-----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, Le5bYrHruU1+dDrdygkZgp6HALiESS0sBCdownIFXNlS0wc6efBPnz7l3cxuEDU/ sHqx4ckvx4LpmQzKcjugdQ== 0000914190-96-000296.txt : 19961015 0000914190-96-000296.hdr.sgml : 19961015 ACCESSION NUMBER: 0000914190-96-000296 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961011 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: 96642500 BUSINESS ADDRESS: STREET 1: 1201 LUND BLVD CITY: ANOKA STATE: MN ZIP: 55303 BUSINESS PHONE: 6127804454 MAIL ADDRESS: STREET 1: 2274 WOODALE DRIVE CITY: MOUNDS VIEW STATE: MN ZIP: 55112 10-Q 1 FORM 10-Q FOR QUARTER ENDED 8-31-96 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, 1996 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.) 1201 Lund Boulevard Anoka, Minnesota 55303 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 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: 5,742,967 shares of Common Stock, $.01 par value per share, outstanding as of October 8, 1996. PART I FINANCIAL INFORMATION Item 1. Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS August 31, 1996 and February 29, 1996
August 31, February 29, ASSETS 1996 1996 ------------ ------------ (Unaudited) CURRENT ASSETS Cash and cash equivalents $616,399 $2,166,863 Receivables: Trade, less allowance for doubtful accounts of $748,000 at August 31, 1996 and $489,000 at February 29, 1996 18,562,800 16,228,666 Refundable income taxes 155,146 Inventory 24,027,859 22,813,850 Prepaid expenses 686,963 960,079 Deferred income taxes 827,000 827,000 ------------ ------------ Total current assets $44,721,021 $43,151,604 ------------ ------------ PROPERTY AND EQUIPMENT, at cost Land $600,000 $600,000 Building 5,024,767 4,825,740 Production equipment 4,637,768 4,069,078 Office furniture and equipment 1,760,781 1,509,120 Warehouse equipment 331,850 315,509 Vehicles 46,925 46,925 ------------ ------------ $12,402,091 $11,366,372 Less accumulated depreciation 2,169,689 1,511,689 ------------ ------------ $10,232,402 $9,854,683 ------------ ------------ OTHER ASSETS License agreements, less accumulated amortization of $2,749,000 at August 31, 1996 and $2,459,000 at February 29, 1996 $2,355,289 $2,645,268 Other 307,046 306,247 ------------ ------------ $2,662,335 $2,951,515 ------------ ------------ $57,615,758 $55,957,802 ============ ============
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) August 31, 1996 and February 29, 1996
August 31, February 29, LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1996 ------------ ------------- (Unaudited) CURRENT LIABILITIES Notes payable to bank $12,354,250 $5,268,000 Current maturities of long-term debt 856,913 943,060 Accounts payable, trade 3,027,003 9,462,883 Accrued expenses 846,441 2,532,676 Income taxes 154,156 - ------------ ------------- Total current liabilities $17,238,763 $18,206,619 ------------ ------------- LONG-TERM DEBT, less current maturities $6,345,345 $6,880,360 ------------ ------------- DEFERRED INCOME TAXES $440,000 $440,000 ------------ ------------- DEFERRED REVENUE $600,000 $600,000 ------------ ------------- SHAREHOLDERS' EQUITY Common Stock, par value $.01 per share; authorized 10,000,000 shares; issued and outstanding 5,738,793 shares at August 31, 1996, 5,721,000 shares at February 29, 1996 $57,388 $57,210 Additional paid-in capital 9,491,281 9,396,802 Retained earnings 23,442,981 20,376,811 ------------ ------------ $32,991,650 $29,830,823 ------------ ------------ $57,615,758 $55,957,802 ============ ============
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, 1996 1995 1996 1995 --------------------- -------------------- --------------------- -------------------- Net sales $15,634,944 $23,229,805 $46,221,743 $54,006,268 Cost of goods sold 11,474,675 15,979,035 32,978,677 37,238,922 --------------------- -------------------- --------------------- -------------------- Gross profit $4,160,269 $7,250,770 $13,243,066 $16,767,346 --------------------- -------------------- ----------------------- -------------------- Operating expenses: Selling $1,954,914 $2,183,890 $4,345,468 $4,777,096 General and administrative 1,484,564 1,879,409 3,421,357 3,921,614 --------------------- -------------------- --------------------- -------------------- $3,439,478 $4,063,299 $7,766,825 $8,698,710 --------------------- -------------------- --------------------- -------------------- Operating income $720,791 $3,187,471 $5,476,241 $8,068,636 Other income (expense): Interest expense (399,812) (195,370) (723,071) (459,329) Other 0 0 0 0 --------------------- -------------------- --------------------- -------------------- Income before income taxes $320,979 $2,992,101 $4,753,170 $7,609,307 Income taxes 110,000 1,040,000 1,687,000 2,775,000 --------------------- -------------------- --------------------- -------------------- Net income for the period $210,979 $1,952,101 $3,066,170 $4,834,307 ===================== ==================== ===================== ==================== Net income per common share: $0.04 $0.32 $0.52 $0.80 ===================== ==================== ===================== ==================== Weighted average number of common shares outstanding including Common Share equivalents 5,983,901 6,089,271 5,931,080 6,062,450 ===================== ==================== ===================== ====================
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Six Months Ended August 31, 1996 and 1995 (Unaudited)
August 31, August 31, 1996 1995 -------------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $3,066,170 $4,834,307 Adjustments required to reconcile net income to net cash provided by (used in) operating activities: Depreciation 658,000 315,000 Amortization 316,979 351,358 Deferred income taxes - (150,000) Change in assets and liabilities: Receivables (2,178,988) (1,424,418) Inventories (1,214,009) (615,278) Prepaid expenses 273,116 279,045 Accounts payable (6,435,880) (448,144) Accrued expenses (1,686,235) (313,605) Income taxes 154,156 1,000 ------------ ---------- Net cash provided by (used in) operating activities ($7,046,691) $2,829,265 ------------ ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ($1,035,719) ($1,180,552) Other (27,799) (78,815) ------------ ---------- Net cash used in investing activities ($1,063,518) ($1,259,367) ------------ ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds (payments) on short-term borrowings $7,086,250 ($582,000) Principal payments on long-term borrowings (621,162) (626,891) Net proceeds from issuances of common stock 1996; 17,750 shares, 1995; 90,338 shares 94,657 467,472 ----------- ----------- Net cash provided by (used in) financing activities $6,559,745 ($741,419) ----------- ----------- Increase (decrease) in cash and cash equvalents ($1,550,464) $828,479 Cash and cash equivalents: Beginning $2,166,863 $601,394 ----------- ----------- Ending $616,399 $1,429,873 =========== ===========
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, 1996, and the consolidated statements of operations for the three-month and six-month periods ended August 31, 1996 and August 31, 1995 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, 1996 and August 31, 1995 and for all periods presented have been made. The operating results for the period ended August 31, 1996 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. Net sales were $15.6 million in the second quarter of fiscal 1997, a decrease of 33% over the comparable quarter of fiscal 1996 when sales were $23.2 million. Net sales for the first six-months of fiscal 1997 were $46.2 million, compared to $54 million for the first six-months of fiscal 1996, a decrease of 14%. In-line roller skates, ice skates and roller hockey product sales decreased 35%, 98% and 66%, respectively, and accessory and part sales increased 8% from the second quarter of fiscal 1996 to fiscal 1997. Sales of in-line roller skates accounted for approximately 80% of total sales in the second quarter of fiscal 1997 compared to 82% in the second quarter of fiscal 1996. Sales of accessories and parts accounted for approximately 18% of total sales in the second quarter of fiscal 1997 compared to 11% in the second quarter of fiscal 1996. Street hockey equipment accounted for approximately 2% of total sales in the second quarter of fiscal 1997 compared to 4% in the second quarter of fiscal 1996. Ice skate sales were insignificant in the second quarter of fiscal 1997 compared to 3% of total sales in the second quarter of fiscal 1996. Sales to the Company's ten largest customers accounted for 60% of the Company's total sales in the second quarter of fiscal 1997 compared to 55% of the Company's sales in the second quarter of fiscal 1996. The worldwide markets for the Company's products continue to grow and expand. As a result the Company was able to continue to increase its foreign sales outside of North America in the second quarter of fiscal 1997. Domestic sales were 63% of total net sales in the second quarter of fiscal 1997 compared to 68% in the second quarter of fiscal 1996, while export sales were 37% in the second quarter of fiscal 1997 compared to 32% in the second quarter of fiscal 1996. Export sales consisted of sales in Canada and outside North America of 1% and 36% of total net sales in the second quarter of fiscal 1997, respectively, compared to 12% and 20% in the second quarter of fiscal 1996, respectively. Several factors contributed to the Company's sales performance in the second quarter of fiscal 1997. The lower percentage of domestic and Canadian sales is a result of an overall retail slowdown in sporting goods purchases, continued excess inventories in the marketplace and continued strong competition with our mass merchant accounts. With the soft retail environment in the United States and Canada the level of customer reorders were well below Company expectations. The increase in the sales outside of North America is a result of the Company's ability to capitalize on continued industry growth in the foreign market. Gross Margin. The Company's gross margin decreased $3,090,501 (or 43%) between the second quarter of fiscal 1997 and the second quarter of fiscal 1996. Gross margin as a percentage of sales was 27% in the second quarter of fiscal 1997 compared to 31% in the second quarter of fiscal 1996. The decrease in the gross margin percentage is primarily due to the overall retail slowdown and continued excess retail inventories. This has resulted in increased competition and gross margin pressure at all levels, from the mass merchants to the specialty shops. The Company's UltraWheels in-line skate sales and non-UltraWheels in-line skate sales accounted for approximately 60% and 40% of total in-line skate sales in the second quarter of fiscal 1997, respectively, compared to 47% and 53% of total in-line skate sales in the second quarter of fiscal 1996. Operating Expenses. The Company's operating expenses, (consisting of Selling expenses and General and Administrative expenses) were $3,439,478, or 22% of net sales in the second quarter of fiscal 1997, compared to $4,063,299, or 17% of net sales in the second quarter of fiscal 1996. Selling expenses decreased $228,976 (or 11%), between the second quarters of fiscal 1997 and 1996, and were approximately 13% and 9% in the second quarter of fiscal 1997 and 1996, respectively. The decrease in Selling expenses can be attributed to reduced commissions and endorsement royalties associated with the decreased sales volume. General and Administrative expenses decreased $394,845 (or 21%) between the second quarter of fiscal 1997 and 1996, and were approximately 9% and 8% of net sales in the second quarters of fiscal 1997 and 1996, respectively. The decrease in General and Administrative expenses in the second quarter of fiscal 1997 was primarily due to savings associated with the Company's new office and warehouse facility, the ability of management to respond quickly to the reduced sales activity and the continued efforts by management to control spending and expenses. Other Income and Expense. Interest expense in the second quarter of fiscal 1997 was $399,812, or 3% of net sales, compared to $195,370 or 1% of net sales, in the second quarter of fiscal 1996. The increase in Interest expense is primarily due to an increase in the use of the Company's bank line of credit and the addition of the mortgage note associated with the Company's new office and warehouse facility. Net Income. Net income decreased $1,741,122 (or 89%) between the second quarter of fiscal 1997 and 1996, and earnings per share was $ .04 in the second quarter of fiscal 1997 compared to $ .32 in the second quarter of fiscal 1996. The decrease in net income can be attributed primarily to the decrease in sales and gross margins as discussed above. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $616,399 as of August 31, 1996, compared to $2,166,863 as of February 29, 1996. The decrease in cash and cash equivalents is a result of $7,046,691 of cash used in operating activities and $1,063,518 of cash used in investing activities being partially offset by $6,559,745 of cash provided by financing activities. The net cash used in operating activities was primarily from the decrease in accounts payable, an increase in receivables and inventory and net income for the quarter. The net cash used in investing activities was primarily for the purchase of capital assets. The net cash provided by financing activities was primarily proceeds received on the Company's line of credit. The Company had net working capital of $27,482,258 as of August 31, 1996, compared to $24,944,985 as of February 29, 1996. The improvement in the Company's net working capital was primarily attributable to an increase in the Company's receivables and inventory. The Company's debt-to-worth ratio was .7 to 1 as of August 31, 1996, compared to .9 to 1 as of February 29, 1996. The Company's long-term debt, which consists primarily of the mortgage note on the Company's office and warehouse facility and obligations under endorsement license agreements, less current maturities, was $6,345,345 as of August 31, 1996. As of August 31, 1996, the Company had revolving line of credit established with a bank that provides for borrowings of up to $15,000,000, of which $12,354,250 was outstanding. In addition, the Company has a line of credit established with the bank providing for borrowings of up to $1,000,000 for the purchase of equipment and improvements. As of August 31, 1996, approximately $30,000 was outstanding on this credit facility. 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 1997. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. (a) The Company held its Annual Meeting on June 28, 1996. (b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to management's nominees as listed in the proxy statement, and all of such nominees were elected. The shareholders set the number of directors at five (5) by a vote of 5,307,609 shares in favor, with 26,735 share voted against and 30,604 shares abstaining. The following persons were elected to serve as directors of the Company until the next annual meeting of shareholders with the following votes:
Number of Number of Nominee Votes For Votes Withheld John J. Egart 5,287,305 77,643 David G. Soderquist 5,286,342 78,606 Joe Mendelsohn 5,286,492 78,456 Timothy G. Rath 5,285,517 79,431 Stanley E. Hubbard 5,272,855 92,093
The shareholders ratified the appointment of McGladrey & Pullen, LLP as the Company's independent auditors for the fiscal year ending February 28, 1997 by a vote of 5,313,183 shares in favor, with 25,910 shares voted against and 25,855 shares abstaining. 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/ Robert L. Lenius, Jr. Robert L. Lenius, Jr. Vice President and CFO Dated: October 8, 1996 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBIT INDEX TO FORM 10-Q For Quarter Ended: Commission File No.: 0-16422 August 31, 1996 ------------------------------------------------------------------- FIRST TEAM SPORTS, INC. ------------------------------------------------------------------- Exhibit Number Description 3.1 Restated Articles of Incorporation - incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended February 29, 1996 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 Company'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 27 Financial Data Schedule (included in electronic version only) EX-27 2 ART 5 FDS FOR 2 QUARTER 10-Q
5 1 U.S. DOLLARS 6-MOS FEB-28-1997 MAR-01-1996 AUG-31-1996 1 616,399 0 18,562,800 748,000 24,027,859 44,721,021 12,402,091 2,169,689 57,615,758 17,238,763 6,345,345 0 0 57,388 32,934,262 57,615,758 46,221,743 46,221,743 32,978,677 32,978,677 0 0 723,071 4,753,170 1,687,000 3,066,170 0 0 0 3,066,170 .52 .52
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