-----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, BRUUaTzC/6jClPNTEN7UY6WvBS5qxcVjUlAhiLrKek63FJ/sYgqQgTbTvt+RHbtp GkV8Tiv1Jw6kExoqPrlwFQ== 0000914190-99-000254.txt : 19990715 0000914190-99-000254.hdr.sgml : 19990715 ACCESSION NUMBER: 0000914190-99-000254 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990531 FILED AS OF DATE: 19990714 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: SEC FILE NUMBER: 000-16442 FILM NUMBER: 99664179 BUSINESS ADDRESS: STREET 1: 1201 LUND BLVD CITY: ANOKA STATE: MN ZIP: 55303 BUSINESS PHONE: 6127804454 MAIL ADDRESS: STREET 1: 1201 LUND BLVD CITY: ANOKA STATE: MN ZIP: 55303-1092 10-Q 1 FORM 10-Q FOR FIRST 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.: May 31, 1999 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: 5,803,861 shares of Common Stock, $.01 par value per share, outstanding as of July 8, 1999. PART I FINANCIAL INFORMATION Item 1. Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS May 31, 1999 and February 28, 1999
May 31, February 28, ASSETS 1999 1999 ----------- ----------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 1,271,674 $ 723,574 Receivables: Trade, less allowance for doubtful accounts of $748,000 at May 31, 1999 and $642,000 at February 28, 1999 17,545,382 12,284,005 Refundable income taxes 762,517 1,136,858 Inventories 10,110,812 10,047,020 Prepaid expenses 630,157 839,777 Deferred income taxes 1,267,000 1,175,000 ----------- ----------- Total current assets 31,587,542 26,206,234 PROPERTY AND EQUIPMENT, Land 600,000 600,000 Building 4,988,680 4,988,680 Production equipment 2,294,158 2,278,231 Office furniture and equipment 1,855,544 1,825,257 Warehouse equipment 939,306 937,677 Vehicles 101,043 104,380 ----------- ----------- 10,778,731 10,734,225 Less accumulated depreciation 3,623,806 3,316,390 ----------- ----------- 7,154,925 7,417,835 Deferred income taxes 1,896,000 1,988,000 OTHER ASSETS License agreements, less accumulated amortization of $3,774,000 at May 31, 1999 and $3,687,000 at February 28, 1999 1,592,695 1,680,024 Goodwill, less accumulated amortization of $362,000 at May 31, 1999 and $329,000 at February 28, 1999 1,115,888 1,119,197 Other 702,277 723,104 ----------- ----------- 3,410,860 3,522,325 ----------- ----------- $44,049,327 $39,134,394 =========== ===========
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) May 31, 1999 and February 28, 1999
May 31, February 28, LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1999 ------------ ------------ (Unaudited) CURRENT LIABILITIES Notes payable to bank $ 7,765,000 $ 2,525,000 Current maturities of long-term debt 1,295,583 1,305,763 Accounts payable, trade 3,456,513 3,692,759 Accrued expenses 930,701 1,311,043 ------------ ------------ Total current liabilities 13,447,797 8,834,565 LONG-TERM DEBT, less current maturities 5,181,105 5,576,967 DEFERRED INCOME TAXES 195,000 195,000 DEFERRED REVENUE 600,000 600,000 SHAREHOLDERS' EQUITY Common Stock, par value $.01 per share; authorized 10,000,000 shares; issued and outstanding 5,803,848 shares at May 31, 1999 and February 28, 1999 58,039 58,039 Additional paid-in capital 9,825,240 9,825,240 Retained earnings 15,344,485 14,647,756 Accumulated other comprehensive income (loss) (602,339) (603,173) ------------ ------------ 24,625,425 23,927,862 ------------ ------------ $ 44,049,327 $ 39,134,394 ============ ============
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended May 31, 1999 1998 ------------ ------------ Net sales $ 14,176,606 $ 15,138,589 Cost of goods sold 9,599,922 10,782,924 ------------ ------------ Gross profit 4,576,684 4,355,665 ------------ ------------ Operating expenses: Selling 1,325,459 1,400,361 General and administrative 1,993,517 1,749,570 ------------ ------------ 3,318,976 3,149,931 ------------ ------------ Operating income 1,257,708 1,205,734 Interest expense (178,769) (359,181) ------------ ------------ Income before income tax expense 1,078,939 846,553 Income tax expense (382,211) (282,553) ------------ ------------ Net income for the period $ 696,728 $ 564,000 ============ ============ Net income per share: Basic $ 0.12 $ 0.10 Diluted $ 0.12 $ 0.10 Shares used in computation of net income per share: Basic 5,803,861 5,792,253 Diluted 5,904,487 5,885,956
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Three Months Ended May 31, 1999 and 1998 (Unaudited)
May 31, May 31, 1999 1998 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income 696,728 564,000 Adjustments required to reconcile net income to net cash used in operating activities: Depreciation 307,416 311,205 Amortization 143,402 164,727 Change in operating assets and liabilities: Receivables (5,333,047) (5,389,085) Inventories (36,560) 2,983,737 Prepaid expenses 210,118 134,798 Accounts payable (236,604) (899,783) Accrued expenses (376,487) (168,259) Income taxes 410,470 312,597 ---------- ---------- Net cash used in operating activities (4,214,564) (1,986,063) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (49,344) -- Other -- (261,774) ---------- ---------- Net cash used in investing activities (49,344) (261,774) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds on short-term borrowings 5,240,000 3,375,000 Proceeds from long-term borrowings -- 262,760 Principal payments on long-term borrowings (405,433) (356,158) Net proceeds from exercise of stock options -- -- ---------- ---------- Net cash provided by financing activities 4,834,567 3,281,602 ---------- ---------- Increase in cash and cash equvalents 570,659 1,033,765 Effect of foreign currency translation (22,559) 31,161 Cash and cash equivalents: Beginning 723,574 1,869,545 ---------- ---------- Ending 1,271,674 2,934,471 ========== ==========
See Notes to Consolidated Financial Statements 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 principals 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, 1999 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, 1999. NOTE 2. As of March 1, 1998, the Company adopted Financial Accounting Standards Board Statement No. 130 Report Comprehensive Income ("Statement 130"). Statement 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's net income or shareholders' equity. Statement 130 requires the Company's foreign currency translation, which prior to adoption was reported separately in shareholders' equity, to be included in other comprehensive income. During the quarters ended May 31, 1999 and 1998, total comprehensive income amounted to $697,560 and $357,659 respectively. NOTE 3. Basic EPS Diluted EPS 1999 1998 1999 1998 ---- ---- ---- ---- (in thousands, except per share data) Three Months Ended May 31 Net Income $ 697 $ 564 $ 697 $ 564 ===================== ==================== Weighted average common shares outstanding 5,804 5,792 5,804 5,792 Stock options -- -- 100 94 --------------------- -------------------- Total common equivalent shares outstanding 5,804 5,792 5,904 5,886 ===================== =================== Net Income per share $.12 $.10 $.12 $.10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net Sales. Net sales were $14.2 million in the first quarter of fiscal 2000, a decrease of 6% compared to the first quarter of fiscal 1999 when sales were $15.1 million. In-line skate sales volume decreases, combined with a decrease in the average selling price of the Company's Skate Attack brand, were the principal factors in the Company's net sales decline in the first quarter of fiscal 2000. The Company's product groups consist of in-line skates, in-line accessories and parts (primarily protective wear and replacement wheels and bearings), roller hockey products, ice hockey sticks and ice hockey protective wear and accessories. Within the product groups, the Company maintains UltraWheels(TM), Skate Attack(TM), Heavy(TM) and Third World(TM) in-line product lines and a Hespeler ice hockey line. The UltraWheels, Heavy and Third World lines consist of higher quality and higher priced products that are targeted for the 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 at the specialty and sporting goods chain stores. A breakdown and analysis of the Company's main product lines is as follows: First Quarter --------------------------------- (amounts in millions) Fiscal 2000 Fiscal 1999 --------------------------------- Amount % Amount % Change ----- ----- ----- ----- ----- In-line Skates $11.3 79.6% $12.3 81.5% (8.1%) In-line Accessories and Parts 1.5 10.6% 1.8 11.9% (16.7%) Ice Hockey Sticks 0.5 3.5% 0.6 4.0% (16.7%) Ice Hockey Protective and Access. 0.9 6.3% 0.4 2.6% 125.0% ----- ----- ----- ----- $14.2 100.0% $15.1 100.0% (6.0%) ----- ----- ----- ----- The Company distributes products to numerous countries worldwide. A geographic breakdown for the first quarter is as follows: First Quarter --------------------------------- (amounts in millions) Fiscal 2000 Fiscal 1999 --------------------------------- Amount % Amount % Change ----- ----- ----- ----- ----- Domestic $ 7.7 54.2% $ 8.8 58.3% (12.5%) Canada 4.8 33.8% 4.2 27.8% 14.3 Europe 1.5 10.6% 2.1 13.9% (28.6%) Other International 0.2 1.4% 0.0 0.0% 100.0% ----- ----- ----- ----- Total Net Sales $14.2 100.0% $15.1 100.0% (6.0%) ===== ===== ===== ===== Several factors contributed to the Company's sales performance in the first quarter of fiscal 2000. The decrease in domestic sales is the result of a loss in product placements with the mass merchant distribution channels. This was a continued result of the mass merchants reduction in branded selections as well as a continued decline in the average price of in-line skates at the mass merchant level. Sales of the Company's Skate Attack brand (sold primarily to the mass merchants) decreased approximately 70% while sales of the Ultra Wheels brand increased 24%. During the first quarter of fiscal 1999, approximately 43% of the Company's in-line skate sales came from the sporting good chain stores compared to 78% during the first quarter of fiscal 2000. The increased sales in Canada were primarily the result of Hespeler ice hockey product sales and the continued strong acceptance of the Company's in-line products in Canada. The decrease in European sales is primarily the result of continued competitive pressures in the European in-line skate market and the continued number of in-line skate customers buying direct from Pacific Rim manufacturers. The increase in other international sales is primarily the result of the Company's continued efforts to open up new accounts in the international arena. While the Company believes there are some positive signs that the market conditions in the in-line industry may be improving, the national and international markets continue to be very competitive and under extreme price competition. Gross Margin As a percentage of net sales, the gross margin was 32% in the first quarter of fiscal 2000 compared to 29% in the first quarter of fiscal 1999. The increase in the gross margin as a percentage of net sales in the first quarter of fiscal 2000 was primarily due to an increase in the percentage of Ultra Wheels skates versus the Skate Attack skates and an increase in the percentage of total sales related to Hespeler products. As stated above the Company's strategy has been to focus on the sporting goods chain stores and its Ultra Wheels brand of in-line skates, which carry better margins. The Company's Ultra Wheels brand accounted for 79% of total net sales in the first quarter of fiscal 2000 compared to 61% in the first quarter of fiscal 1999, while the Company's Skate Attack brand accounted for 11% of total sales in the first quarter of fiscal 2000 compared to 32% in the first quarter of fiscal 1999. The Hespeler brand accounted for 10% of total net sales in the first quarter of fiscal 2000 compared to 7% in the first quarter of fiscal 1999. Operating Expenses. Selling expenses were $1.3 million, or 9% of total net sales, in the first quarter of fiscal 2000 compared to $1.4 million or 9% in the first quarter of fiscal 1999. The decrease in selling expenses in fiscal 2000 is primarily the result of a reduction in royalties and co-op advertising costs associated with the decreased sales volume and management's efforts to closely monitor and control its expenditures. General and administrative expenses were $2.0 million, or 14% of total net sales, in the first quarter of fiscal 2000 compared to $1.7 million or 12% in the first quarter of fiscal 1999. The increase in general and administrative expenses in fiscal 2000 was primarily related to personnel costs and insurance costs. In fiscal 1997 the Company purchased a new software system and appropriate computer hardware. As part of the Company's selection process, the ability to recognize the year 2000 was a major requirement and thus the Company is prepared for the change. The Company is currently working to quantify and minimize the potential impact of the year 2000 on the processing of date sensitive information by the Company's vendors and/or customers. Based on preliminary information, costs of addressing potential problems are currently not expected to have a material adverse impact on the Company's financial position, results of operations or cash flows in future periods. Other Income and Expense. Interest expense was $179,000 in the first quarter of fiscal 2000, compared to $359,000 in the first quarter of fiscal 1999. The decrease in interest expense for fiscal 2000 was primarily due to decreased usage of the Company's line of credit facility. The Company has continued to manage its cash flows, which during the first quarter resulted in a decrease in the outstanding balance of its line of credit facility as compared to the prior year's first quarter. Provision for Income Taxes. The Company's effective tax rate was 35% in the first quarter of fiscal 2000 compared to 33% in the first quarter of fiscal 1999. The slight increase in fiscal 2000 is primarily due to the effect of state and foreign tax rates, the percentage of state and foreign revenues, deferred tax items and the level of pre-tax income. Net Income. The Company had net income of $697,000, or $.12 per share, in the first quarter of fiscal 2000 compared to $564,000 or $.10 per share, in fiscal 1999. The improvement for the first quarter can be primarily attributed to the increase in the gross margins as discussed above. LIQUIDITY AND CAPITAL RESOURCES In the first quarter of fiscal 2000, the Company's operations used $4.2 million of cash compared to $2.0 million in the first quarter of fiscal 1999. The increase in the net cash use by operations was primarily the result of the change in the Company's inventory and accounts payable balances. Net cash used in investing activities was $49,000 in the first quarter of fiscal 2000 compared to $262,000 in the first quarter of fiscal 1999. The use of cash for investing activities in fiscal 2000 was attributable to equipment purchases. Net cash provided by financing activities was $4.8 million in the first quarter of fiscal 2000 compared to $3.3 million in the first quarter of fiscal 1999. The increase in the net cash provided by financing activities was primarily due to the change in the Company's credit facility. The Company's debt to worth ratio was .8 to 1 as of May 31, 1999 compared to .6 to 1 as of February 28, 1999 and .7 to 1 as of May 31, 1998. The Company's long-term debt, which consists primarily of a mortgage note on the Company's facility and obligations under endorsement license agreements, less current maturities, was $5.2 million as of May 31, 1999. The Company's primary financing facility is a $10 million revolving credit line, which is subject to a borrowing base which is calculated twice a month, and is based on a percentage of eligible receivables and inventories. As of May 31, 1999, the borrowing base limitation was $10 million, of which $7.8 million was outstanding. In connection with this credit facility, the Company agreed, among other things, to maintain certain minimum financial ratio and income levels. The Company's revolving credit line expired June 30, 1999 and has been extended through September 1, 1999. The Company is reviewing financing proposals from various lenders and expects to enter into a new comparable financing facility. The Company believes its current cash position, funds available under existing bank arrangements, the ability to obtain additional financing, and cash generated from operations will be sufficient to finance the Company's operating requirements through fiscal 2000. 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 hedges its exposure to translation gains and losses by maintaining and controlling its foreign cash flows when possible, thus reducing such exposure. 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 14, 1999 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBIT INDEX TO FORM 10-Q For Quarter Ended: Commission File No.: 0-16422 May 31, 1999 - -------------------------------------------------------------------------------- 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 10.1* Amendment dated as of December 1, 1998 to Employment Agreement, Dated August 18, 1997, between the Company and Kent Brunner** Exhibit Number Description 10.2* Amendment dated as of January 1, 1998 to Employment Agreement dated January 23, 1996 between the Company and John J. Egart** 10.3* Amendment dated as of January 1, 1998 to Employment Agreement dated January 23, 1996 between the Company and David G. Soderquist** 27* Financial Data Schedule (included in electronic version only) **Management contract or compensatory plan or arrangement. - ------------- *Filed herewith EX-10.1 2 AMENDMENT TO EMPLOYMENT AGREEMENT (BRUNNER) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of December 1, 1998, between FIRST TEAM SPORTS, INC., a Minnesota corporation (the "Company"), and KENT A. BRUNNER, a resident of Minnesota ("Executive"). WITHNESSETH WHEREAS, the Company and Executive have entered into an Employment Agreement dated as of August 18, 1997 (the "Employment Agreement"); and WHEREAS, Sections 3, 6, 7 and 9 of the Employment Agreement provide that Executive shall receive certain cash payments calculated on the basis of Executive's "Base Salary" in the event Executive's employment is terminated by the Company under various circumstances or in the event the term of the Employment Agreement is now renewed; and WHEREAS, the Company and Executive have agreed to amend Sections 3, 6, 7 and 9 of the Employment Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained the parties hereto agree as follows: 1. Amendment of Section 3 of Employment Agreement. Section 3 of the Employment Agreement is hereby amended to read in its entirety as follows: The Company shall retain Executive and Executive shall serve in the employ of the Company for a minimum period of two (2) years commencing as of the date of this Agreement; provided, however, that either Executive or the Company may terminate the employment of Executive during the term in accordance with, and subject to the right of Executive to receive payments and other benefits that may be due pursuant to this Agreement. The Agreement will be subject to automatic renewals for successive additional two (2) year periods, unless terminated earlier as provided in Section 9 of this Agreement. 2. Amendment of Section 6 of Employment Agreement. Section 6(a)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) The Company shall make a cash payment to Executive equal to the greater of (A) the sum of the highest monthly Base Salary in effect any time during the three-year period immediately preceding such termination times the number of months remaining in the Term (without regard to renewals) under this Agreement, plus an amount equal to the incentive bonus earned by Executive in the prior fiscal year multiplied by the number of months remaining in the Term (without regard to renewals) divided by twelve (12), or (B) the sum of the highest annual Base Salary in effect any time during the three-year period immediately preceding such termination, plus the amount of incentive bonus earned by Executive during the prior fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 3. Amendment of Section 7 of Employment Agreement. Section 7(a)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) Subject to paragraph (c) hereof, the Company shall make a cash payment to Executive equal to the greater of (A) the sum of the highest monthly Base Salary in effect any time during the three-year period immediately preceding such termination times the number of months remaining in the Term (without regard to renewals) under this Agreement, plus an amount equal to the incentive bonus earned by Executive in the prior fiscal year multiplied by the number of months remaining in the Term (without regard to renewals) divided by twelve (12), or (B) 2 times the sum of the highest annual Base Salary in effect any time during the three-year period immediately preceding such termination, and the amount of incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment under this Agreement ceases. For purposes of Clause (B), the computation of the amount of incentive bonuses shall be based upon the bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 4. Amendment of Section 9(b) of Employment Agreement. Section 9(b)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) Unless the notice of nonrenewal is given during a Transition Period, the Company shall make a cash payment equal to the amount of the highest annual Base Salary in effect any time during the three-year period immediately preceding termination of employment. Such payment shall be made in cash within fifteen (15) days from and after the end of Executive's employment term. If the notice of renewal is given during a Transition Period, then, subject to Section 7(c), the Company shall make a cash payment to Executive equal to two (2) times the sum of (A) the amount of the highest annual Base Salary in effect any time during the three-year period immediately preceding termination of Executive's employment and (B) the amount of incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment under this Agreement ceases. For purposes of Clause (B), the computation of the amount of incentive bonuses shall be based upon the bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 5. Other Provisions Unaffected. Except as provided herein, all other provisions to the Employee Agreement shall remain in force and unaffected by this Amendment. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its officer, and Executive has executed this Agreement, as of the day and year first written above. FIRST TEAM SPORTS, INC. By /s/ John J. Egart John J. Egart, President and Chief Executive Officer /s/ Kent A. Brunner Kent A. Brunner EX-10.2 3 AMENDMENT TO EMPLOYMENT AGREEMENT (EGART) AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1, 1998, between FIRST TEAM SPORTS, INC., a Minnesota corporation (the "Company"), and JOHN J. EGART, a resident of Minnesota ("Executive"). WITHNESSETH WHEREAS, the Company and Executive have entered into an Employment Agreement dated as of January 23, 19996 (the "Employment Agreement"); and WHEREAS, Sections 6, 7 and 9 of the Employment Agreement provide that Executive shall receive certain cash payments calculated on the basis of Executive's "Base Salary" in the event Executive's employment is terminated by the Company under various circumstances or in the event the term of the Employment Agreement is now renewed; and WHEREAS, in light of the disappointing recent financial performance of the Company and the in-line skate industry generally, Executive has voluntarily agreed to accept a reduction in the amount of Base Salary payable to Executive under the Employment Agreement; provided that such reduction does not reduce the amounts to which Executive would otherwise be entitled pursuant to Sections 6, 7 or 9 of the Employment Agreement in the event of a termination or nonrenewal of employment; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained the parties hereto agree as follows: 1. Amendment of Section 6 of Employment Agreement. Section 6(a)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) The Company shall make a cash payment to Executive equal to the greater of (A) the sum of the highest monthly Base Salary in effect any time during the three-year period immediately preceding such termination times the number of months remaining in the Term (without regard to renewals) under this Agreement, plus an amount equal to the incentive bonus earned by Executive in the prior fiscal year multiplied by the number of months remaining in the Term (without regard to renewals) divided by twelve (12), or (B) the sum of the highest annual Base Salary in effect any time during the three-year period immediately preceding such termination, plus the amount of incentive bonus earned by Executive during the prior fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 2. Amendment of Section 7 of Employment Agreement. Section 7(a)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) Subject to paragraph (c) hereof, the Company shall make a cash payment to Executive equal to the greater of (A) the sum of the highest monthly Base Salary in effect any time during the three-year period immediately preceding such termination times the number of months remaining in the Term (without regard to renewals) under this Agreement, plus an amount equal to the incentive bonus earned by Executive in the prior fiscal year multiplied by the number of months remaining in the Term (without regard to renewals) divided by twelve (12), or (B) 2 times the sum of the highest annual Base Salary in effect any time during the three-year period immediately preceding such termination, and the amount of incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment under this Agreement ceases. For purposes of Clause (B), the computation of the amount of incentive bonuses shall be based upon the bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 3. Amendment of Section 9(b) of Employment Agreement. Section 9(b)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) Unless the notice of nonrenewal is given during a Transition Period, the Company shall make a cash payment equal to the amount of the highest annual Base Salary in effect any time during the three-year period immediately preceding termination of employment. Such payment shall be made in cash within fifteen (15) days from and after the end of Executive's employment term. If the notice of renewal is given during a Transition Period, then, subject to Section 7(c), the Company shall make a cash payment to Executive equal to two (2) times the sum of (A) the amount of the highest annual Base Salary in effect any time during the three-year period immediately preceding termination of Executive's employment and (B) the amount of incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment under this Agreement ceases. For purposes of Clause (B), the computation of the amount of incentive bonuses shall be based upon the bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 4. Other Provisions Unaffected. Except as provided herein, all other provisions to the Employee Agreement shall remain in force and unaffected by this Amendment. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its officer, and Executive has executed this Agreement, as of the day and year first written above. FIRST TEAM SPORTS, INC. By /s/ Kent A. Brunner Kent A. Brunner , Vice President of Finance /s/ John J. Egart John J. Egart EX-10.3 4 AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1, 1998, between FIRST TEAM SPORTS, INC., a Minnesota corporation (the "Company"), and DAVID G. SODERQUIST, a resident of Minnesota ("Executive"). WITHNESSETH WHEREAS, the Company and Executive have entered into an Employment Agreement dated as of January 23, 19996 (the "Employment Agreement"); and WHEREAS, Sections 6, 7 and 9 of the Employment Agreement provide that Executive shall receive certain cash payments calculated on the basis of Executive's "Base Salary" in the event Executive's employment is terminated by the Company under various circumstances or in the event the term of the Employment Agreement is now renewed; and WHEREAS, in light of the disappointing recent financial performance of the Company and the in-line skate industry generally, Executive has voluntarily agreed to accept a reduction in the amount of Base Salary payable to Executive under the Employment Agreement; provided that such reduction does not reduce the amounts to which Executive would otherwise be entitled pursuant to Sections 6, 7 or 9 of the Employment Agreement in the event of a termination or nonrenewal of employment; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained the parties hereto agree as follows: 1. Amendment of Section 6 of Employment Agreement. Section 6(a)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) The Company shall make a cash payment to Executive equal to the greater of (A) the sum of the highest monthly Base Salary in effect any time during the three-year period immediately preceding such termination times the number of months remaining in the Term (without regard to renewals) under this Agreement, plus an amount equal to the incentive bonus earned by Executive in the prior fiscal year multiplied by the number of months remaining in the Term (without regard to renewals) divided by twelve (12), or (B) the sum of the highest annual Base Salary in effect any time during the three-year period immediately preceding such termination, plus the amount of incentive bonus earned by Executive during the prior fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 2. Amendment of Section 7 of Employment Agreement. Section 7(a)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) Subject to paragraph (c) hereof, the Company shall make a cash payment to Executive equal to the greater of (A) the sum of the highest monthly Base Salary in effect any time during the three-year period immediately preceding such termination times the number of months remaining in the Term (without regard to renewals) under this Agreement, plus an amount equal to the incentive bonus earned by Executive in the prior fiscal year multiplied by the number of months remaining in the Term (without regard to renewals) divided by twelve (12), or (B) 2 times the sum of the highest annual Base Salary in effect any time during the three-year period immediately preceding such termination, and the amount of incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment under this Agreement ceases. For purposes of Clause (B), the computation of the amount of incentive bonuses shall be based upon the bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 3. Amendment of Section 9(b) of Employment Agreement. Section 9(b)(i) of the Employment Agreement is hereby amended to read in its entirety as follows: "(i) Unless the notice of nonrenewal is given during a Transition Period, the Company shall make a cash payment equal to the amount of the highest annual Base Salary in effect any time during the three-year period immediately preceding termination of employment. Such payment shall be made in cash within fifteen (15) days from and after the end of Executive's employment term. If the notice of renewal is given during a Transition Period, then, subject to Section 7(c), the Company shall make a cash payment to Executive equal to two (2) times the sum of (A) the amount of the highest annual Base Salary in effect any time during the three-year period immediately preceding termination of Executive's employment and (B) the amount of incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment under this Agreement ceases. For purposes of Clause (B), the computation of the amount of incentive bonuses shall be based upon the bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment." 4. Other Provisions Unaffected. Except as provided herein, all other provisions to the Employee Agreement shall remain in force and unaffected by this Amendment. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its officer, and Executive has executed this Agreement, as of the day and year first written above. FIRST TEAM SPORTS, INC. By /s/ John J. Egart John J. Egart, President and Chief Executive Officer /s/ David G. Soderquist David G. Soderquist EX-27 5 ART 5 FDS FOR FIRST QUARTER
5 1 U.S. Dollars 3-MOS FEB-29-2000 MAR-01-1999 MAY-31-1999 1 1,271,674 0 18,293,382 748,000 10,110,812 31,587,542 10,778,731 3,623,806 44,049,327 13,447,797 5,181,105 0 0 58,039 24,567,386 44,049,327 14,176,606 14,176,606 9,599,922 9,599,922 0 0 178,769 1,078,939 382,211 696,728 0 0 0 696,728 .12 .12
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