8-K 1 c21289-8k.txt SEC 8K DOCUMENT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): June 22, 2001 Commission File Number: 0-19298 RIDDELL SPORTS INC. (Exact name of registrant as specified in its charter) DELAWARE 22-2890400 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2525 Horizon Lake Drive, Suite 1, Memphis, TN 38133 (Address of principal executive offices) (Zip code) (901) 387-4300 (Registrant's telephone number, including area code) 1450 Broadway, Suite 2001, New York, NY 10018 (Former name, former address and former fiscal year, if changed since last report) 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 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 registrant's classes of common stock, as of the latest practicable date. 9,452,250 Common Shares as of June 22, 2001 Item 2. Acquisition or Disposition of Assets On June 22, 2001, the company completed the sale of its Riddell Group Division to an acquisition affiliate of Lincolnshire Management, Inc., ("Lincolnshire") a New York based, private-equity fund. The purchase price, which was determined by an arms-length negotiation, was for approximately $61 million in cash, plus an adjustment to cover seasonal funded indebtedness incurred by the Riddell Group Division during 2001. The current amount of the adjustment is estimated at $6.3 million. The sale was made pursuant to a stock purchase agreement dated April 27, 2001 between Riddell Sports Inc. and Lincolnshire. The Riddell Group Division includes: (i) all of the Company's team sports business, excluding Umbro branded team soccer products, (ii) the Company's licensing segment, which allows third-parties to market certain products using the Riddell and MacGregor trademarks to third parties and (iii) the Company's retail segment, including the New York Executive Office, which managed the segment, which markets a line of sports collectibles and athletic equipment to retailers in the United States and to a limited extent internationally. The assets and liabilities involved in the transaction principally included cash, accounts receivable, inventories, prepaid expenses, other receivables, property and equipment, intangible assets, accounts payable, accrued liabilities and other liabilities. Item 5. Other Events With the sale of the Riddell Group, the Company announced the resignation of David Mauer as President and Chief Executive Officer and as a director of Riddell Sports Inc., and the promotion of Jeffrey G. Webb, current Chief Operating Officer, to President and Chief Executive Officer. The Company also announced the promotion of John M. Nichols from Chief Financial Officer of Varsity Spirit Corporation to Chief Financial Officer of Riddell Sports Inc. David Groelinger, the previous Chief Financial Officer, will remain as an Executive Vice President of Riddell Sports Inc. during a transition period. The Company has also announced the move of its principal executive offices to the executive offices of Varsity Spirit Corporation, 2525 Horizon Lake Drive, Suite 1, Memphis, Tennessee 38133 from 1450 Broadway, Suite 2001, New York, New York 10018. Item 7. Financial Statements and Exhibits The following is filed as an Exhibit to this Current Report on Form 8-K: Stock Purchase Agreement dated as of April 27, 2001 between Riddell Acquisition Sub, Inc. and Riddell Sports Inc. (b) Pro Forma Financial Information The following is a presentation of unaudited pro forma financial information of Riddell Sports Inc., including an unaudited pro forma consolidated balance sheet as of March 31, 2001 -2- and pro forma consolidated statements of operations for the year ended December 31, 2000 and for the quarter ended March 31, 2001. The pro forma balance sheet has been computed assuming the disposition of the Riddell Group Division had been consummated on March 31, 2001, while the pro forma statements of operations have been computed assuming the disposition had been consummated as of January 1, 2000. Such unaudited pro forma financial information should be read in conjunction with the financials statements reported in the company's Form 10-K for the year ended December 31, 2000 and Form 10-Q for the quarterly period ended March 31, 2001. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the disposition of the Riddell Group Division been consummated in accordance with the assumptions noted above, nor is it necessarily indicative of future operating results or financial position. In the second quarter of 2001, the company expects to record a loss on the Sale of the Riddell Group Division of $17.2 million. This loss is not reflected in the pro forma statements of operations. -3- RIDDELL SPORTS INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET MARCH 31, 2001 (IN THOUSANDS)
Riddell Less: Sports Riddell Inc. Sports Pro Forma Description (as reported) Group Adjustments Pro Forma --------------------------------------- ------------------------------------------------- ---------------- ASSETS CURRENT ASSETS Cash $1,457 $(1,016) $36,724(1) $37,165 Accounts Receivable 35,464 (26,747) - 8,717 Inventories 38,370 (21,379) - 16,991 Prepaid Expenses 7,019 (2,755) - 4,264 Other Receivables 444 (444) 1,000(2) 1,000 Deferred Taxes 6,770 - - 6,770 ------------------------------------------------- ---------------- 89,524 (52,341) 37,724 74,907 PROPERTY AND EQUIPMENT 8,751 (4,146) - 4,605 INTANGIBLE ASSETS 101,358 (29,134) - 72,224 OTHER ASSETS 3,226 (2,587) - 639 ------------------------------------------------- ---------------- TOTAL ASSETS $202,859 $(88,208) $37,724 $152,375 ================================================= ================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $10,994 $(3,280) $6,155(3) $13,869 Accrued Liabilities 8,056 (3,578) - 4,478 Customer Deposits 3,492 - - 3,492 ------------------------------------------------- ---------------- TOTAL CURRENT LIABILITIES 22,542 (6,858) 6,155 21,839 LONG-TERM DEBT 152,081 - (29,581)(1) 122,500 DEFERRED TAXES 2,270 - - 2,270 OTHER LIABILITIES 3,040 (3,040) - - COMMITMENTS AND CONTIGENCIES - - - - STOCKHOLDERS' EQUITY Preferred Stock - - - - Common Stock 95 - - 95 Capital in Excess of Par 37,306 - - 37,306 Accumulated Deficit (14,475) - (17,160)(4) (31,635) ------------------------------------------------- ---------------- TOTAL STOCKHOLDERS' EQUITY 22,926 - (17,160) 5,766 ------------------------------------------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $202,859 $(9,898) $(40,586) $152,375 ================================================= ================
-4- RIDDELL SPORTS INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 (IN THOUSANDS)
Riddell Less: Sports Riddell Inc. Sports Pro Forma Description (as reported) Group Adjustments Pro Forma --------------------------------------- ------------------------------------------------- ---------------- NET REVENUES Net Sales, Products and Reconditioning $176,659 $(88,121) - $88,538 Camps and Events 56,856 - - 56,856 Royalty Income 1,206 (1,206) - - ------------------------------------------------- ---------------- NET REVENUES 234,721 (89,327) - 145,394 COSTS OF REVENUES Products and Reconditioning 102,652 (52,318) - 50,334 Camps and Events 38,138 - - 38,138 ------------------------------------------------- ---------------- TOTAL COSTS OF REVENUES 140,790 (52,318) - 88,472 ------------------------------------------------- ---------------- GROSS PROFIT 93,931 (37,009) - 56,922 SELLING, GENERAL AND ADMINISTRATIVE 77,072 (30,236) - 46,836 OTHER CHARGES (CREDITS) (154) 154 - - ------------------------------------------------- ---------------- INCOME FROM OPERATIONS 17,013 (6,927) - 10,086 INTEREST EXPENSE 16,352 (7,103) - 9,249 ------------------------------------------------- ---------------- INCOME BEFORE TAXES 661 176 - 837 INCOME TAXES 100 (100) - - ------------------------------------------------- ---------------- NET INCOME(5) $561 $276 - $837 ================================================= ================
-5- RIDDELL SPORTS INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS QUARTER ENDED MARCH 31, 2001 (IN THOUSANDS)
Riddell Less: Sports Riddell Inc. Sports Pro Forma Description (as reported) Group Adjustments Pro Forma ------------------------------------------------ ------------------------------------------------- ---------------- NET REVENUES Net Sales, Products and Reconditioning $28,641 $(21,703) - $6,938 Camps and Events 11,616 - 11,616 Royalty Income 326 (326) - - ------------------------------------------------- ---------------- NET REVENUES 40,583 (22,029) - 18,554 COSTS OF REVENUES Products and Reconditioning 17,470 (12,441) - 5,029 Camps and Events 6,867 - - 6,867 ------------------------------------------------- ---------------- TOTAL COSTS OF REVENUES 24,337 (12,441) - 11,896 ------------------------------------------------- ---------------- GROSS PROFIT 16,246 (9,588) - 6,658 SELLING, GENERAL AND ADMINISTRATIVE 20,075 (8,187) - 11,888 ------------------------------------------------- ---------------- INCOME FROM OPERATIONS (3,829) (1,401) - (5,203) INTEREST EXPENSE 3,617 (1,574) - 2,043 ------------------------------------------------- ---------------- INCOME (LOSS) BEFORE TAXES (7,446) 173 - (7,273) INCOME TAXES (4,500) - - (4,500) ------------------------------------------------- ---------------- NET INCOME (LOSS)(5) $(2,946) $173 - $(2,773) ================================================= ================
-6- Notes to Unaudited Pro Forma Financial Statements Balance Sheet: (1) This pro forma adjustment represents the $67.3 million in cash received from Lincolnshire, less $1 million deposited into a 30 day escrow account. The proceeds received were used to repay all indebtedness outstanding at closing under its $48 million credit facility with Bank of America. Outstanding borrowings on the credit facility were approximately $29.6 million as of March 31, 2001. (2) Represents $1 million of the sales proceeds deposited into a 30 day escrow account. (3) Reflects liabilities incurred as a result of the sale, including transaction fees, employee severance and other charges. (4) Represents the loss on the sale of the Riddell Sports Group applied to the company's accumulated deficit. This loss will be recognized in the second quarter of 2001. Income Statement: (5) Pro forma 2000 basic and diluted income per share, excluding the loss on the sale of the Riddell Sports Group, was $0.09 per share. First quarter loss per share, excluding the loss on the sale of the Riddell Sports Group, was $(0.29) on a pro forma basis. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. RIDDELL SPORTS INC. (Registrant) Date: July 9, 2001 By: /s/ John M. Nichols ------------------------------------------- Name: John M. Nichols Title: Chief Financial Officer and Senior Vice President -7-