-----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, ELMtd98gh4rXBCfQVokZr8cbNt+A0ukRlySkLsICenVgd5BvMcmuDK7e+ven9wqp 93l3TsAzjtsiGAovYESj2A== 0000927025-97-000043.txt : 19970404 0000927025-97-000043.hdr.sgml : 19970404 ACCESSION NUMBER: 0000927025-97-000043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970403 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAWLINGS SPORTING GOODS CO INC CENTRAL INDEX KEY: 0000921915 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 431674348 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24450 FILM NUMBER: 97573859 BUSINESS ADDRESS: STREET 1: 1859 INTERTECH DR CITY: FENTON STATE: MO ZIP: 63026 BUSINESS PHONE: 3143493500 MAIL ADDRESS: STREET 1: 1859 INTERTECH DR CITY: FENTON STATE: MO ZIP: 63026 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended February 28, 1997 Commission file number 0-24450 RAWLINGS SPORTING GOODS COMPANY, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 43-1674348 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 1859 Intertech Drive, Fenton, Missouri 63026 (Address of Principal Executive Offices) (Zip Code) (314) 349-3500 (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 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 Number of shares outstanding of the issuer's Common Stock, par value $0.01 per share, as of March 10, 1997: 7,711,908 shares. Part I. FINANCIAL INFORMATION Item 1. Financial Statements Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Statements of Income (Amounts in thousands, except per share data) (Unaudited) Quarter Ended Six Months Ended February 28, February 28, 1997 1996 1997 1996
Net revenues $52,859 $51,405 $81,118 $86,856 Cost of goods sold 35,803 35,452 55,244 59,980 Gross profit 17,056 15,953 25,874 26,876 Selling, general and administrative expenses 9,258 9,103 17,400 17,559 Operating income 7,798 6,850 8,474 9,317 Interest expense, net 948 1,077 1,686 1,979 Other expense, net 68 59 98 161 Income before income taxes 6,782 5,714 6,690 7,177 Provision for income taxes 2,543 2,240 2,509 2,813 Net income $ 4,239 $ 3,474 $ 4,181 $ 4,364 Average number of common shares outstanding 7,708 7,678 7,704 7,670 Net income per common share $ 0.55 $ 0.45 $ 0.54 $ 0.57
The accompanying notes are an integral part of these consolidated statements. Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Balance Sheets (Amounts in thousands, except share data) (Unaudited) February 28, August 31, 1997 1996 ASSETS Current Assets: Cash and cash equivalents $ 882 $ 789 Accounts receivable, net of allowance of $1,458 and $1,498 respectively 57,429 30,090 Inventories 36,517 32,415 Prepaid expenses 678 1,472 Deferred income taxes 3,161 3,162 Total current assets 98,667 67,928 Property, plant and equipment, net 8,681 7,860 Other assets 647 698 Deferred income taxes 23,493 25,766 Total assets $ 131,488 $ 102,252 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,741 $ 9,119 Accrued liabilities 9,560 8,461 Total current liabilities 19,301 17,580 Long-term debt 62,200 38,700 Other long-term liabilities 11,204 11,508 Total liabilities 92,705 67,788 Stockholders' equity: Preferred stock, none issued - - Common stock, 7,711,908 and 7,697,527 shares issued and outstanding, respectively 77 77 Additional paid-in capital 25,958 25,820 Retained earnings 12,748 8,567 Stockholders' equity 38,783 34,464 Total liabilities and stockholders' equity $ 131,488 $ 102,252 The accompanying notes are an integral part of these consolidated balance sheets. Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Statements of Cash Flow (Amounts in thousands) (Unaudited) Six Months Ended February 28, 1997 1996 Cash flows from operating activities: Net income $ 4,181 $ 4,364 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 606 556 Deferred income taxes 2,274 2,673 Changes in operating assets and liabilities: Accounts receivable, net (27,339) (31,128) Inventories (4,102) (2,201) Prepaid expenses 794 360 Other assets (42) (24) Accounts payable 622 4,585 Accrued liabilities and other 795 2,073 Net cash used in operating activities (22,211) (18,742) Cash flows from investing activities: Capital expenditures (1,334) (639) Cash flows from financing activities: Net borrowings of long-term debt 23,500 19,800 Payment from former parent related to purchase price settlement - 275 Issuance of common stock 138 204 Net cash provided by financing activities 23,638 20,279 Net increase in cash and cash equivalents 93 898 Cash and cash equivalents, beginning of period 789 1,337 Cash and cash equivalents, end of period $ 882 $ 2,235 The accompanying notes are an integral part of these consolidated statements. Rawlings Sporting Goods Company, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Summary of Significant Accounting Policies. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission pertaining to interim financial information and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report for the year ended August 31, 1996. In the opinion of management, all adjustments consisting only of normal recurring adjustments considered necessary for a fair presentation of financial position and results of operations have been included therein. The results for the six months ended February 28, 1997 are not necessarily indicative of the results that may be expected for a full fiscal year. Note 2: Inventories Inventories consisted of the following (in thousands): February 28, August 31, 1997 1996 Raw materials $ 5,616 $ 5,624 Work in process 2,038 1,899 Finished goods 28,863 24,892 $36,517 $32,415 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS Quarter Ended February 28, 1997 Compared with Quarter Ended February 29, 1996 Net revenues in the quarter ended February 28, 1997 were $52,859,000, or 2.8 percent higher than net revenues of $51,405,000 in the comparable quarter last year. Increased net revenues from basketball and apparel products and improved licensing revenues, partially offset by lower sales of baseball- related products, primarily accounted for the increase. The increase in net revenues from basketball products primarily related to promotions with NCAA corporate sponsors and an NCAA promotion with a large discount retailer. The increase in licensing revenues primarily related to footwear and casual wear products. The decline in net revenues from baseball-related products was primarily confined to baseball gloves with most other baseball product categories showing increases. Gross margin in the quarter ended February 28, 1997 was 32.3 percent, 1.3 margin points higher than the comparable quarter last year. Improved margins in basketball and apparel products and higher licensing revenues resulted in the improved margin. The gross margin on basketball products improved as a result of the promotions with NCAA corporate sponsors which generally result in above average margins. The apparel gross margins continued to improve as a result of more production in the Company's lower cost Costa Rica facility and improved volumes and efficiency at the U.S. apparel facility. Selling, general and administrative (SG&A) expenses were $9,258,000 in the quarter ended February 28, 1997, or 1.7 percent higher than SG&A expenses of $9,103,000 in the comparable prior year quarter. As a percent of net revenues, SG&A expenses were 17.5 percent in the quarter ended February 28, 1997 compared with 17.7 percent in the prior year quarter. Interest expense was $948,000 in the quarter ended February 28, 1997, or 12.0 percent lower than interest expense of $1,077,000 in the comparable prior year quarter. Lower average debt outstanding was primarily responsible for the decrease. Six Months Ended February 28, 1997 Compared with the Six Months Ended February 29, 1996 Net revenues for the six months ended February 28, 1997 were $81,118,000, 6.6 percent below net revenues of $86,856,000 in the comparable six month period last year. Lower net revenues from baseball-related products, primarily baseball gloves, partially offset by higher net revenues from basketball and apparel products were primarily responsible for the net revenue decline. Lower net revenues from baseball gloves resulted from a continued trend toward later shipments to retailers and a major warehouse club exiting the baseball category. Most retailers continue to be optimistic regarding the spring selling season for baseball- related products. The Company continues to believe it is well positioned to take advantage of an improved spring selling season for baseball-related products. Gross margin for the six months ended February 28, 1997 was 31.9 percent, 1.0 margin point higher than the comparable period last year. Higher gross margins from apparel and basketball products were primarily responsible for the improved margin. SG&A expenses for the six months ended February 28, 1997 were $17,400,000, or 0.9 percent lower than SG&A expenses of $17,559,000 in the comparable prior year period. As a percent of net revenues, SG&A expenses were 21.5 percent in the six months ended February 28, 1997 compared with 20.2 percent in the comparable prior year six month period. The decline in net revenues and a large amount of fixed SG&A expenses resulted in the increase in SG&A as a percent of net revenues. Interest expense for the six months ended February 28, 1997 was $1,686,000, or 14.8 percent lower than interest expense of $1,979,000 in the comparable prior year six month period. The decrease in interest expense is primarily the result of lower average debt outstanding. SEASONALITY Net revenues of baseball equipment and related team uniforms are highly seasonal. Customers historically have placed orders with the Company for baseball-related products beginning in July for shipment beginning in October (pre-season orders). These pre- season orders from customers historically represented approximately 75 percent to 80 percent of the customers' anticipated needs for the entire baseball season. The amount of these pre-season orders historically determined the Company's net revenues and profitability between October 1 and March 31. The Company then receives additional orders (fill-in orders) which depend upon customers' actual sales of products during the baseball season (sell-through). Fill-in orders are typically received by the Company between February and May. These orders historically represented approximately 20 percent to 25 percent of the Company's sales of baseball-related products during a particular season. Pre-season orders for certain baseball-related products from certain customers are not required to be paid until early spring. These extended terms increase the risk of collectability related to accounts receivable. In fiscal 1996 and 1997, customers have begun placing their pre-season orders later and a larger percentage of orders are fill-in orders. In addition, with an increasing number of customers on automatic replenishment systems more and more orders are received on a ship-at-once basis. This change has resulted in shipments to the customer closer to the time the products are actually sold. This trend has and may continue to have the effect of shifting the seasonality and quarterly results of the Company with higher inventory and debt levels required to meet orders for immediate delivery. The sell-through of baseball-related products also affects the amount of inventory held by customers at the end of the season which is carried over by the customer for sale in the next baseball season. Customers typically adjust their pre-season orders for the next baseball season to account for the level of inventory carried over from the preceding baseball season. Football equipment and related team uniforms are both shipped by the Company and sold by retailers primarily in the period between March 1 and September 30. Basketballs and related team uniforms generally are shipped and sold throughout the year. Because the Company's sales of baseball-related products exceed those of its other products, Rawlings' business is seasonal, with its highest net revenues and profitability recognized between November 1 and April 30. Except for the historical information contained herein, the matters outlined in the management's discussion and analysis are forward looking statements that involve risks and uncertainties, including quarterly fluctuation in results, retail sell rates for the Company's products which may result in more or less orders than those anticipated and the impact of competitive products and pricing. In addition, other risks and uncertainties are detailed from time to time in the Company's SEC reports, including the report on Form 10-K for the year ended August 31, 1996. LIQUIDITY AND CAPITAL RESOURCES Working capital increased $29,018,000 for the six months ended February 28, 1997, primarily the result of the seasonal increase in accounts receivable and inventories. Cash flows used in operating activities for the six months ended February 28, 1997 were $22,211,000, or 18.5 percent higher than the $18,742,000 used in the comparable prior year period. The increase is primarily the result of a larger build in inventories and a smaller build in accounts payable and accrued liabilities. Capital expenditures were $1,334,000 for the six months ended February 28, 1997 compared to $639,000 in the comparable prior year period. With the planned expansion of the Costa Rica facility and other equipment purchases, the Company expects capital expenditures of approximately $2,500,000 in fiscal 1997. The Company had net borrowings for seasonal working capital needs of $23,500,000 in the six months ended February 28, 1997. This resulted in total debt at February 28, 1997 of $62,200,000, $1,500,000, or 2.4 percent, below total debt as of February 29, 1996. Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The annual stockholders' meeting was held on January 16, 1997. At the meeting the following nominees were elected pursuant to the following votes: Nominee For Withheld Michael McDonnell 6,336,115 29,561 Michael J. Roarty 6,334,285 31,391 The following directors' term of office continued after the meeting: Andrew N. Baur Linda L. Griggs William C. Robinson Carl J. Shields The approval of the Board of Directors' selection of Arthur Andersen LLP as independent public accountants was approved pursuant to the following vote: For Against Abstain 6,335,263 16,835 13,578 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None. (b) Reports on Form 8-K None. 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 thereunto duly authorized. RAWLINGS SPORTING GOODS COMPANY, INC. Date: April 2, 1997 /s/ CARL J. SHIELDS Carl J. Shields Chairman, CEO and President Date: April 2, 1997 /s/ PAUL E. MARTIN Paul E. Martin Chief Financial Officer (Principal Accounting Officer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS AUG-31-1997 FEB-28-1997 882 0 58,887 1,458 36,517 98,667 21,622 12,941 131,488 19,301 73,404 0 0 77 38,706 131,488 81,118 81,118 55,244 55,244 17,400 0 1,686 6,690 2,509 4,181 0 0 0 4,181 .54 .54
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