<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
----------------
-----------------
Commission File Number: 1-13042
RIDE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 91-1571027
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8160 304th Avenue Southeast
Preston, Washington 98050
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
(425) 222-6015
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(Registrant's telephone number, including area code)
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 1933 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, without par value -- 10,771,352 as of April 30, 1997
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INDEX
RIDE, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- March 31, 1997 and December
31, 1996
Condensed consolidated statements of operations -- Three months ended
March 31, 1997 and 1996
Condensed consolidated statements of cash flows -- Three months ended
March 31, 1997 and 1996
Notes to condensed consolidated financial statements -- March 31, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited)
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,597 $ 3,232
Receivables, less allowance for doubtful accounts of
$728 at March 31, 1997 and $655 at
December 31, 1996 8,311 14,193
Inventories 6,289 5,986
Prepaid expenses and other current assets 639 450
Income taxes receivable 4,051 2,836
Deferred tax assets 1,423 1,423
------------------------------
Total current assets 22,310 28,120
Plant and equipment, net of accumulated depreciation 5,906 5,757
Notes receivable, net of discount 1,923 1,884
Goodwill, net of accumulated amortization 14,238 14,292
Other assets 580 602
------------------------------
Total assets $44,957 $50,655
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,680 $ 4,631
Accrued expenses and other current liabilities 1,703 2,161
Accrued restructuring charges 492 615
------------------------------
Total current liabilities 3,875 7,407
Long-term debt, less current portion 578 604
Deferred income taxes 335 335
Shareholders' equity:
Preferred stock 500 500
Common stock 39,634 39,583
Retained earnings 35 2,226
------------------------------
Total shareholders' equity 40,169 42,309
------------------------------
Total liabilities and shareholders' equity $44,957 $50,655
==============================
</TABLE>
See accompanying notes
2
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RIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
Net sales $ 5,034 $ 12,777
Cost of goods sold 3,706 9,390
---------------------------
Gross profit 1,328 3,387
Selling, general and administrative expenses 4,708 5,076
---------------------------
Operating loss (3,380) (1,689)
Interest income 58 194
Interest expense (12) (19)
---------------------------
Loss before income taxes (3,334) (1,514)
Income tax benefit (1,152) (532)
---------------------------
Net loss $ (2,182) $ (982)
===========================
Per share:
Primary ($ 0.20) ($ 0.09)
Fully diluted ($ 0.20) ($ 0.09)
Weighted average common shares outstanding:
Primary 10,771 10,522
Fully diluted 10,771 10,522
</TABLE>
See accompanying notes
3
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RIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
Net cash provided by (used in) operating activities $(1,205) $ (2,919)
INVESTING ACTIVITIES:
Purchase of plant and equipment (428) (1,705)
Sale of securities available for sale -- 2,129
Other (18) (8)
---------------------------
Net cash provided by (used in) investing activities (446) 416
Financing Activities:
Proceeds from exercise of common stock options 51 16
Repayment of long-term debt (26) --
Dividends paid on preferred stock (9) (9)
---------------------------
Net cash provided by financing activities 16 7
---------------------------
Net increase (decrease) in cash and cash equivalents (1,635) (2,496)
Cash and cash equivalents at beginning of period 3,232 14,271
---------------------------
Cash and cash equivalents at end of period $ 1,597 $ 11,775
===========================
SUPPLEMENTAL DISCLOSURE:
Cash paid for income taxes $ 63 $ 172
Cash paid for interest $ 16 $ 5
NONCASH FINANCING ACTIVITIES:
Tax benefit of stock option exercises $ -- $ 12
Preferred stock dividends declared but not paid $ 9 $ 9
</TABLE>
See accompanying notes
4
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RIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by Ride, Inc. (the "Company"), in accordance with generally accepted
accounting principles for interim financial statements and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation have been included. The Company's revenues are highly
seasonal, occurring primarily between June and December as its products are
shipped to customers. The results of operations for the three months ended March
31, 1997, therefore may not be indicative of the results for the full fiscal
year. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1996. All amounts are stated in US dollars.
2. NET LOSS PER SHARE
Net loss per share has been computed by dividing the net loss, after reduction
for Preferred Stock dividends, by the weighted average number of common shares
outstanding. Common equivalent shares are excluded from the net loss per share
computation because their effects are antidilutive.
3. INVENTORIES
Inventories at March 31, 1997 and December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------------------
(In thousands)
<S> <C> <C>
Finished goods $ 7,753 $ 9,415
Raw materials and work in process 2,372 2,487
Obsolescence reserve (3,836) (5,916)
-------------------------
$ 6,289 $ 5,986
=========================
</TABLE>
4. LINE OF CREDIT
The Company has a $30 million revolving credit line agreement with a bank to
finance import letters of credit and working capital needs expiring June 30,
1997. The line has certain operating covenants, including financial ratios,
working capital restrictions and restrictions on payment of dividends on the
Company's Common Stock. The Company received a waiver from the bank with respect
to its working capital covenant as of March 31, 1997, and has amended the line
of credit agreement to reduce this restriction for future periods.
5
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RIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. FOREIGN CURRENCY TRANSACTIONS
The Company enters into foreign currency forward contracts to hedge firm
purchase and sales orders denominated in foreign currencies. At March 31, 1997,
the Company had open positions to purchase 1.5 million Deutsche Marks for
approximately $1.0 million which mature through September 1997. The net loss on
these forward contracts as of March 31, 1997 of approximately $106,000 has been
deferred and will be recognized when the related commitments are settled.
6. LITIGATION
On March 14, 1997, a securities class action complaint (the "Complaint") was
filed against the Company and four of its founders in the United States District
Court for the Western District of Washington at Seattle. The Complaint was filed
on behalf of parties who purchased shares of the Company's common stock during
the period beginning August 10, 1995 and ending on December 30, 1996. The
Complaint alleges the Company and its founders issued misleading reports and
information to the investing public. The Company intends to vigorously defend
this lawsuit, however, it is unable to predict the outcome of this action at
this time.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
To the extent that this Quarterly Report on Form 10-Q discusses financial
projections, information or expectations about the Company's products or
markets, or otherwise makes statements about the future, such statements are
forward looking and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from the statements made. These
factors include the competitive environment, industry and product
concentrations, dependence on third-party selling efforts and other risks
outlined in more detail in the Company's Annual Report on Form 10-K as filed
with the Securities and Exchange Commission for the fiscal year ended December
31, 1996. Certain forward looking statements contained in the following
discussion are more specifically identified with the symbol (*).
GENERAL
The Company is a leading designer, manufacturer and marketer of snowboards and
related products through its subsidiaries: Ride Snowboard Company ("Ride
Snowboards"), Ride Manufacturing, Inc. ("Ride Manufacturing," formerly known as
Thermal Snowboards, Inc.), Ride Canada, Inc. ("Ride Canada") and SMP Clothing,
Inc. ("SMP"). The Company was founded in September 1992 and acquired Ride
Manufacturing in September 1995 and SMP in October 1995. Finally, the Company
acquired C.A.S. Sports International, Inc. and C.A.S. Sports Agency, Inc.
(collectively, "CAS") in August 1994. On October 11, 1996, the Company sold the
CAS entities and the related excess inventory and brokered-OEM businesses. The
results of operations of the CAS excess inventory and brokered-OEM businesses
are included in the Company's financial statements through the date those
businesses were sold.
The Company's operations vary significantly during the year based on the winter
sports season. The season for winter sports, which includes snowboarding,
typically runs from November through March in northern hemisphere markets.
Accordingly, the Company generates the majority of its sales in the third and
fourth quarters, as snowboard retailers time their purchases to meet expected
retail demand.* Because relatively lower net sales are generated in the first
and second quarters of the year, the Company expects to incur operating losses
in the first half of the year.*
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1997 COMPARED WITH QUARTER ENDED MARCH 31, 1996
Net sales in the first quarter of 1997 were $5.0 million compared to $12.8
million in the first quarter of 1996. Approximately $3.2 million of the 1996
amount was generated by the CAS excess inventory and brokered-OEM businesses
sold in October 1996. The remaining difference was due primarily to first
quarter 1996 shipments to one of the Company's Japanese distributors not
recurring in the 1997 period. During the first quarter of 1997, the Company
reduced the number of its distributors in Japan from four to three and announced
that "Ride," "Liquid" and "Preston" branded products would be sold directly to
key retailers in Japan. The Company expects that this change in distribution
channels will result in a higher percentage of sales to Japan, on a relative
basis, occurring in the second half of the year than in prior years.*
Hard goods (defined as snowboards, bindings, boots and skateboards) represented
49% of first quarter 1997 net sales while soft goods (apparel and accessories)
made up 51%. For the first quarter of 1996, hard goods comprised 86% of sales
and soft goods 14%. The increase in soft goods sales is attributable primarily
to growth in Spring season sales at the Company's SMP subsidiary coupled with
the fact that the sold CAS businesses were predominantly hard goods oriented.
For the first quarter of 1997, sales in North America made up 72% of total sales
with international sales comprising the remaining 28%. For the first quarter of
1996, North America comprised 46% of total sales and international 54%. The
decrease in international sales is attributable to the change in distribution in
Japan as well as the excess inventory situation in that market.
7
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Gross margins for the three months ended March 31, 1997 were 26.4% compared to
26.5% for the same period in 1996. Gross margins were positively impacted in
1997 by the higher percentage of soft goods sales and the disposition of the
lower-margin CAS businesses. Approximately 49% of first quarter 1997 sales were
comprised of 1996 close out inventories which had a negative impact on gross
margins.
Selling, general and administrative expenses decreased for the first quarter of
1997 to $4.7 million from $5.1 million in the first quarter of 1996. This
decrease was due to the disposition of the CAS businesses and lower executive
salaries offset by increased variable expenses (primarily commissions and bad
debts), occupancy expenses and legal expenses. Variable expenses increased over
the first quarter of 1996 due to a higher percentage of sales coming from the
North American market where the Company acts as its own distributor. Selling,
general and administrative expenses in the first quarter of the year include
seasonal amounts associated with the major industry trade shows and new product
introductions.
Interest income decreased to $58,000 in the first quarter of 1997 compared with
$194,000 for the first quarter of 1996. The decrease was due to overall lower
invested cash balances in the first quarter of 1997 as compared to the same
period in 1996 due to capital supplied by the Company's August 1995 public stock
offering. Interest expense in the first quarter of 1996 included interest paid
on the SMP acquisition note payable which was paid off in the third quarter of
1996.
The effective tax rate for the first quarter of 1997 was 34.5% compared with
35.1% for the first quarter of 1996. The lower rate is due primarily to the
disposition of the CAS businesses which were based principally in Canada and had
a higher overall income tax rate.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarters of both 1997 and 1996, the Company financed its
operations primarily through cash balances on hand and collection of year-end
receivables. Net cash used in operating activities totaled approximately $1.2
million in the first quarter of 1997 compared with $2.9 million in the
comparable period of 1996. This decrease was due to primarily to a smaller
inventory buildup in 1997 than in 1996. Net cash used in investing activities
totaled $446,000 during the first quarter of 1997 compared to net cash provided
by investing activities of $416,000 in the first quarter of 1996. The 1996
quarter includes approximately $2.1 million in proceeds from the sale of short
term investments, offset by capital expenditures of approximately $1.7 million
as compared to capital expenditures of $428,000 in the first quarter of 1997. A
significant portion of both 1996 and 1997 first quarter capital expenditures are
associated with molds and tooling for snowboards and snowboard bindings. Net
cash provided by financing activities totaled $16,000 in the first quarter of
1997 compared with $7,000 in the comparable period of 1996.
The Company has a $30 million revolving line of credit arrangement with a bank
to finance import letters of credit and working capital needs. Advances on the
line bear interest at the bank's prime rate or at a LIBOR option. At April 30,
1997, the Company had approximately $1.5 million in outstanding import letters
of credit drawn against this line. No direct advances were outstanding on the
revolving line of credit. The line of credit expires on June 30, 1997 and has
certain operating covenants, including financial ratios, working capital
restrictions and restrictions on payment of dividends on the Company's Common
Stock. The Company received a waiver from the bank with respect to its working
capital covenant as of March 31, 1997, and has amended the line of credit
agreement to reduce this restriction for future periods. The Company is in the
process of renegotiating this credit facility.*
Certain of the Company's purchase commitments and sales are denominated in
foreign currencies. Because a change in the value of such currencies relative to
the U.S. dollar will affect the Company's gross profit and net income, the
Company enters into forward currency contracts to hedge against adverse currency
fluctuations. Although the Company believes that these contracts decrease the
overall exposure to gains and losses from currency fluctuations, such exposure
cannot be entirely eliminated.*
8
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 1996, the Company initiated legal proceedings against Switch Manufacturing,
alleging infringement by Switch of certain of the Company's patented binding
technologies. Switch has initiated a counterclaim in the lawsuit, alleging
misuse of patent and unfair business practices by the Company, to which claims
the Company believes it has meritorious defenses. The case is pending in the
United States District Court for the Northern District of California as Raines,
et al. v. Switch Manufacturing v. Ride, Inc., Civil Action No. C96-2648-DLJ.
Also in 1996, the Company initiated legal proceedings against Wide Ride, Inc. in
Federal District Court for the District of Colorado, styled Ride Snowboard
Company v. Wide Ride, Inc., Civil Action No. 96-D-2003. The suit alleges
infringement of the Company's registered "Ride" trademark by Wide Ride. The
Company intends to vigorously prosecute both lawsuits.
On March 14, 1997, a shareholder filed a lawsuit against the Company and four of
its current or former officers and directors in the United States District Court
for the Western District of Washington at Seattle, styled Murray v. Ride, Inc.
et al., Civil Action No. C97-0402Z. A second lawsuit was filed against the same
parties on April 9, 1997 by two shareholders in the same court under Taylor et
al. v. Ride, Inc. et al., Civil Action No. C97-560Z. Identical except for the
named plaintiffs and facts specific to each, the lawsuits allege violations of
certain federal securities laws and state laws, and purport to seek damages on
behalf of a class of shareholders who purchased the Company's common stock
during the period August 10, 1995 through December 30, 1996. The Company
believes the lawsuits are without merit and intends to vigorously defend against
the claims.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1 Restated Articles of Incorporation and Certificate of
Designation of Relative Rights and Preferences of the Series A
7% Cumulative Nonvoting Preferred Stock (1)
3.2 Bylaws of the Company (1)
3.3 Articles of Amendment to Articles of Incorporation (9)
3.4 Articles of Amendment to Articles of Incorporation (10)
9
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3.5 Articles of Correction (12)
4.1 Article VI of the Articles of Incorporation regarding
Shareholder Rights (See Exhibit 3.1) (1)
4.2 Article VIII of the Articles of Incorporation regarding Voting
Rights (See Exhibit 3.1) (1)
4.4 Specimen Stock Certificate (2)
10.10 Exclusive Distributorship Agreement dated December 7, 1992, by
and between Ride Snowboard Company and Far East Trading Co.,
Ltd. (3)
10.24 Exchange Agreement, dated December 31, 1993, between Ride
Snowboard Company and Mark M. Salter (1)
10.25 Employment Agreement, dated August 18, 1994, by and between
Ride Snowboard Company and James J. Salter (4)
10.26 Form of Employment Agreement between Ride Snowboard Company
and Roger B. Madison, Jr. (1)
10.27 Employment Agreement, dated January 1, 1995, by and between
Ride Snowboard Company and Timothy G. Pogue (7)
10.28 Form of Ride Snowboard Company 1994 Stock Option Plan (1)
10.29 Form of Ride Snowboard Company 1994 Directors' Nonqualified
Stock Option Plan (1)
10.30 Lease Agreement with Teachers Insurance & Annuity Association
dated January 10, 1994 (1)
10.32 Amended Form of Underwriting Agreement (5)
10.34 Standard Form Multiple Occupancy Lease, dated November 29,
1994, by and between Ride Snowboard Company and BDC Preston
Properties One Limited Partnership (6)
10.35 Business Loan Agreement, dated June 10, 1996, by and between
Ride, Inc. and U.S. Bank of Washington, N.A. (21)
10.36 Stock Purchase Agreement, dated August 18, 1994, between Ride
Snowboard Company and James J. Salter, the James Salter Family
Trust, Kenneth Finkelstein Family Trust, The Snow Trust,
Robert Marcovitch, Kerry Wasserman, Rick Clarfield, Howard
Cohen, Gary Kell, Sandra Pelegrin, Alan Langer, Dan Opyc,
C.A.S. Sports International, Inc. and C.A.S. Sports Agency,
Inc. (8)
10.45 Ride Snowboard Company 1995 Employee Stock Purchase Plan (9)
10.46 Ride Snowboard Company 1995 Foreign Subsidiary Employee Stock
Purchase Plan (9)
10.47* Exclusive OEM Agreement, dated July 26, 1995, by and between
Ride Snowboard Company and Straight Line Water Sports, Inc.
(11)
10.48 Employment Agreement, dated September 1, 1995, between the
Company and David A. Janes, Jr. (13)
10.49 Employment Agreement, dated September 1, 1995, between the
Company and Bernard Gervasoni (13)
10.50 Employment Agreement, dated October 19, 1995, between the
Company and
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David Milo Myers (14)
10.51 Registration Rights Agreement dated October 19, 1995, between
the Company and David Milo Myers, Lawrence Kraus and Michael
Wise (14)
10.52 Stock Purchase Agreement, dated September 1, 1995, between the
Company and the shareholders and option holders of 5150
Snowboards, Inc. and Thermal Snowboards, Inc. (15)
10.53 Asset Purchase Agreement, dated October 19, 1995, among the
Company, Sex Money Power Clothing, Inc., David Milo Myers,
Lawrence Kraus and Michael Wise (16)
10.54 Form of Underwriting Agreement by and between the Company and
Hambrecht & Quist LLC and Dain Bosworth Incorporated (17)
10.55* Amendment No.1 to Exclusive Distributorship Agreement, dated
October 24, 1995, by and between Ride Snowboard Company, 5150
Snowboards, Inc., SMP Clothing, Inc. and Far East Trading
Company Ltd. (18)
10.56 Employment Agreement, dated October 14, 1995, by and between
the Company and Kenneth J. Finkelstein (19)
10.57 Employment Agreement, dated January 1, 1996, by and between
C.A.S. Sports International, Inc. and Robert F. Marcovitch
(19)
10.58 First Amendment, dated August 4, 1995, to Lease Agreement by
and between Ride Snowboard Company and BDC Preston Properties
One Limited Partnership (19)
10.59 Second Amendment, dated November 21, 1995, to Lease Agreement
by and between Ride Snowboard Company and BDC Preston
Properties One Limited Partnership (19)
10.60 Third Amendment, dated March 26, 1996, to Lease Agreement by
and between Ride Snowboard Company and BDC Preston Properties
One Limited Partnership (19)
10.61 Amendment No. 2 to Exclusive Distributorship Agreement, dated
October 24, 1995, by and between Ride Snowboard Company, 5150
Snowboards, Inc., SMP Clothing, Inc. and Far East Trading
Company Ltd. (20)
10.63 Agreement, dated May 7, 1996, by and between Ride, Inc. and
James J. Salter (21)
10.64 Agreement, dated August 2, 1996, by and between Ride, Inc. and
Kenneth J. Finkelstein (21)
10.65 Agreement, dated August 7, 1996, by and between Ride, Inc. and
Robert E. Hall (21)
10.66 Stock Purchase Agreement, dated October 11, 1996, by and
between Ride, Inc. and Gen-X Equipment, Inc. (22)
10.67 Amendment No. 1 to Resignation Agreement, dated October 11,
1996, by and between Ride, Inc. and James J. Salter. (22)
10.68 Amendment No. 1 to Resignation Agreement, dated October 11,
1996, by and between Ride, Inc. and Kenneth J. Finkelstein.
(22)
10.69 Resignation and Release Agreement, dated October 28, 1996, by
and between Ride, Inc. and Timothy G. Pogue (23)
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10.70 Letter agreement, dated December 6, 1996, by and between Ride,
Inc. and Straight Line Water Sports, Inc. (23)
10.71 Letter agreement, dated December 12, 1996, by and between
Ride, Inc. and Straight Line Water Sports, Inc. (23)
10.72* Financial Advisory Agreement, dated January 15, 1997, by and
between Ride, Inc. and Roger Madison, Jr.
27.1 Financial Data Schedule
- ------------------------------------
(1) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Registration Statement on Form SB-2, file no.
33-75770-LA.
(2) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Amendment No. 1 to Registration Statement on Form
SB-2, file no. 33-75770-LA.
(3) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Registration Statement on Form SB-2, file no.
33-75770-LA, with confidential portions omitted and filed separately
with the Commission pursuant to a Request of Confidential Treatment
under Rule 406 of the Securities Act of 1933.
(4) Exhibit is incorporated by reference to Exhibit No. 10.1 to the
Company's Current Report on Form 8-K, dated August 31, 1994.
(5) Exhibit is incorporated by reference to Exhibit No. 1.1A to the
Company's Amendment No. 1 to Registration Statement on Form SB-2, file
no. 33-75770-LA.
(6) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
(7) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Post-Effective Amendment No. 1 to the Registration
Statement on Form SB-2, file no. 33-75770-LA.
(8) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Post-Effective Amendment No. 2 to the Registration
Statement on Form SB-2, file no. 33-75770-LA.
(9) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Registration Statement on Form S-1, file no. 33-94814.
(10) Exhibit is incorporated by reference to an identically numbered exhibit
to Amendment No. 1 to the Company's Registration Statement on Form S-1,
file no. 33-94814.
(11) Exhibit is incorporated by reference to an identically numbered exhibit
to Amendment No. 1 to the Company's Registration Statement on Form S-1,
file no. 33-94814, with confidential portions omitted and filed
separately with the Commission pursuant to a Request of Confidential
Treatment under Rule 406 of the Securities Act of 1933.
(12) Exhibit is incorporated by reference to an identically numbered exhibit
to Amendment No. 2 to the Company's Registration Statement on Form S-1,
file no. 33-94814.
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(13) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Current Report on Form 8-K, dated September 1, 1995.
(14) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Current Report on Form 8-K, dated October 20, 1995.
(15) Exhibit is incorporated by reference to Exhibit No. 2.1 to the
Company's Current Report on Form 8-K, dated September 1, 1995.
(16) Exhibit is incorporated by reference to Exhibit No. 2.2 to the
Company's Current Report on Form 8-K, dated October 20, 1995.
(17) Exhibit is incorporated by reference to Exhibit No. 1.1 to the
Company's Registration Statement on Form S-1, file no. 33-94814.
(18) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Quarterly Report on Form 10-Q, for the fiscal quarter
ended September 30, 1995.
(19) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
(20) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996.
(21) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1996.
(22) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Current Report on Form 8-K, dated October 11, 1996.
(23) Exhibit is incorporated by reference to an identically numbered exhibit
to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
* Certain portions of this exhibit have been omitted and filed separately
with the Commission pursuant to an Application for Confidential
Treatment.
(b) Reports on Form 8-K
Not applicable.
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EXHIBIT INDEX
Manual
Exhibit No. Description Page No.
- ----------- ----------- --------
10.72* Financial Advisory Agreement, dated January 15, 1997,
by and between Ride, Inc. and Roger Madison, Jr.
27.1 Financial Data Schedule
* Certain portions of this exhibit have been omitted and filed
separately with the Commission pursuant to an Application for
Confidential Treatment.
14
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RIDE, INC.
- ----------------------------------
(Registrant)
Dated: May 14, 1997 By /s/ Robert E. Hall
---------------------------------------
Robert E. Hall
President and Chief Executive Officer
Dated: May 14, 1997 By /s/ G. Scott Stewart
---------------------------------------
G. Scott Stewart
Chief Financial Officer
15
<PAGE> 1
ROGER B. MADISON, JR.
22229 N.E. 140TH WAY
WOODINVILLE, WA 98072
(206) 861-6695
FAX (206) 861-6696
January 15, 1997
Mr. Robert E. Hall
President & Chief Executive Officer
Ride, Inc.
8160 304th Ave. S.E.
Preston, WA 98050
RE: Exclusive Financial Advisory Engagement
Dear Bob:
I would be pleased to act as the exclusive financial advisor to Ride in
connection with Ride's M&A Activities.*
In this capacity, I will render the following financial advisory
services to Ride:
(i) review with the Company's board of directors and members of
management the Company's financial plans, its strategic plans and business
alternatives;
(ii) assist the Company in the evaluation and, if determined to be
advisable, selection of potential targets and represent the Company in
contacting, qualifying and negotiating with potential targets approved by the
Company; without limiting the generality of the foregoing, qualifying activities
in connection with potential and actual targets shall include, without
limitation, performing the "due diligence" activities customary in the
investment banking industry, which, by way of example only, shall include
investigation, review and analysis of all relevant aspects of the target's
business and the preparation of such pro forma financial models as Ride may
request
(iii) meet with members of management and, if requested, the entire
board of directors to discuss the Company's position and any recommendation to
stockholders
- ----------------
* All capitalized terms used in this letter agreement shall have the meanings
set forth in Exhibit A hereto.
<PAGE> 2
concerning any proposal to acquire a target as well as available strategic
alternatives and their financial implications; and
(iv) to the extent requested by the Company, assist the Company in
financing strategies, including presentations to and negotiations with potential
lenders.
As I am acting under this letter solely as an independent contractor, I
understand that I will have no authority hereunder to bind the Company in any
way to any particular M&A Activity. In addition, nothing contained in this
letter agreement will require the Company to accept the terms of any proposal.
The Company has the right in its sole and absolute discretion to reject any M&A
Activity regardless of the terms proposed.
As compensation for my services, the Company will, upon consummation of
a Transaction, pay me financial advisory fees as follows:
(i) Within thirty (30) days of closing the Transaction, the Company
will pay me an initial fee amounting to
(a) [*] percent [*] of the first $1,000,000 of Consideration;
plus
(b) [*] percent [*] of the next $1,000,000 of Consideration;
plus
(c) [*] percent [*] of the next $1,000,000 of Consideration; plus
(d) [*] percent [*] of all Consideration exceeding $3,000,000.
(ii) In addition to the fee payable under the foregoing paragraph, the
Company will, within ninety (90) days after the end of the twelfth month
following the closing of the Transaction, pay me a fee amounting to [*]
percent [*] of the amount of Gross Profit contributed in the twelve month
period after closing of the Transaction by any entity or assets that may be
acquired in the Transaction. For purposes of this paragraph (ii), the
commencement date of the twelve month period upon which compensation hereunder
is to be calculated shall be rounded to the nearest first of the month preceding
or following the closing date of the Transaction, as the case may be.
From time to time during the term hereof, I will notify the Company in
writing of potential Transactions I will pursue under this letter agreement. If
the Company notifies me in writing within fifteen (15) days of receiving any
such notice that it intends to engage the services of a nationally-recognized
investment banking firm to complete a particular Transaction described in such
notice, then the Company may do so without any further obligation to me with
respect to that particular Transaction, and I will have no
<PAGE> 3
obligations hereunder with respect to that particular Transaction. If, after the
expiration of such fifteen (15) day period with respect to any potential
Transaction, the Company in its reasonable discretion determines that it is in
the best interests of the Company and its shareholders to engage the services of
a nationally-recognized investment banking firm to complete any Transaction
during the Term hereof, as compensation for my services with respect to such
Transaction I will be entitled to receive twenty-five percent (25%) of all fees
described in paragraphs (i) and (ii) above as compensation for my services with
respect to such Transaction, payable as set forth in such paragraphs (i) and
(ii) above. I agree that in such case I will cooperate with the Company and the
investment banking firm so retained by the Company and will comply with the
reasonable requests of the Company and such investment banking firm.
All Travel Expenses incident to the rendering of my services pursuant
to this engagement will be paid by the Company. Such expenses must receive the
prior written approval of an authorized representative of the Company. If such
expenses are paid in the first instance by me, the Company will reimburse me
therefor on presentation of proper expense accounts prepared in accordance with
the Company's standard expense account procedures applicable to expenses
incurred by the Company's chief executive officer. As incentive for me to keep
such expenses to a reasonable level, I agree that, with respect to the
Transactions for which I am paid the full amount of the fees provided for in
paragraphs (i) and (I) above, fifty percent (50%) of expenses attributable to
such Transaction that is consummated shall be paid by me in the form of a
set-off of the fees payable by the Company to me hereunder.
I represent and warrant to the Company that I will perform the services
described herein in a careful, professional and workmanlike manner, that I am
free to enter into this letter agreement and that the services I will perform
hereunder will not infringe upon any rights of other parties. I also agree to
defend, indemnify and hold the Company, its directors, officers and employees
harmless from all losses, claims, and expenses (including without limitation,
attorneys' fees) arising from any breach of my warranties herein.
The Company represents and warrants to me that the person signing this
letter agreement on behalf of the Company is duly authorized to do so and that
this letter agreement represents the valid and binding obligation of the
Company.
<PAGE> 4
The Company agrees to indemnify me in connection with the rendering of my
services hereunder in accordance with the terms of the indemnification set forth
in Exhibit B hereto.
The Company agrees that I am entitled to rely upon all reports of the
Company (and its affiliates) and information supplied to me by or on behalf of
the Company (whether written or oral), and I shall not in any respect be
responsible for the accuracy or completeness of any such report or information
or have an obligation to verify the same.
I agree not to disclose to third parties (other than to such agents and
professional advisors as the Company may agree in advance in writing and who
agree in writing to be bound by the confidentiality terms hereof) any
confidential information (as that term is defined herein) received from or
prepared by me in connection with M&A Activities except as contemplated by this
letter agreement or as such disclosure may be required by law. For purposes of
this letter agreement, "confidential information" shall mean non-public
information of any kind or nature concerning any and all aspects of the Company
received from or prepared by me in connection with M&A Activities that is not
otherwise available from sources outside of the Company (or its affiliates), and
any such information concerning a target that the Company is obligated to
maintain as confidential. Confidential information, as defined herein, shall
cease to be confidential when it: (a) becomes generally available, or (b) comes
to my attention through sources that do not, to my reasonable knowledge at the
time, involve a violation of this or any similar agreement. All tangible items
embodying or disclosing any portion of the confidential information shall be and
remain the property of the Company and shall be returned to the Company upon the
termination of the my services hereunder. At such time, I shall also assemble
all tangible items of works-in-progress, notes, plans, and other materials
related in any way to my services, and will promptly deliver such items to the
Company.
I agree that I shall, in my position as Director, abstain from
participating in any vote by the Board of Directors or a committee thereof
relating or in any way pertaining to a Transaction.
The term of this letter agreement shall commence on the date of
acceptance by the Company and shall terminate one year thereafter. Upon
expiration of such one year term, the term shall be automatically extended for
consecutive one-year periods unless the Company or I notify the other in writing
at least sixty (60) days prior to the end of such term or extended term that it
or I elect to terminate the term of my engagement hereunder. In the event of any
such extension, my engagement shall be pursuant to the terms of this letter
agreement and such additional or different terms as the Company and I agree in
writing.
<PAGE> 5
Within fifteen (15) days after the effective date of any termination of
this letter agreement, I will provide to the Company a written list of the
potential M&A Activities under consideration at the time of termination. With
respect to any such listed M&A Activity involving a Transaction closing within
one (1) year after the termination of my engagement hereunder, the Company
shall, either (i) elect to continue my engagement under the terms hereof with
respect to such Transaction, or (ii) elect not to continue my engagement and pay
me twenty-five percent of the fees described in paragraphs (i) and (ii) above as
provided in those paragraphs.
Unless otherwise required by law, any advice, written or oral, rendered
by me pursuant to this letter agreement may not be disclosed publicly without my
prior written consent, which consent shall not be unreasonably withheld. Upon
the prior written consent of the Company, which consent shall not be
unreasonably withheld, I may place advertisements in financial and other
newspapers and journals at my own expense describing my services to the Company
hereunder, provided such advertisements do not disclose any confidential
information (as that term is defined herein) or portray the Company in a
negative light.
This letter agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof; provided, however, that this letter agreement shall not affect in any
way the Company's or my rights and obligations under (i) my employment agreement
dated February 22, 1994, (ii) any new employment agreement between the Company
and me, (iii) my Ride stock and stock options, and (iv) my indemnification
rights as a member of the Company's board of directors.
This letter agreement shall be governed by, and construed in accordance
with, the laws of the State of Washington, without giving effect to the State's
conflicts of laws principles, and venue for any proceeding hereunder shall be in
the federal and state courts sitting in King County, Washington. The prevailing
party in any action or proceeding to construe or enforce this letter agreement
shall be awarded its reasonable attorneys' fees and all other costs incurred in
such action or proceeding at all stages thereof. If any provision of this letter
agreement is held to be invalid or unenforceable to any extent in any context,
it shall nevertheless be enforced to the fullest extent allowed by law in that
and other contexts, and the validity and force of the remainder of this
Agreement shall not be affected thereby. Any failure of Ride or me to require
strict performance by the other of any part of this letter agreement shall not
be considered consent or waiver of any other breach of the same or of any other
provisions hereof, and shall not be effective unless in a writing signed by an
authorized representative of Ride or me, as the case may be.
<PAGE> 6
My rights and duties hereunder may not be assigned to others without the prior
written consent of Ride.
If the foregoing correctly sets forth the understanding between us,
please so indicate on the enclosed copy of this letter agreement and return one
original copy to me.
I look forward to working with Ride on these matters.
Very truly yours,
/s/ Roger B. Madison, Jr.
Roger B. Madison, Jr.
AGREED AND ACCEPTED:
RIDE, INC.
/s/ David H. Davis/ for Robert E. Hall (per telephonic authority)
- --------------------------------------
By Robert E. Hall
President & Chief Executive Officer
DATE: 1-16-97
--------------
<PAGE> 7
Mr. Robert Hall
January 15, 1997
Page 7
EXHIBIT A
DEFINITIONS
"Board of Directors" shall mean the Board of Directors of Ride, Inc.
"Company" shall mean Ride, Inc.
"Consideration" shall mean the total value of all consideration
exchanged in any Transaction, including without limitation cash, stock valued as
provided under the terms of the definitive Transaction documentation, debt
instruments, "earn-out" notes, royalties and any other value exchanged in the
Transaction. Unless otherwise agreed to in writing by the Company and me: (a)
the value of any debt instruments exchanged in a Transaction shall be the face
value of any such instrument; and (b) the value of any royalties or "earn-out"
notes exchanged in a Transaction shall be as agreed to in writing by the Company
and me. If the Company and I are unable to reach agreement on the value of such
consideration, then the Company and I will agree to appoint an independent third
party to determine such value. If the Company and I are unable to agree on the
appointment of such third party, then the Company and I will each appoint a
third party, and these two persons will appoint a third party mutually agreeable
to the two, and these three persons shall conclusively determine the value of
the consideration at issue.
"Director" shall mean a member of the Board of Directors.
"GAAP" shall mean applicable generally accepted accounting principles
consistently applied.
"Gross Profit" shall mean sales revenues, less cost of sales, as
determined under GAAP.
"M&A Activities" shall mean all of Ride's merger, acquisition and
business combination activities in the industries identified on Exhibit C hereto
and such additional markets or industries as Ride may in its sole discretion
specify and proscribe in writing from time to time. M&A Activities shall
include, without limitation, any transaction or event or series or combination
thereof, other than in the ordinary course of trade or business, whereby
directly or indirectly, control of or a majority interest in equity or assets is
transferred; such transactions or events to include without limitation a sale or
exchange of capital stock or assets (whether in a leveraged acquisition or
otherwise), a merger or consolidation, a tender or exchange offer, the formation
of a joint venture or partnership, or any similar transaction or event.
"Ride" shall mean Ride, Inc.
"Transaction" shall mean any transaction involving an M&A Activity.
<PAGE> 8
Mr. Robert Hall
January 15, 1997
Page 8
"Travel Expenses" shall mean all surface and air transportation costs,
lodging and meal expenses and reasonable entertainment expenses that have
received prior written approval by an authorized representative of Ride incurred
by me in the course and furtherance of M&A Activities. In no event shall
cellular telephone expenses wherever incurred, and transportation expenses
incurred for travel in the Puget Sound region, be deemed reimbursable Travel
Expenses.
<PAGE> 9
Mr. Robert Hall
January 15, 1997
Page 9
EXHIBIT B
INDEMNIFICATION
In connection with the services which I have agreed to render to the
Company hereunder, the Company shall (A) indemnify me and hold me harmless to
the fullest extent permitted by law against any losses, claims, damages or
liabilities to which I may become subject in connection with (i) my use of
information that is inaccurate in any respect (as a result of misrepresentation,
omission, failure to update, or otherwise) that is provided to me by the
Company, its representatives, agents or advisers, regardless of whether I should
have known of such inaccuracy, or (ii) any other aspect of my rendering such
services, unless it is finally judicially determined that such losses, claims,
damages or liabilities relating thereto arise only out of the gross negligence
or willful misconduct of me, and (B) reimburse me for any legal or other
expenses reasonably incurred by me in connection with investigating, preparing
to defend or defending any lawsuits, claims or other proceedings arising in any
manner out of or in connection with my performance of my duties hereunder. If
for any reason the foregoing indemnity is unavailable to me or insufficient to
hold me harmless, then the claims, liabilities, losses, damages or expenses in
such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and me on the other but also the
relative fault of the Company and me, as well as any relevant equitable
considerations. Notwithstanding the provisions of this letter agreement, the
aggregate contribution of me to all claims, liabilities, losses, damages and
expenses shall not exceed the amount of fees actually received by me pursuant to
my engagement by the Company. It is hereby further agreed that the relative
benefits to the Company on the one hand and me on the other hand with respect to
the transactions contemplated in this letter agreement shall be deemed to be in
the same proportion as (i) the total value of the transaction bears to (ii) the
fees paid to me with respect to such transactions. The Company agrees that the
indemnification reimbursement commitments set forth in this letter agreement
shall apply whether or not I am a formal party to any such lawsuits or other
proceedings, that I am entitled to retain separate counsel of my choice in
connection with any of the matters to which such commitments relate, that such
commitments shall be in addition to any liability that the Company may have to
me at common law or otherwise, and that such commitments shall extend upon the
terms set forth in this letter agreement to any controlling person, director,
officer, employee, agent or affiliate of me and shall survive any termination of
this letter agreement.
<PAGE> 10
Mr. Robert Hall
January 15, 1997
Page 10
EXHIBIT C
EXCLUSIVE M&A ACTIVITIES INDUSTRIES
Business entities, including without limitation, corporations, limited liability
companies, partnerships, limited partnerships, joint ventures, and sole
proprietorships, whose primary business activity is the development, design,
manufacture and/or marketing of any one or more of the following:
Snowboards
Snowboard Boots
Snowboard Bindings
Snowboard Apparel
Snowboard Accessories
Wakeboards
Water Skis
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,597
<SECURITIES> 0
<RECEIVABLES> 8,311
<ALLOWANCES> 728
<INVENTORY> 6,289
<CURRENT-ASSETS> 22,310
<PP&E> 5,906
<DEPRECIATION> (1,347)
<TOTAL-ASSETS> 44,957
<CURRENT-LIABILITIES> 3,875
<BONDS> 0
0
500
<COMMON> 39,635
<OTHER-SE> 34
<TOTAL-LIABILITY-AND-EQUITY> 44,957
<SALES> 5,034
<TOTAL-REVENUES> 5,034
<CGS> 3,706
<TOTAL-COSTS> 3,706
<OTHER-EXPENSES> 4,708
<LOSS-PROVISION> 54
<INTEREST-EXPENSE> (46)
<INCOME-PRETAX> (3,334)
<INCOME-TAX> (1,152)
<INCOME-CONTINUING> (2,182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,182)
<EPS-PRIMARY> ($0.20)
<EPS-DILUTED> (0.20)
</TABLE>
