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, 2002
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)
(636) 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 31, 2002: 8,088,656 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)
<Table>
<Caption>
Quarter Ended Six Months Ended
February 28, February 28,
----------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net revenues ..................................... $ 65,042 $ 66,105 $ 98,450 $ 102,944
Cost of goods sold ............................... 45,605 45,886 69,568 72,094
---------- ---------- ---------- ----------
Gross profit ................................ 19,437 20,219 28,882 30,850
Selling, general and administrative expenses ..... 10,470 10,689 20,499 20,649
Unusual expense (income) ......................... -- 82 -- (972)
---------- ---------- ---------- ----------
Operating income ............................ 8,967 9,448 8,383 11,173
Interest expense ................................. 675 1,381 1,309 2,557
---------- ---------- ---------- ----------
Income before income taxes .................. 8,292 8,067 7,074 8,616
Provision for income taxes ....................... 3,055 2,868 2,635 3,071
---------- ---------- ---------- ----------
Net income .................................. $ 5,237 $ 5,199 $ 4,439 $ 5,545
========== ========== ========== ==========
Net income per common share, basic and
diluted ..................................... $ 0.65 $ 0.65 $ 0.55 $ 0.69
========== ========== ========== ==========
Shares used in computing per share amounts:
Basic ....................................... 8,103 8,013 8,091 8,006
Assumed exercise of stock options ........... 7 -- 4 1
---------- ---------- ---------- ----------
Diluted ..................................... 8,110 8,013 8,095 8,007
========== ========== ========== ==========
</Table>
2
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share data)
<Table>
<Caption>
February 28,
2002 August 31,
(Unaudited) 2001
------------ ------------
Assets
Current Assets:
Cash and cash equivalents .......................... $ 999 $ 921
Accounts receivable, net of allowance of
$3,124 and $2,871 respectively .................. 65,767 27,750
Inventories ........................................ 36,732 33,379
Deferred income taxes .............................. 4,277 4,277
Prepaid expenses ................................... 880 606
------------ ------------
Total current assets ........................... 108,655 66,933
Property, plant and equipment ......................... 7,668 7,271
Deferred income taxes ................................. 19,844 22,367
Long-term receivables ................................. 667 --
Other assets .......................................... 2,167 1,970
------------ ------------
Total assets ................................... $ 139,001 $ 98,541
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt and
revolving credit agreement ..................... $ 61,254 $ 34,684
Accounts payable ................................... 19,262 10,178
Accrued liabilities ................................ 9,354 8,740
------------ ------------
Total current liabilities ...................... 89,870 53,602
Long-term debt, less current maturities ............... 3,707 4,242
Other long-term liabilities ........................... 9,291 9,291
------------ ------------
Total liabilities .............................. 102,868 67,135
------------ ------------
Stockholders' equity:
Preferred stock, none issued ....................... -- --
Common stock, $0.01 par value, 50,000,000
shares authorized, 8,088,656 and 8,011,145
shares issued and outstanding, respectively .... 81 80
Additional paid-in capital ......................... 31,451 31,151
Stock subscription receivable ...................... (1,211) (1,421)
Cumulative other comprehensive loss ................ (1,627) (1,492)
Retained earnings .................................. 7,439 3,088
------------ ------------
Stockholders' equity ............................... 36,133 31,406
------------ ------------
Total liabilities and stockholders' equity ..... $ 139,001 $ 98,541
============ ============
</Table>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
(Amounts in thousands)
(Unaudited)
<Table>
<Caption>
Six Months Ended
February 28,
------------------------
2002 2001
---------- ----------
Cash flows from operating activities:
Net income ................................................. $ 4,439 $ 5,545
Adjustments to reconcile net income
to net cash used in continuing operations:
Depreciation and amortization .......................... 966 1,030
Gain on sale of Springfield distribution center ........ -- (1,115)
Changes in operating assets and liabilities:
Accounts receivable .................................... (38,017) (37,137)
Inventories ............................................ (3,353) (6,859)
Accounts payable ....................................... 9,084 7,192
Other .................................................. 1,897 2,980
---------- ----------
Net cash used in continuing operations .......................... (24,984) (28,364)
Net cash provided by discontinued operations .................... -- 1,814
---------- ----------
Net cash used in operating activities ........................... (24,984) (26,550)
---------- ----------
Cash flows from investing activities:
Capital expenditures of continuing operations .............. (1,396) (496)
Capital expenditures of discontinued operations ............ -- (24)
Proceeds from sale of Springfield distribution center ...... -- 2,376
---------- ----------
Net cash provided by (used in) investing activities ............. (1,396) 1,856
---------- ----------
Cash flows from financing activities:
Net increase in revolving credit agreement ................. 26,570 26,364
Repayments of long-term debt ............................... (535) (2,529)
Issuance of common stock ................................... 213 226
Proceeds from stock subscription receivable ................ 210 --
---------- ----------
Net cash provided by financing activities ....................... 26,458 24,061
---------- ----------
Net increase (decrease) in cash and cash equivalents ............ 78 (633)
Cash and cash equivalents, beginning of period .................. 921 1,424
---------- ----------
Cash and cash equivalents, end of period ........................ $ 999 $ 791
========== ==========
</Table>
The accompanying notes are an integral part of these consolidated statements.
4
Rawlings Sporting Goods Company, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Form 10-K
for the year ended August 31, 2001 filed on November 28, 2001. 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, 2002 are not necessarily indicative of the results that may be
expected for a full fiscal year.
Note 2: Discontinued Segment
On June 26, 2000 the Company made a strategic decision to seek a buyer
for its Vic hockey business. Vic provided an extensive line of equipment for
hockey teams including hockey sticks, hockey protective equipment and goalie
protective equipment. The sale of the Vic hockey business was completed during
the quarter ended May 31, 2001 under substantially the same terms as originally
provided. Proceeds from the sale totaled $2,551,000 including cash of $1,474,000
at closing and $1,077,000 of 7% notes to be received through May 2004 which are
included in Other Assets on the Consolidated Balance Sheet. Net revenues of the
discontinued segment for the three months and six months ended February 28, 2001
were $704,000 and $2,209,000, respectively.
Note 3: Unusual Expense (Income)
In connection with the relocation of distribution facilities to a new
single location in Washington, Missouri, the Springfield, Missouri distribution
center was sold in September 2000. The move to Washington was completed in the
fourth quarter of fiscal 2001. The gain on the sale of Springfield of $1,115,000
offset by $143,000 of transition costs incurred during the move to Washington
has been included as unusual income in the Consolidated Statement of Income for
the six months ended February 28, 2001. Transition costs of $82,000 incurred
during the move to Washington has been included as unusual expense for the three
months ended February 28, 2001.
5
Note 4: Inventories
Inventories consisted of the following (in thousands):
<Table>
<Caption>
February 28, August 31,
2002 2001
------------ ------------
Raw materials........... $ 7,016 $ 6,629
Work in process......... 793 531
Finished goods.......... 28,923 26,219
------------ ------------
Total inventories....... $ 36,732 $ 33,379
============ ============
</Table>
Note 5: Long-term Receivables
On January 22, 2002 Kmart Corporation filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. As of the date of the bankruptcy filing,
the Company had accounts receivable from Kmart of $1,334,000. One-half of this
amount, or $667,000, is included in Long-term Receivables on the Consolidated
Balance Sheet. The remaining $667,000 is included in Accounts Receivable with a
corresponding amount in Allowance for Doubtful Accounts on the Consolidated
Balance Sheet.
Note 6: Debt
On December 28, 1999, the Company refinanced its credit facility by
entering into a five-year credit agreement expiring December 1, 2004 with a
financial institution. Actual availability is based on the Company's outstanding
receivables and inventories. The facility also allows for a $3,000,000 seasonal
advance from August through February. Borrowings under the agreement are based
on an interest rate of LIBOR plus 2.50 percent. A commitment fee of 0.50 percent
is charged on any unused portion of the facility.
The credit facility includes various convenants, including requirements
that the Company achieve certain EBITDA levels as defined in the agreement,
maintain a fixed charge ratio, limit capital expenditures and restrict the
payment of dividends. The covenants for EBITDA and fixed charge ratio for the
twelve months ended February 28, 2002 were $6,700,000 and 1.0 respectively.
Actual EBITDA and fixed charge ratio for the same period were $5,998,000 and
0.9, respectively. The Company received a waiver for compliance with these
covenants from it's financial institution. The covenants for EBITDA for the
third and fourth quarters of fiscal 2002 are $7,500,000 and $9,000,000,
respectively and the fixed charge ratio for the same periods is 1.0 and 1.15,
respectively.
6
Total unused availability under the credit facility at February 28, 2002 was
approximately $4,277,000. The Company believes its capital structure and current
credit facility are adequate to provide for its short term and long term
operations to the extent that the Company is able to satisfy the EBITDA and
other covenants set forth in the credit facility.
Note 7: Comprehensive Income
For the three months ended February 28, 2002 comprehensive income was
$5,159,000 compared with comprehensive income of $5,167,000 for the comparable
prior year period. For the six months ended February 28, 2002 comprehensive
income was $4,304,000 compared with comprehensive income of $5,116,000 for the
six months ended February 28, 2001.
Note 8: Termination of Rights Agreement
At the Company's Annual Meeting of Stockholders held on May 15, 2001,
holders of a majority of the shares of common stock represented at the meeting
voted against the retention of the Company's Rights Agreement, dated July 1,
1994. Accordingly, the Board of Directors of the Company authorized the
redemption of the rights and the termination of the Rights Agreement effective
December 31, 2001.
All rights holders of record as of December 31, 2001 were entitled to a
redemption price of $.01 per right held. The Company paid the redemption price
in common shares of the Company at the value of $2.8337 per share. A total of
31,008 common shares were issued as a stock dividend.
Note 9: Operating Segments
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company has identified operating segments based on internal
management reports. Aggregation of similar operating segments into a single
reportable operating segment is permitted if the businesses are considered to
have similar long-term economic characteristics. The Company has four operating
segments based on its product categories, which in applying the aggregation
criteria have been aggregated into two reportable segments: Sports Equipment and
Licensing.
The sports equipment segment manufactures and distributes sports
equipment and uniforms for team sports including baseball, basketball and
football. The licensing segment licenses the Rawlings brand name on products
sold by other companies and includes products such as footwear and activewear.
There are no significant determinable operating expenses or interest costs for
the licensing segment. The accounting policies of the segments are the same as
those for the Company. The
7
revenues generated and long-lived assets located outside the United States are
not significant for separate presentation.
<Table>
<Caption>
Quarter Ended Six Months Ended
February 28, February 28,
2002 2001 2002 2001
-------- -------- -------- --------
Net revenues
Sports equipment $ 63,761 $ 64,644 $ 95,995 $100,518
Licensing 1,281 1,461 2,455 2,426
-------- -------- -------- --------
Consolidated net revenues $ 65,042 $ 66,105 $ 98,450 $102,944
======== ======== ======== ========
Operating income
Sports equipment $ 7,686 $ 7,987 $ 5,928 $ 8,747
Licensing 1,281 1,461 2,455 2,426
-------- -------- -------- --------
Consolidated operating income $ 8,967 $ 9,448 $ 8,383 $ 11,173
======== ======== ======== ========
</Table>
<Table>
<Caption>
February 28, August 31,
2002 2001
------------ ------------
Total assets
Sports equipment $ 138,340 $ 98,222
Licensing 661 319
------------ ------------
Consolidated total assets $ 139,001 $ 98,541
============ ============
</Table>
Licensing revenues were $1,281,000 in the quarter ended February 28,
2002 which was a 12.3 percent decline from the comparable prior year period.
This reduction was primarily due to lower revenues of $136,000, of which $81,000
was attributable to unfavorable currency exchange rates, from Asics, the
Company's Japanese licensee.
Licensing revenues for the six months ended February 28, 2002 were
$2,455,000 or $29,000 greater than the six months ended February 28, 2001.
8
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
General
The Company continues to implement initiatives to decrease costs and
increase sales. Although sales for the quarter ended February 28, 2002 were less
than the comparable quarter of the prior year, sales in the month of February,
2002 increased 13.1 percent versus February, 2001. Initial reports on sales in
March 2002 suggest a continuation of this trend. Although the unresolved labor
issue in Major League Baseball and a weakened economy could present hurdles, the
Company hopes to regain most of the first half 2002 sales decline in the third
quarter of 2002. The Company believes that cost management opportunities exist
as the Company realizes efficiencies of the consolidation of its distribution
facilities. In addition, the Company continues to reduce selling, general and
administrative expenses and expects to reduce such expenses further in fiscal
year 2003 as the Company's licenses for NCAA basketball and Major League
Baseball uniforms expire.
RESULTS OF OPERATIONS
Quarter Ended February 28, 2002 Compared
with Quarter Ended February 28, 2001
The Company's net revenues for the quarter ended February 28, 2002 were
$65,042,000 or 1.6 percent below net revenues of $66,105,000 for the quarter
ended February 28, 2001. The decrease in net revenues was primarily due to lower
sales of memorabilia baseballs.
The Company's gross profit for the quarter ended February 28, 2002 was
$19,437,000 or 3.9 percent lower than the gross profit of $20,219,000 for the
comparable quarter last year. The gross profit margin for the February 2002
quarter was 29.9 percent, 0.7 margin points under the 30.6 percent gross profit
margin for the comparable period last year. The decrease in gross profit was
primarily due to the lower net revenues of memorabilia baseballs and reduced
margins for basketballs and apparel.
Selling, general and administrative (SG&A) expenses of $10,470,000 were
$219,000 lower than the quarter ended February 28, 2001. Lower expense was
experienced in all major categories with the exception of distribution costs and
advertising and promotion expense. SG&A expense for the quarter ended February
28, 2002 was 16.1 percent of net revenues or 0.1 percentage points below the
comparable quarter in the prior year.
9
The unusual expense item for the three months ended February 28, 2001
of $82,000 represented transition costs incurred during the relocation of
distribution facilities to a new single location in Washington, Missouri.
Interest expense for the quarter ended February 28, 2002 was $675,000
or 51.1 percent lower than interest expense of $1,381,000 in the comparable
quarter last year. Lower average interest rates of 4.3 points and lower average
borrowings of $4,300,000 accounted for the decrease in interest expense.
Net income for the quarter ended February 28, 2002 was $5,237,000
compared to $5,199,000 in the comparable quarter last year. Lower interest
expense and SG&A expenses partially offset by decreased gross profit and net
revenues were the primary reasons for the increase.
Six Months Ended February 28, 2002
Compared with the Six Months Ended February 28, 2001
The Company's net revenues for the six months ended February 28, 2002
were $98,450,000 or 4.4 percent below the net revenues of $102,944,000 in the
comparable prior year period. The decrease in net revenues was primarily due to
lower sales of baseball gloves and memorabilia baseballs.
The Company's gross profit for the six months ended February 28, 2002
was $28,882,000 or 6.4 percent lower than the gross profit of $30,850,000 for
the six months ended February 28, 2001. The gross profit margin of 29.3 percent
for the six month period was 0.7 margin points below the comparable period last
year. The decrease in gross profit was primarily due to the lower net revenues
of baseball gloves and memorabilia baseballs and decreased margins for footballs
and basketballs.
SG&A expenses for the six months ended February 28, 2002 of $20,499,000
were $150,000 lower than the $20,649,000 SG&A expenses in the comparable prior
year period. Lower expenses in almost every category with the exception of
distribution costs and advertising and promotion expense accounted for the
decreased SG&A expenses. As a percent of net revenues SG&A expenses were 20.8
percent this year or 0.7 percentage points higher than the first six months of
last year.
The unusual income item for the six months ended February 28, 2001 was
comprised of the $1,115,000 gain on the sale of the Springfield, Missouri
distribution center, offset by $143,000 of transition costs incurred during the
move to Washington, Missouri.
10
Interest expense for the six months ended February 28, 2002 was
$1,309,000 or $1,248,000 below the comparable prior year period. Lower average
interest rates of 4.1 points and lower average borrowings of $4,200,000
accounted for the decrease in interest expense.
Net income for the six months ended February 28, 2002 was $4,439,000
compared to $5,545,000 for the six months ended February 28, 2001. The decrease
in net income was primarily due to lower net revenues and the gain on the sale
of the distribution center in the November 2000 quarter partially offset by
lower interest expense.
New Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." The new
standard replaces FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The primary
objectives of this statement were to develop one accounting model, based on the
framework established in Statement 121, for long-lived assets to be disposed of
by sale and to address significant implementation issues. Statement 144 requires
that all long-lived assets, including discontinued operations, be measured at
the lower of carrying amount or fair value less cost to sell, whether reported
in continuing operations or in discontinued operations. The standard is
effective for fiscal years beginning after December 15, 2001. Adoption of SFAS
No. 144 is not expected to impact our consolidated financial position. The
Company will adopt SFAS No. 144 in fiscal 2003.
Liquidity and Capital Resources
Working capital increased by $5,454,000 during the six months ended
February 28, 2002 primarily as a result of a seasonal increase in accounts
receivable and inventories, offset by increases in short-term borrowings under
the revolving credit agreement and in accounts payable.
Net cash used in operating activities for the six months ended February
28, 2002 was $24,984,000 or 5.9 percent below the $26,550,000 used in the six
months ended February 28, 2001. The improvement in cash used in operating
activities was primarily due to a smaller increase in inventories.
Capital expenditures were $1,396,000 for the six months ended February
28, 2002 compared to $520,000 in the comparable prior year period. The increase
in capital expenditures was primarily related to upgrading the Washington,
Missouri facility for certain manufacturing operations and for implementation
and expansion of the
11
Company's computer systems. The Company expects capital expenditures for fiscal
2002 to be approximately $1,750,000.
The Company had net borrowings, primarily related to seasonal working
capital needs, of $26,035,000 in the six months ended February 28, 2002. This
resulted in total debt as of February 28, 2002 of $64,961,000 or 6.4 percent
lower than the total debt of $69,417,000 as of February 28, 2001.
On December 28, 1999, the Company refinanced its credit facility by
entering into a five-year credit agreement expiring December 1, 2004 with a
financial institution. Actual availability is based on the Company's outstanding
receivables and inventories. The facility also allows for a $3,000,000 seasonal
advance from August through February. Borrowings under the agreement are based
on an interest rate of LIBOR plus 2.50 percent. A commitment fee of 0.50 percent
is charged on any unused portion of the facility.
The credit facility includes various convenants, including requirements
that the Company achieve certain EBITDA levels as defined in the agreement,
maintain a fixed charge ratio, limit capital expenditures and restrict the
payment of dividends. The covenants for EBITDA and fixed charge ratio for the
twelve months ended February 28, 2002 were $6,700,000 and 1.0 respectively.
Actual EBITDA and fixed charge ratio for the same period were $5,998,000 and
0.9, respectively. The Company received a waiver for compliance with these
covenants from its financial institution. The covenants for EBITDA for the third
and fourth quarters of fiscal 2002 are $7,500,000 and $9,000,000, respectively
and the fixed charge ratio for the same periods is 1.0 and 1.15, respectively.
Total unused availability under the credit facility at February 28, 2002 was
approximately $4,277,000. The Company believes its capital structure and current
credit facility are adequate to provide for its short term and long term
operations to the extent that the Company is able to satisfy the EBITDA and
other covenants set forth in the credit facility.
Seasonality
Net revenues of baseball equipment and team uniforms are highly
seasonal. Customers generally place orders with the Company for baseball-related
products beginning in August for shipment beginning in November (pre-season
orders). These pre-season orders from customers generally represent
approximately 50 percent to 65 percent of the customers' anticipated needs for
the entire baseball season. The amount of these pre-season orders generally
determines the Company's net revenues and profitability between November 1 and
February 28. 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 generally represent approximately 35 percent to
50 percent of the Company's sales of baseball-related products during a
particular season. Pre-season orders for certain baseball-related products from
certain
12
customers are not required to be paid until early spring. These extended terms
increase the risk of collectibility of accounts receivable. An increasing number
of customers are on automatic replenishment systems; therefore, 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. To offset these risks, the Company implemented
for the Spring 2000 season a Port of Entry (POE) program to encourage retailers
to place and receive early orders, as well as other changes in credit terms to
reduce risk and debt levels. 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 team uniforms are both shipped by the Company and sold by
retailers primarily in the period between March 1 and September 30. Basketballs
and 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.
Cautionary Factors That May Affect Future Results, Financial Condition or
Business
Statements made in this report, other reports and proxy statements
filed with the Securities and Exchange Commission, communications to
stockholders, press releases and oral statements made by representatives of the
Company that are not historical in nature, or that state the Company's or
management's intentions, hopes, beliefs, expectations, or predictions of the
future, are "forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, and involve risks and
uncertainties. The words "should," "will be," "intended," "continue," "believe,"
"may," "expect," "hope," "anticipate," "goal," "forecast" and similar
expressions are intended to identify such forward-looking statements. It is
important to note that any such performance, and actual results, financial
condition or business could differ materially from those expressed in such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, changes in customer buying
patterns, a general economic slowdown, a Major League Baseball work stoppage,
lower retail sell rates for the Company's products, changes in the Company's
financial position, a significant increase in the prices of raw materials such
as leather, changes in the competitive environment as well as those discussed in
this document and elsewhere in reports filed with the Securities and Exchange
Commission.
Financial projections are, by nature, uncertain forecasts of future
results which are not susceptible to precise measurement. The assumptions upon
which the financial projections set forth herein are based are subject to
significant financial, market,
13
economic, regulatory and competitive uncertainties, contingencies, risks and
other factors which are difficult or impossible to predict accurately, all of
which are difficult to qualify and many of which are beyond the control of the
Company. Accordingly, investors are cautioned not to place undue reliance on the
financial projections since actual results may vary materially from the results
reflected in the financial projections.
The Company undertakes no obligation to update or revise
forward-looking statements including the financial projections to reflect
changed assumptions, the occurrence of unanticipated events or changes in future
operating results, financial condition or business over time.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company has certain market risk exposures related to interest
rates. The Company is exposed to market risks related to fluctuations in
interest rates for its variable rate borrowings of $64,931,000 as of February
28, 2002. A change in interest rates of 1% on the balance outstanding at
February 28, 2002 would cause a change in total annual pretax earnings and cash
flows of $649,000 assuming other factors are held constant.
Due to the relative size of the Company's foreign operations, the
Company believes it does not have any material exposure to foreign currency
fluctuations.
14
Part II.
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2 Changes in Securities and Use of Proceeds
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual Stockholders' Meeting was held on January 9, 2002.
At the meeting the following matters were voted upon by the
stockholders and received the following votes:
The following nominees were elected as directors to serve
until the annual meeting of stockholders following the
Company's fiscal year ending August 31, 2004:
<Table>
<Caption>
Number of Number of
Nominee Votes For Votes Withheld
------- --------- --------------
William C. Robinson 6,046,679 471,240
Edward F. Ryan 6,048,509 469,410
</Table>
The following directors' term of office continued after the
meeting:
Andrew N. Baur
Michael McDonnell
Stephen M. O'Hara
15
The ratification of the Board of Directors' selection of
Arthur Andersen LLP as independent public accountants of the
Company for the Company's fiscal year ending August 31, 2002:
<Table>
<Caption>
For Against Abstain
--- ------- -------
6,426,598 77,442 13,879
</Table>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Agreement, dated as of January 1,
2002, by and between Rawlings Sporting Goods
Company, Inc. and Howard B. Keene.
10.2 Amendment No. 8 to Credit Agreement, dated
as of March 5, 2002, among Rawlings Sporting
Goods Company, Inc., General Electric
Capital Corporation and the other Credit
Parties signatory thereto.
(b) Reports on Form 8-K
(i) A current report on Form 8-K, filed on
December 4, 2001 (regarding the resignations
of Messrs. Host and Prather from the
Company's Board of Directors).
(ii) A current report on Form 8-K, filed on
December 26, 2001 (regarding Settlement
Agreement entered into by the Company with
Bull Run Corporation).
(iii) A current report on Form 8-K, filed on
January 2, 2002 (regarding termination of
the Rights Agreement between the Company and
ChaseMellon Shareholder Services and the
redemption of the rights offered under such
agreement).
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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 12, 2002 /s/ STEPHEN M. O'HARA
-----------------------------------
Stephen M. O'Hara
Chairman of the Board and
Chief Executive Officer
Date: April 12, 2002 /s/ WILLIAM F. LACEY
-----------------------------------
William F. Lacey
Vice President and Chief Financial Officer
(Principal Accounting Officer)
17