, 1991(1) 10.8 Agreement Regarding Termination of Lease between the Company and B.D.I. Partnership dated February 18, 1991 regarding the Company's former facility at 2141 - 108th Lane N.E., Minneapolis, Minnesota -- incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended February 28, 1991(1) 10.9 License Agreement between the Company and STX, Inc. dated February 21, 1991 regarding the Company's license for knee and elbow pads -- incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended February 28, 1991(1) 10.10License Agreement between the Company, Wayne Gretzky and Janet Jones Gretzky dated as of December 1, 1994 -- incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended February 28, 1995(1) 10.11License Agreement between the Company and Creative Sports Concepts, Inc. dated as of October 31, 1994 -- incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended February 28, 1995(1) 10.12License Agreement between the Company and Katarina Witt effective March 1, 1992 -- incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended February 29, 1992(1) 10.13Player Agreement between the Company and Brett Hull dated as of April 7, 1992 -- incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended February 29, 1992(1) 10.14Company Bonus Plan for certain executive officers of the Company regarding fiscal 1995 -- incorporated by reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1994(1) 10.15Company Bonus Plan for certain executive officers of the Company regarding fiscal 1996 -- incorporated by reference to Exhibit 10.15 to the company's annual report on Form 10-K for the year ended February 28, 1995(1)(2) 10.16The Company's 1990 Nonqualified Stock Option Plan, as amended by resolutions dated May 25, 1989 -- incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended February 28, 1991(1)(2) 10.17Agreement for consulting services dated August 19, 1992 between the Company and Joe Mendelsohn -- incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended February 28, 1993(1)(2) 10.18Amendment to Agreement for consulting services dated May 17, 1994 between the Company and Joe Mendelsohn -- incorporated by reference to Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1994(1)(2) 10.19Amendment to Agreement for consulting services dated March 9, 1995 between the Company and Joe Mendelsohn -- incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended February 28, 1995(1)(2) 10.20The Company's 1993 Employee Stock Purchase Plan -- incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended February 28, 1993(1)(2) 10.21The Company's 1994 Stock Option and Incentive Compensation Plan -- incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended February 28, 1994(1)(2) - - --------------------------------- (1) Incorporated by reference to a previously filed exhibit or report (2) Management contract or compensatory plan or arrangement EX-27 2 FDS --
5 1 U.S. Dollars 6-MOS FEB-28-1996 MAR-01-1995 AUG-31-1995 1 1,429,873 0 18,324,389 595,000 21,453,449 42,529,400 4,726,721 1,241,284 49,255,892 20,567,549 2,567,549 57,185 0 0 26,094,673 49,255,892 54,006,268 54,006,268 37,019,215 37,019,215 0 0 459,329 7,609,307 2,775,000 4,834,307 0 0 0 4,834,307 .80 .80
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