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 May 31, 2002
Commission file number 0-24450
RAWLINGS SPORTING GOODS COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
<Table>
Delaware 43-1674348
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
</Table>
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 June 30, 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 Nine Months Ended
May 31, May 31,
----------------------------- -----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenues ...................................... $ 49,247 $ 43,467 $ 147,697 $ 146,411
Cost of goods sold ................................ 35,997 31,573 105,565 103,667
------------ ------------ ------------ ------------
Gross profit ................................. 13,250 11,894 42,132 42,744
Selling, general and administrative expenses ...... 10,575 9,928 31,074 30,577
Unusual expense (income) .......................... -- 762 -- (210)
------------ ------------ ------------ ------------
Operating income ............................. 2,675 1,204 11,058 12,377
Interest expense .................................. 668 1,162 1,977 3,719
------------ ------------ ------------ ------------
Income before income taxes ................... 2,007 42 9,081 8,658
Provision (benefit) for income taxes .............. 843 (78) 3,478 2,993
------------ ------------ ------------ ------------
Net income ................................... $ 1,164 $ 120 $ 5,603 $ 5,665
============ ============ ============ ============
Net income per common share, basic and diluted .... $ 0.14 $ 0.01 $ 0.69 $ 0.71
============ ============ ============ ============
Shares used in computing per share amounts:
Basic ........................................ 8,129 8,035 8,103 8,016
Assumed exercise of stock options ............ 44 1 17 1
------------ ------------ ------------ ------------
Diluted ...................................... 8,173 8,036 8,120 8,017
============ ============ ============ ============
</Table>
2
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share data)
<Table>
<Caption>
May 31,
2002 August 31,
(Unaudited) 2001
------------ ------------
Assets
Current Assets:
Cash and cash equivalents ........................... $ 1,707 $ 921
Accounts receivable, net of allowance of
$3,204 and $2,871 respectively ................... 36,066 27,750
Inventories ......................................... 31,080 33,379
Deferred income taxes ............................... 4,277 4,277
Prepaid expenses .................................... 768 606
------------ ------------
Total current assets ............................ 73,898 66,933
Property, plant and equipment .......................... 7,464 7,271
Deferred income taxes .................................. 19,019 22,367
Long-term receivables .................................. 667 --
Other assets ........................................... 2,524 1,970
------------ ------------
Total assets .................................... $ 103,572 $ 98,541
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt and
revolving credit agreement ...................... $ 32,552 $ 34,684
Accounts payable .................................... 9,987 10,178
Accrued liabilities ................................. 10,524 8,740
------------ ------------
Total current liabilities ....................... 53,063 53,602
Long-term debt, less current maturities ................ 3,208 4,242
Other long-term liabilities ............................ 9,291 9,291
------------ ------------
Total liabilities ............................... 65,562 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 ....................... (581) (1,421)
Cumulative other comprehensive loss ................. (1,544) (1,492)
Retained earnings ................................... 8,603 3,088
------------ ------------
Stockholders' equity ........................... 38,010 31,406
------------ ------------
Total liabilities and stockholders' equity ...... $ 103,572 $ 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>
Nine Months Ended
May 31,
------------------------------
2002 2001
------------ ------------
Cash flows from operating activities:
Net income ................................................... $ 5,603 $ 5,665
Adjustments to reconcile net income
to net cash used in continuing operations:
Depreciation and amortization ............................ 1,460 1,481
Gain on sale of Springfield distribution center .......... -- (1,115)
Changes in operating assets and liabilities:
Accounts receivable ...................................... (8,316) (6,534)
Inventories .............................................. 2,299 (3,432)
Accounts payable ......................................... (191) (2,325)
Other .................................................. 3,701 4,180
------------ ------------
Net cash provided by (used in) continuing operations .............. 4,556 (2,080)
Net cash provided by discontinued operations ...................... -- 1,125
------------ ------------
Net cash provided by (used in) operating activities ............... 4,556 (955)
------------ ------------
Cash flows from investing activities:
Capital expenditures of continuing operations ................ (1,657) (691)
Capital expenditures of discontinued operations .............. -- (55)
Proceeds from sale of Springfield distribution center ........ -- 2,376
Proceeds from sale of discontinued operations ................ -- 1,474
------------ ------------
Net cash provided by (used in) investing activities ............... (1,657) 3,104
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in revolving credit agreement ........ (2,078) 893
Repayments of long-term debt ................................. (1,088) (4,049)
Issuance of common stock ..................................... 213 300
Proceeds from stock subscription receivable .................. 840 --
------------ ------------
Net cash used in financing activities ............................. (2,113) (2,856)
------------ ------------
Net increase (decrease) in cash and cash equivalents .............. 786 (707)
Cash and cash equivalents, beginning of period .................... 921 1,424
------------ ------------
Cash and cash equivalents, end of period .......................... $ 1,707 $ 717
============ ============
</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 nine months ended
May 31, 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 nine months ended May 31, 2001
were $455,000 and $2,664,000, 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 $905,000 of transition costs incurred during the move to Washington
has been included as unusual income in the Consolidated Statement of Income for
the nine months ended May 31, 2001. Transition costs of $762,000 incurred during
the move to Washington have been included as unusual expense for the three
months ended May 31, 2001.
5
Note 4: Inventories
Inventories consisted of the following (in thousands):
<Table>
<Caption>
May 31, August 31,
2002 2001
------------ ------------
Raw materials ............................... $ 5,365 $ 6,629
Work in process ............................. 783 531
Finished goods .............................. 24,932 26,219
------------ ------------
Total inventories ........................... $ 31,080 $ 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 $2,000,000 seasonal
advance from August 2002 through February 2003. 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 covenants, 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 May 31, 2002 were $7,500,000 and 1.00, respectively. Actual
EBITDA and fixed charge ratio for the same period were $7,512,000 and 1.09,
respectively. The covenants for EBITDA and fixed charge ratio for the twelve
months ended August 31, 2002 are $9,000,000, and 1.15, respectively. As of May
31, 2002, the Company is in compliance with the debt covenants related to the
credit facility. Total unused availability under the credit facility at
6
May 31, 2002 was approximately $7,966,000. 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 May 31, 2002 and May 31, 2001 comprehensive
income was $1,247,000 and $578,000, respectively. Comprehensive income for the
nine months ended May 31, 2002 and May 31, 2001 was $5,551,000 and $5,694,000,
respectively.
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 Nine Months Ended
May 31, May 31,
----------------------------- -----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenues
Sports equipment $ 47,616 $ 42,007 $ 143,611 $ 142,525
Licensing 1,631 1,460 4,086 3,886
------------ ------------ ------------ ------------
Consolidated net revenues $ 49,247 $ 43,467 $ 147,697 $ 146,411
============ ============ ============ ============
Operating income (loss)
Sports equipment $ 1,044 $ (256) $ 6,972 $ 8,491
Licensing 1,631 1,460 4,086 3,886
------------ ------------ ------------ ------------
Consolidated operating income $ 2,675 $ 1,204 $ 11,058 $ 12,377
============ ============ ============ ============
</Table>
<Table>
<Caption>
May 31, August 31,
2002 2001
------------ ------------
Total assets
Sports equipment $ 102,051 $ 98,222
Licensing 1,521 319
------------ ------------
Consolidated total assets $ 103,572 $ 98,541
============ ============
</Table>
Licensing revenues were $1,631,000 in the quarter ended May 31, 2002 which was
$171,000, or 11.7 percent above the comparable prior year period. This increase
was primarily attributable to greater revenues from the Company's footwear
licensee partially offset by lower revenues from Asics, the Company's Japanese
licensee.
Licensing revenues for the nine months ended May 31, 2002 were $4,086,000 or
$200,000 greater than the nine months ended May 31, 2001. The improved revenues
were primarily due to increased revenues from the Company's footwear licensee
partially offset by lower revenues from Asics, the Company's Japanese licensee.
8
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
General
The Company was able to regain all of the first half 2002 sales decline
in the third quarter of 2002. The Company continues to implement initiatives to
decrease costs and increase sales. The Company believes that cost management
opportunities exist as the Company realizes efficiencies of the consolidation of
its distribution facilities. The Company expects to reduce selling, general and
administrative expenses in fiscal year 2003 as the Company's licenses for NCAA
basketball and Major League Baseball uniforms expire. As a result of the lower
margins on the NCAA basketball and Major League Baseball Uniform licenses, the
Company does not anticipate a decrease in earnings due to the non-renewal of
these agreements. The unresolved labor issue in Major League Baseball and a
weakened economy could adversely affect the Company's financial performance in
the fourth quarter 2002 and fiscal year 2003.
RESULTS OF OPERATIONS
Quarter Ended May 31, 2002 Compared
with Quarter Ended May 31, 2001
The Company's net revenues for the quarter ended May 31, 2002 were
$49,247,000 or 13.3 percent greater than net revenues of $43,467,000 for the
quarter ended May 31, 2001. The increase in net revenues was primarily the
result of higher sales in all categories of baseball-related products. Baseballs
and baseball gloves contributed $3,835,000 of the increase in the quarter ended
May 31, 2002 compared to the comparable quarter in the prior year.
The Company's gross profit for the quarter ended May 31, 2002 was
$13,250,000 or 11.4 percent above the gross profit of $11,894,000 for the same
quarter last year. The gross profit margin for the May 2002 quarter was 26.9
percent, 0.5 margin points under the 27.4 percent gross profit margin for the
quarter ended May 31, 2001. The increase in gross profit was primarily due to
the higher sales of baseball-related products partially offset by reduced
margins for apparel and basketballs.
Selling, general and administrative (SG&A) expenses for the three
months ended May 31, 2002 were $10,575,000 or $647,000 above the comparable
prior year quarter. SG&A expenses were 21.5 percent of net revenues or 1.3
percentage points below the May
9
2001 quarter. The increase in SG&A expenses was primarily related to
distribution costs and royalties partially offset by lower commissions and
advertising and promotion costs.
The unusual expense item for the quarter ended May 31, 2001 of $762,000
represented transition costs incurred during the relocation of distribution
facilities to a new single location in Washington, Missouri.
Interest expense for the quarter ended May 31, 2002 was $668,000 or
42.5 percent lower than interest expense of $1,162,000 in the comparable quarter
of the prior year. Lower average interest rates of 3.1 percentage points and
lower average borrowings of $4,300,000 accounted for the decrease in interest
expense.
Net income for the three months ended May 31, 2002 was $1,164,000
compared to $120,000 in the comparable quarter last year. The net income
improvement was primarily due to increased sales, lower interest expense and the
transition costs incurred during the relocation of the distribution facilities
in the May 2001 quarter, partially offset by higher SG&A expenses.
Nine Months Ended May 31, 2002
Compared with the Nine Months Ended May 31, 2001
The Company's net revenues for the nine months ended May 31, 2002 were
$147,697,000 or 0.9 percent greater than the net revenues of $146,411,000 in the
comparable period of the prior year. The increase in net revenues was primarily
due to higher sales of baseball-related products.
The Company's gross profit for the nine months ended May 31, 2002 was
$42,132,000 or 1.4 percent lower than the gross profit of $42,744,000 for the
nine months ended May 31, 2001. The gross profit margin of 28.5 percent was 0.7
margin points below the comparable prior year period. The decrease in gross
profit was primarily due to lower margins for basketballs, footballs, and
apparel partially offset by increased baseball-related product sales.
SG&A expenses for the nine months ended May 31, 2002 of $31,074,000
were $497,000 greater than the $30,577,000 SG&A expenses in the comparable
period last year. As a percent of net revenues SG&A expenses were 21.0 percent
this year compared to 20.9 percent last year. Increased distribution costs and
royalties partially offset by lower commissions and professional fees accounted
for the higher SG&A expenses.
The unusual income item for the nine months ended May 31, 2001 was
comprised of the $1,115,000 gain on the sale of the Springfield, Missouri
distribution center, offset by $905,000 of transition costs incurred during the
move to Washington, Missouri.
10
Interest expense for the nine months ended May 31, 2002 was $1,977,000
or $1,742,000 below the comparable prior year period. Lower average interest
rates of 4.0 percentage points and lower average borrowings of $4,200,000
accounted for the decrease in interest expense.
Net income for the nine months ended May 31, 2002 was $5,603,000 or
$62,000 below net income of $5,665,000 for the nine months ended May 31, 2001.
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 $7,504,000 during the nine months ended
May 31, 2002 primarily as a result of an increase in accounts receivable and a
decrease in short-term borrowings under the revolving credit agreement partially
offset by a decrease in inventories.
Net cash provided by operating activities for the nine months ended May
31, 2002 was $4,556,000 or $5,511,000 greater than the $955,000 used in the nine
months ended May 31, 2001. The increase was primarily due to a reduction in
inventories this year compared to an increase last year. Other cash provided by
operating activities in 2002 included $3,349,000 related to the utilization of
net operating loss carryforwards for tax purposes.
Capital expenditures were $1,657,000 for the nine months ended May 31,
2002, compared to $746,000 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 Company's computer systems. The Company expects capital
expenditures for fiscal 2002 to be approximately $1,800,000.
11
The Company repaid $3,166,000 of its outstanding debt in the nine
months ended May 31, 2002. This resulted in total debt as of May 31, 2002 of
$35,760,000, which was $6,666,000, or 15.7 percent, lower than the total debt of
$42,426,000 as of May 31, 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 $2,000,000 seasonal
advance from August 2002 through February 2003. 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 covenants, 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 May 31, 2002 were $7,500,000 and 1.00, respectively. Actual
EBITDA and fixed charge ratio for the same period were $7,512,000 and 1.09,
respectively. The covenants for EBITDA and fixed charge ratio for the twelve
months ended August 31, 2002 are $9,000,000, and 1.15, respectively. As of May
31, 2002, the Company is in compliance with the debt covenants related to the
credit facility. Total unused availability under the credit facility at May 31,
2002 was approximately $7,966,000. 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 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
12
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 has 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, 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
13
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 $35,748,000 as of May 31,
2002. A change in interest rates of 1% on the balance outstanding at May 31,
2002 would cause a change in total annual pretax earnings and cash flows of
$357,000 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
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Waiver to Credit Agreement, dated as of April 9,
2002, among Rawlings Sporting Goods Company, Inc.,
General Electric Capital Corporation and the other
Credit Parties signatory thereto.
(b) Reports on Form 8-K
None.
15
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: July 12, 2002 /s/ STEPHEN M. O'HARA
----------------------------------------------
Stephen M. O'Hara
Chairman of the Board and
Chief Executive Officer
Date: July 12, 2002 /s/ WILLIAM F. LACEY
----------------------------------------------
William F. Lacey
Vice President and Chief Financial Officer
(Principal Accounting Officer)
16