-----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, VDvWbq2YkHLh3Uaeqc4OQrqXGnJ7GzfLS4PmZubJOLC1Dz9dZQJEfJpEVkhAjAS8 ncx11zX6EO2fYxU9DqJUPA== 0000914190-96-000003.txt : 19960112 0000914190-96-000003.hdr.sgml : 19960111 ACCESSION NUMBER: 0000914190-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960110 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: 96502470 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 3RD 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.: November 30, 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.) 1201 Lund Boulevard Anoka, Minnesota 55303 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 576-3500 2274 Woodale Drive Mounds View, MN 55112 (Former Address) -------------------------------------- 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: 5,721,000 shares of Common Stock, $.01 par value per share, outstanding as of January 5, 1996. PART I FINANCIAL INFORMATION Item 1. Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS November 30, 1995 and February 28, 1995 November 30, February 28, ASSETS 1995 ------- ----------- (Unaudited) CURRENT ASSETS Cash and cash equivalents ................................................ $ 1,716,471 $ 601,394 Receivables: Trade, less allowance for doubtful accounts of $482,000 at November 30, 1995 and $562,000 at February 28, 1995 ...................................................... 23,105,942 16,854,825 Refundable income taxes ................................................ -- 46,146 Inventory (finished goods) ............................................... 14,214,674 15,187,283 Inventory (unfinished goods) ............................................. 6,930,194 5,650,888 Prepaid expenses ......................................................... 684,195 888,734 Deferred income taxes .................................................... 712,000 501,000 ----------- ----------- Total current assets $47,363,476 $39,730,270 EQUIPMENT AND LEASEHOLD IMPROVEMENTS at cost Vehicles ................................................................ $ 63,582 $ 62,306 Office furniture and equipment .......................................... 847,668 650,479 Warehouse equipment ..................................................... 149,821 118,898 Production equipment .................................................... 3,380,970 2,558,748 Leasehold improvements .................................................. 161,483 155,738 Building construction in process ........................................ 2,429,450 -- ----------- ----------- $ 7,032,974 $ 3,546,169 Less accumulated depreciation ............................................ 1,454,284 926,284 ----------- ----------- $ 5,578,690 $ 2,619,885 ----------- ----------- OTHER ASSETS License agreements, less accumulated amortization of $2,300,000 at November 30, 1995 and $1,807,000 at February 28, 1995 ............................................................... $ 2,804,182 $ 3,296,830 Other ................................................................... 281,813 216,768 ----------- ----------- $ 3,085,995 $ 3,513,598 ----------- ----------- $56,028,161 $45,863,753 =========== ===========
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) November 30, 1995 and February 28, 1995 November 30, February 28, LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1995 ----------- ------------ (Unaudited) CURRENT LIABILITIES Notes payable to bank ........................................................ $14,159,000 $ 9,064,000 Current maturities of long-term debt .............................................................. 815,972 936,644 Accounts payable, trade ...................................................... 7,690,610 9,015,376 Accrued expenses ............................................................. 2,391,328 2,605,160 Income taxes ................................................................. 347,851 -- ----------- ----------- Total current liabilities ...................................................... $25,404,761 $21,621,180 ----------- ----------- LONG-TERM DEBT, less current maturities ...................................................... $ 2,449,810 $ 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 5,721,043 shares at November 30, 1995, 5,628,184 shares at February 28, 1995 ....................................... $ 57,210 $ 56,282 Additional paid-in capital ................................................... 8,729,802 8,228,843 Retained earnings ............................................................ 18,986,578 12,564,954 ----------- ----------- $27,773,590 $20,850,079 ----------- ----------- $56,028,161 $45,863,753 =========== ===========
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended Six months ended November 30, November 30, 1995 1994 1995 1994 ----------- ------------ ------------ ----------- Net sales .......................................................... $ 22,616,765 $ 24,344,356 $ 76,623,033 $ 66.209,299 Cost of goods sold .... ............................................ 15,954,575 16,878,111 52,973,790 46,465,259 ------------ ------------ ------------ ------------ Gross profit ....................................................... $ 6,662,190 $ 7,466,245 $ 23,649,243 $ 19,744,040 ------------ ------------ ------------ ------------ Operating expenses: Selling .......................................................... $ 1,714,894 $ 2,017,508 $ 6,491,990 $ 5,371,511 General and administrative .................................................. 2,173,392 2,180,770 6,314,713 5,906,216 ------------ ------------ ------------ ------------ $ 3,888,286 $ 4,198,278 $ 12,806,703 $ 11,277,727 ------------ ------------ ------------ ------------ Operating income ................................................ $ 2,773,904 $ 3,267,967 $ 10,842,540 $ 8,466,313 Other income (expense): Interest income .................................................. 3,079 0 3,079 149 Interest expense ................................................. (296,666) (204,838) (755,995) (510,507) Other ............................................................ 0 8,782 0 (42,773) ------------ ------------ ------------ ------------ Income before income taxes .......................................................... $ 2,480,317 $ 3,054,347 $ 10,089,624 $ 7,913,182 Income taxes ................ ...................................... 893,000 1,109,098 3,668,000 2,924,354 ------------ ------------ ------------ ------------ Net income for the period ......................................................... $ 1,587,317 $ 1,945,249 $ 6,421,624 $ 4,988,828 ============ ============ ============ ============ Net income per common share: Primary ......................................................... $ 0.27 $ 0.34 $ 1.06 $ 0.89 Fully diluted ................................................... $ 0.27 $ 0.34 $ 1.08 $ 0.87 ============ ============ ============ ============ Weighted average number of common shares outstanding including Common Share equivalents: Primary ......................................................... 5,950,429 5,745,320 6,038,616 5,621,781 Fully diluted ................................................... 5,966,354 5,752,568 5,959,917 5,738,118 ============ ============ ============ ============
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Six Months Ended November 30, 1995 and 1994 (Unaudited) November 30, November 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES Net Income .............................. $ 6,421,624 $ 4,988,828 Adjustments required to reconcile net income to net cash provided by (used in) operating activities: Depreciation ........................... 528,000 330,331 Amortization ........................... 525,948 Deferred income taxes .................. (150,000) -- Change in assets and liabilities: Receivables ........................... (6,251,117) (8,744,972) Inventories ........................... (306,697) (5,045,286) Prepaid expense ....................... 204,539 (86,008) Accounts payable ...................... (1,324,766) 6,449,200 Accrued expenses ...................... (213,832) 1,734,052 Income taxes .......................... 393,997 (31,000) ----------- ----------- Net cash used in operating activities ................. ($ 172,304) ($ 74,153) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ....... ($3,486,805) ($ 562,727) Other .................................... (98,345) (48,969) ----------- ----------- Net cash used in investing activities . ($3,585,150) ($ 611,696) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds on short-term borrowings .............................. $ 5,095,000 $ 1,252,000 Principal payments on long-term borrowings .............................. (724,356) (592,818) Net proceeds from issuances of common stock: 1995, 92,859 shares; 1994, 38,721 shares ...... 501,887 364,732 ----------- ----------- Net cash provided by financing activities .................. $ 4,872,531 $ 1,023,914 ----------- ----------- Increase in cash and cash equivalents ...................... $ 1,115,077 $ 338,065 Cash and cash equivalents: Beginning ................................ $ 601,394 $ 417,987 ----------- ----------- Ending ................................... $ 1,716,471 $ 756,052 =========== ===========
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 November 30, 1995 and the consolidated statements of operations for the three-month and nine-month periods ended November 30, 1995 and November 30, 1994 and the consolidated statements of cash flows for the nine-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 November 30, 1995 and November 30, 1994 and for all periods presented have been made. The operating results for the period ended November 30, 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 third quarter of fiscal 1996 (the quarter ended November 30, 1995) were $22,616,765, a decrease of 7% over the comparable quarter of fiscal 1995 when net sales were $24,344,356. Net sales for the first nine-months of fiscal 1996 were $76,623,034, compared to $66,209,299 for the first nine-months of fiscal 1995, an increase of 16%. Net export sales were $3,582,151, or 16% of total sales, in the third quarter of fiscal 1996 compared to $2,449,611, or 10% of total sales, in the third quarter of fiscal 1995. The net export sales for the third quarter of fiscal 1996 and 1995 consisted of Canadian net sales of $459,978 and $623,171 and net sales outside of North America of $3,122,173 and $1,826,440 respectively. In-line skate sales accounted for approximately 82% and 84% of total sales in the third quarter of fiscal 1996 and fiscal 1995 respectively. Accessories, street hockey equipment, and ice skate sales accounted for approximately 10%, 3%, 5%, and, 7%, 6% and 3% of total sales in the third quarter of fiscal 1996 and fiscal 1995 respectively. Sales to the Company's ten largest accounts accounted for approximately 77% of the Company's sales in the third quarter of fiscal 1996 compared to 71% of sales in the third quarter of fiscal 1995. The total backlog orders as of January 4, 1996 were approximately $23,875,000 compared to $21,887,000 as of January 5, 1995. Included in the Company's current backlog are orders in the amount of $21,676,000 for future ship dates. Several factors contributed to the decrease in the Company's sales in the third quarter of fiscal 1996. The retail environment was pessimistic and cautious toward the holiday selling season and thus retailers kept their purchases on the conservative side. With the soft retail environment the level of customer reorders were below Company expectations. In addition, with the industry anticipating another growth year in 1995 similar to that of 1994, the marketplace was inundated with product early, resulting in excess inventory levels prior to the holiday selling season. The increase in the Company's sales for the first nine-months of fiscal 1996 compared to fiscal 1995, is a result of the Company's emphasis on building brand image and awareness with innovative new products, (e.g. the Company's new disc braking system (DBS)). This emphasis resulted in strong sales during the first six-months of fiscal 1996. The Company has also been able to capitalize on the continued growth of the industry, particularly in foreign markets. The Company's net export sales increased 46% in the third quarter and 175% in the first nine-months of fiscal 1996 compared to the third quarter and first nine-months of fiscal 1995 respectively. Gross Margin. In the third quarter of fiscal 1996, the Company's gross margin was 29.5% of net sales compared to a gross margin of 30.7% in the third quarter of fiscal 1995. This decrease was due primarily to an increase in sales of the Company's lower margin Skate Attack products as a percentage of total product sales. The Company's Skate Attack brand is made overseas and is sold primarily to mass merchant customers. Operating Expenses. The Company's operating expenses, (consisting of selling expenses and general and administrative expenses), for the third quarter of fiscal 1996 were $3,888,286, or 17% of net sales, compared to $4,198,278, or 17% of net sales, in the third quarter of fiscal 1995. Selling expenses were $1,714,894, or 8% of net sales in the third quarter of fiscal 1996, compared to $2,017,508, or 8% of net sales, in the third quarter of fiscal 1995. Selling expenses decreased $302,614 (or 15%) in the third quarter of fiscal 1996, compared to the third quarter of fiscal 1995. This decrease can be attributed to reduced commissions, and promotional expenses associated with the decreased sales volume. General and administrative expenses were $2,173,392 or 9% of net sales in the third quarter of fiscal 1996, compared to $2,180,770 or 9% of net sales in the third quarter of fiscal 1995. Net Income. The Company had net income of $1,587,317 or $.27 per share, in the third quarter of fiscal 1996, compared to $1,945,249, or $.34 per share in the third quarter of fiscal 1995. This represents a decrease of $357,932 (or 18%) in total earnings and a decrease of $.07 (or 20%) in earnings per share. This decrease can be attributed to the decrease in sales and gross margins. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $1,716,471 as of November 30, 1995, compared to $601,394 as of February 28, 1995. This increase in cash and cash equivalents is a result of $4,872,531 of cash provided by financing activities being partially offset by $3,585,150 of cash used in investing activities and $172,304 of cash used in operating activities. The net cash used in operating activities for the first nine-months of fiscal 1996 resulted primarily from the net earnings and the net effect of the change in receivables, inventories and payables. The net cash used in investing activities was primarily used for the purchase of capital assets including the Company's new warehouse and office facility. The net cash provided by financing activities was primarily from the net borrowings on the Company's line of credit. The Company had net working capital of $21,958,715 as of November 30, 1995, compared to $18,109,090 as of February 28, 1995. The Company's current ratio at November 30, 1995 was 1.9 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 accounts payable. The Company's debt-to-worth ratio was 1 to 1 on November 30, 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 $2,449,810 as of November 30, 1995. As of November 30, 1995, the Company had a revolving line of credit established with a bank that provides for borrowings of up to $15,000,000. 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 November 30, 1995, $243,000 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 Company commenced occupying date for the new facility on January 1, 1996. The Company anticipates financing the new facility through a conventional real estate mortgage. As of November 30, 1995 the Company had borrowed approximately $2,400,000 on the $15,000,000 line of credit to pay for construction costs to date on the new 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 1996. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See Exhibit Index at p. 13 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-Finance (Principal Financial Officer) Dated: January 9, 1996 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBIT INDEX TO FORM 10-Q For Quarter Ended: Commission File No.: 0-16422 November 30, 1995 - ------------------------------------------------------------------- FIRST TEAM SPORTS, INC. - ------------------------------------------------------------------- Exhibit 3.1 Articles of Incorporation, as amended--incorporated by reference to Exhibit 3.1 to the Company's Form 10-K for the fiscal year ended February 28, 1994 * 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 * 27 Financial Data Schedule (filed only with electronic version) - ---------------------- * Incorporated by reference to a previously filed exhibit or report EX-27 2 FDS --
5 1 U.S. Dollars 9-mos FEB-29-1996 MAR-01-1995 NOV-30-1995 1 1,716,471 0 23,105,942 482,000 21,144,868 47,363,476 7,032,974 1,454,284 56,028,161 25,404,761 2,449,810 57,210 0 0 27,716,380 56,028,161 76,623,033 76,623,033 52,973,790 52,973,790 0 0 755,995 10,089,624 3,668,000 6,421,624 0 0 0 6,421,624 1.06 1.08
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