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 November 30, 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 Bowles Avenue, 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 December 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 (Loss)
(Amounts in thousands, except per share data)
(Unaudited)
<Table>
<Caption>
Three Months Ended
November 30,
--------------------------
2002 2001
---------- ----------
Net revenues ..................................... $ 29,974 $ 33,408
Cost of goods sold ............................... 21,026 23,963
---------- ----------
Gross profit ................................ 8,948 9,445
Selling, general and administrative expenses ..... 9,459 10,029
---------- ----------
Operating loss .............................. (511) (584)
Interest expense ................................. 533 634
---------- ----------
Loss before income taxes .................... (1,044) (1,218)
Benefit for income taxes ......................... (386) (420)
---------- ----------
Net loss .................................... $ (658) $ (798)
========== ==========
Net loss per common share, basic and
diluted ..................................... $ (0.08) $ (0.10)
========== ==========
Shares used in computing per share amounts:
Basic ....................................... 8,138 8,080
Assumed exercise of stock options ........... 46 --
---------- ----------
Diluted ..................................... 8,184 8,080
========== ==========
</Table>
The accompanying notes are an integral part of these consolidated statements.
2
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share data)
<Table>
<Caption>
November 30,
2002 August 31,
(Unaudited) 2002
------------ ----------
Assets
Current Assets:
Cash and cash equivalents .......................... $ 268 $ 603
Accounts receivable, net of allowance of
$2,940 and $2,861 respectively .................. 28,735 24,107
Inventories ........................................ 40,879 31,796
Deferred income taxes .............................. 3,115 3,115
Prepaid expenses ................................... 975 396
------------ ----------
Total current assets ........................... 73,972 60,017
Property, plant and equipment ......................... 7,637 7,742
Deferred income taxes ................................. 22,394 21,983
Long-term receivables ................................. 417 417
Other assets .......................................... 1,570 1,674
------------ ----------
Total assets ................................... $ 105,990 $ 91,833
============ ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt and
revolving credit agreement ..................... $ 36,988 $ 27,037
Accounts payable ................................... 12,789 7,689
Accrued liabilities ................................ 9,708 9,613
------------ ----------
Total current liabilities ...................... 59,485 44,339
Long-term debt, less current maturities ............... 2,673 2,941
------------ ----------
Total liabilities .............................. 62,158 47,280
------------ ----------
Stockholders' equity:
Preferred stock, none issued ....................... -- --
Common stock, $0.01 par value, 50,000,000
shares authorized, 8,088,656 and 8,088,656
shares issued and outstanding, respectively .... 81 81
Additional paid-in capital ......................... 39,742 39,742
Cumulative other comprehensive loss ................ (1,680) (1,617)
Retained earnings .................................. 5,689 6,347
------------ ----------
Stockholders' equity .......................... 43,832 44,553
------------ ----------
Total liabilities and stockholders' equity ..... $ 105,990 $ 91,833
============ ==========
</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>
Three Months Ended
November 30,
--------------------------
2002 2001
---------- ----------
Cash flows from operating activities:
Net loss .................................... $ (658) $ (798)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization ........... 522 463
Deferred income taxes ................... (411) (449)
Changes in operating assets and liabilities:
Accounts receivable ..................... (4,628) (3,750)
Inventories ............................. (9,083) (9,097)
Accounts payable ........................ 5,100 7,297
Other ................................... (437) (253)
---------- ----------
Net cash used in operating activities ............ (9,595) (6,587)
---------- ----------
Cash flows from investing activities:
Capital expenditures ........................ (423) (657)
---------- ----------
Net cash used in investing activities ............ (423) (657)
---------- ----------
Cash flows from financing activities:
Net increase in revolving credit agreement .. 9,951 7,438
Repayments of long-term debt ................ (268) (267)
Issuance of common stock .................... -- 65
---------- ----------
Net cash provided by financing activities ........ 9,683 7,236
---------- ----------
Net decrease in cash and cash equivalents ........ (335) (8)
Cash and cash equivalents, beginning of period ... 603 921
---------- ----------
Cash and cash equivalents, end of period ......... $ 268 $ 913
========== ==========
</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, 2002 filed on November 27, 2002. 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 three months ended
November 30, 2002 are not necessarily indicative of the results that may be
expected for a full fiscal year.
Note 2: Effect of New Accounting Standards
In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards No. 144, "Accounting for the Impairment of
Long-Lived Assets" (SFAS 144). SFAS 144, which supersedes SFAS 121, " Accounting
for the Impairment of Long-Lived Assets to be Disposed Of," provides for a
single accounting model for long-lived assets to be disposed of by sale. The
main objective of this Statement is to resolve implementation issues related to
SFAS 121 by clarifying certain of its provisions. This Statement was adopted by
the Company effective September 1, 2002.
5
Note 3: Inventories
Inventories consisted of the following (in thousands):
<Table>
<Caption>
November 30, August 31,
2002 2002
------------ ----------
Raw materials ................. $ 8,015 $ 7,254
Work in process ............... 765 1,027
Finished goods ................ 32,099 23,515
------------ ----------
Total inventories ............. $ 40,879 $ 31,796
============ ==========
</Table>
Note 4: 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 $1,213,000. Of this amount,
$667,000 less an allowance for doubtful accounts of $250,000 is included in
Long-term Receivables on the Consolidated Balance Sheet. The remaining $546,000
is included in Accounts Receivable with a corresponding amount in Allowance for
Doubtful Accounts on the Consolidated Balance Sheet. The net receivable of
$417,000 represents the Company's best estimate of recovery on pre-petition
Kmart receivables.
Note 5: 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 third quarter of fiscal 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 April
2004 which are included in Other Assets on the Consolidated Balance Sheet. This
asset is secured by the Vic trademark. The Company is currently renegotiating
the note.
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
6
of the facility. On November 14, 2002 the Company and its lenders amended the
credit agreement to increase the seasonal advance to $5,000,000 for the period
from November 2002 through January 2003. The Company and its lenders also
amended the credit agreement on December 11, 2002 to permit the Company to enter
into a Single Customer Credit Approved Receivables Purchasing Agreement (SCARPA)
with The CIT Group Commercial Services, Inc. to protect post-petition
receivables from Kmart.
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 November 30, 2002 were $9,125,000 and 1.20, respectively.
Actual EBITDA and fixed charge ratio for the same period were $9,529,000 and
1.58, respectively. The EBITDA requirement increases $125,000 for each of the
fiscal 2003 quarter-end compliance calculations that are based on a rolling four
quarters of EBITDA resulting in a $9,500,000 requirement for the twelve months
ending August 31, 2003. The covenant for fixed charge ratio for each quarter-end
calculation in fiscal 2003 is 1.20. As of November 30, 2002, the Company is in
compliance with the debt covenants related to the credit facility. Total unused
availability under the credit facility at November 30, 2002 was approximately
$3,445,000. 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 Loss
For the three months ended November 30, 2002 and November 30, 2001
comprehensive loss was $721,000 and $855,000, respectively.
Note 8: 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
7
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
revenues generated and long-lived assets located outside the United States are
not significant for separate presentation.
<Table>
<Caption>
Three Months Ended
November 30,
--------------------------
2002 2001
---------- ----------
Net revenues
Sports equipment ............. $ 28,874 $ 32,234
Licensing .................... 1,100 1,174
---------- ----------
Consolidated net revenues ......... $ 29,974 $ 33,408
========== ==========
Operating income (loss)
Sports equipment ............. $ (1,611) $ (1,758)
Licensing .................... 1,100 1,174
---------- ----------
Consolidated operating loss ....... $ (511) $ (584)
========== ==========
</Table>
<Table>
<Caption>
November 30, August 31,
2002 2002
------------ ----------
Total assets
Sports equipment ............. $ 104,563 $ 90,971
Licensing .................... 1,427 862
------------ ----------
Consolidated total assets ......... $ 105,990 $ 91,833
============ ==========
</Table>
Licensing revenues were $1,100,000 in the quarter ended November 30, 2002 which
was $74,000 or 6.3 percent below the comparable prior year period. This
reduction was primarily due to lower revenues from the Company's footwear
licensee and backyard games licensee partially offset by higher revenues from
Asics, the Company's Japanese licensee.
Note 9: Subsequent Event
On December 16, 2002, Rawlings and K2 Inc. announced the signing of a
definitive merger agreement in which Rawlings will become a wholly-owned
subsidiary of K2 Inc. in a stock-for-stock merger. Under terms of the agreement,
each share of Rawlings common stock will be converted into 0.950 of a share of
K2 common stock, subject to a collar mechanism. If the average closing price of
K2 common stock for the 15 trading days ending two trading days prior to the
closing date (the "Average Closing
8
Price") exceeds $10.53 per share, the exchange ratio will be adjusted downward
to an exchange ratio that will result in Rawlings stockholders receiving a
number of shares of K2 common stock (based on the Average Closing Price of K2
common stock) having a value of $10 per share. If the Average Closing Price of
K2 common stock is less than $9.47 per share, the exchange ratio will be
adjusted upward to an exchange ratio that will result in Rawlings stockholders
receiving a number of shares of K2 common stock (based on the Average Closing
Price of K2 common stock) having a value of $9 per share. If the merger is not
completed, Rawlings under certain circumstances could be required to pay K2 Inc.
a termination fee of $2,900,000. K2 Inc. has agreed, upon completion of the
merger, to reimburse Rawlings for $163,000 of merger related expenses incurred
in the quarter ended November 30, 2002. The transaction is expected to be
completed in the spring of 2003. K2 Inc. is a leading designer, manufacturer and
marketer of brand-name sporting goods, recreational and industrial products.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Quarter Ended November 30, 2002 Compared
with Quarter Ended November 30, 2001
The Company's net revenues for the quarter ended November 30, 2002 were
$29,974,000 or 10.3 percent below net revenues of $33,408,000 for the quarter
ended November 30, 2001. The decrease in net revenues was primarily due to lower
sales of footballs, basketballs and apparel partially offset by improved sales
of baseball-related products.
The Company's gross profit margin for the quarter ended November 30,
2002 was 29.9 percent, 1.6 margin points above the 28.3 gross profit margin for
the quarter ended November 30, 2001. The gross profit for the quarter ended
November 30, 2002 was $8,948,000 or 5.3 percent below the comparable period last
year. The improvement in gross profit margin was primarily due to increased
margins in baseball-related products, apparel and footballs. The lower revenues
partially offset by the gross margin improvements accounted for the gross profit
reduction.
Selling, general and administrative (SG&A) expenses for the quarter
ended November 30, 2002 were $9,459,000 or $570,000 below the same quarter last
year. SG&A expenses were 31.6 percent of net revenues or 1.6 percentage points
above the November 2001 quarter due to the lower sales level. Decreased
royalties, due to the expiration of the NCAA basketball contract, professional
fees and commissions contributed to the reduced SG&A expenses.
9
Interest expense for the quarter ended November 30, 2002 was $533,000
or 15.9 percent below the $634,000 interest expense in the comparable quarter
last year. Lower average borrowings of $8,700,000 accounted for the decrease in
interest expense.
Net loss of $658,000 for the quarter ended November 30, 2002 was an
improvement of $140,000 compared to the net loss for the November 2001 quarter.
Reduced SG&A expenses, a higher gross profit margin and decreased interest
expense partially offset by lower net revenues contributed to the improved net
loss.
K2 Inc. Merger
On December 16, 2002, Rawlings and K2 Inc. announced the signing of a
definitive merger agreement in which Rawlings will become a wholly-owned
subsidiary of K2 Inc. in a stock-for-stock merger. Under terms of the agreement,
each share of Rawlings common stock will be converted into 0.950 of a share of
K2 common stock, subject to a collar mechanism. If the average closing price of
K2 common stock for the 15 trading days ending two trading days prior to the
closing date (the "Average Closing Price") exceeds $10.53 per share, the
exchange ratio will be adjusted downward to an exchange ratio that will result
in Rawlings stockholders receiving a number of shares of K2 common stock (based
on the Average Closing Price of K2 common stock) having a value of $10 per
share. If the Average Closing Price of K2 common stock is less than $9.47 per
share, the exchange ratio will be adjusted upward to an exchange ratio that will
result in Rawlings stockholders receiving a number of shares of K2 common stock
(based on the Average Closing Price of K2 common stock) having a value of $9 per
share. If the merger is not completed, Rawlings under certain circumstances
could be required to pay K2 Inc. a termination fee of $2,900,000. K2 Inc. has
agreed, upon completion of the merger, to reimburse Rawlings for $163,000 of
merger related expenses incurred in the quarter ended November 30, 2002. The
transaction is expected to be completed in the spring of 2003. K2 Inc. is a
leading designer, manufacturer and marketer of brand-name sporting goods,
recreational and industrial products.
Liquidity and Capital Resources
Working capital decreased by $1,191,000 during the three months ended
November 30, 2002 primarily as a result of increases in short-term borrowings
under the revolving credit agreement and accounts payable partially offset by a
seasonal increase in inventories and accounts receivable.
Net cash used in operating activities for the quarter ended November
30, 2002 was $9,595,000 or $3,008,000 greater than the $6,587,000 used in the
comparable quarter last year. The increase in cash used was due to a smaller
increase in accounts payable and a larger increase in accounts receivable.
10
Capital expenditures were $423,000 in the quarter ended November 30,
2002 compared to $657,000 in the comparable quarter of the prior year. The
November 2001 quarter included expenditures related to expanding the Washington,
Missouri facility for certain manufacturing operations. The Company expects
capital expenditures for fiscal 2003 to be approximately $1,400,000.
The Company had an increase in net borrowings, primarily related to
seasonal working capital needs, of $9,683,000 in the quarter ended November 30,
2002. This resulted in total debt as of November 30, 2002 of $39,661,000, which
was $6,436,000 or 14.0 percent lower than the total debt of $46,097,000 as of
November 30, 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. On November 14,
2002 the Company and its lenders amended the credit agreement to increase the
seasonal advance to $5,000,000 for the period from November 2002 through January
2003. The Company and its lenders also amended the credit agreement on December
11, 2002 to permit the Company to enter into a Single Customer Credit Approved
Receivables Purchasing Agreement (SCARPA) with The CIT Group Commercial
Services, Inc. to protect post-petition receivables from Kmart.
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 November 30, 2002 were $9,125,000 and 1.20, respectively.
Actual EBITDA and fixed charge ratio for the same period were $9,529,000 and
1.58, respectively. The EBITDA requirement increases $125,000 for each of the
fiscal 2003 quarter-end compliance calculations that are based on a rolling four
quarters of EBITDA resulting in a $9,500,000 requirement for the twelve months
ending August 31, 2003. The covenant for fixed charge ratio for each quarter-end
calculation in fiscal 2003 is 1.20. As of November 30, 2002, the Company is in
compliance with the debt covenants related to the credit facility. Total unused
availability under the credit facility at November 30, 2002 was approximately
$3,445,000. 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.
11
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. Most of the
Company's large customers are on automatic replenishment systems; therefore,
more orders are received on a ship-at-once basis. This results in the Company
producing or purchasing inventory against customer forecasts and shipping to the
customer closer to the time the products are actually sold. This process to meet
orders for immediate delivery increases inventory and debt levels and creates
inventory forecast risks. To offset these risks, the Company has a Port of Entry
(POE) program to encourage retailers to place and receive early orders.
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,"
12
"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, loss of the Major League Baseball
exclusive supplier contract, 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 quantify 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 $39,661,000 as of November
30, 2002. A change in interest rates of 1% on the balance outstanding at
November 30, 2002 would cause a change in total annual pretax earnings and cash
flows of $397,000 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 although a long-term decline in the United States of America dollar
could increase the cost of purchased goods.
13
Item 4. Controls and Procedures
Within 90 days prior to the filing of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's senior management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. The Company's disclosure controls
and procedures are designed to ensure that information required to be disclosed
by the Company in its periodic filings with the SEC, including quarterly reports
such as this Report, is reported accurately and suitably within the time periods
specified in the SEC's rules and forms. Based upon that evaluation, senior
management concluded that the Company's disclosure controls and procedures are
effective in causing material information related to the Company (including its
consolidated subsidiaries) to be recorded, processed, summarized and reported by
the Company's management on a timely basis and to ensure that the quality and
timeliness of the Company's public disclosures comply with applicable disclosure
obligations.
There were no significant changes in the Company's internal controls,
implemented during the quarter ended November 30, 2002, or in other factors that
in management's estimation could significantly affect these internal controls
after the date of the Company's most recent evaluation.
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 Consent and Amendment No. 10 to Credit Agreement, dated as
of December 11, 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, dated September 20, 2002,
reporting under Item 5 the termination of the tax sharing
agreement between the Company and Tyco International.
15
(ii) A current report on Form 8-K, dated November 27, 2002,
reporting under Item 9; Regulation FD Disclosure (regarding
certifications of Form 10-K pursuant to Section 906 of the
Sarbanes-Oxley Act).
(iii) A current report on Form 8-K, dated November 27, 2002,
reporting under Item 5 the adoption of a shareholder rights
plan.
16
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: January 13, 2003 /s/ STEPHEN M. O'HARA
-----------------------------------
Stephen M. O'Hara
Chairman of the Board and
Chief Executive Officer
Date: January 13, 2003 /s/ WILLIAM F. LACEY
-----------------------------------
William F. Lacey
Vice President and Chief Financial Officer
(Principal Accounting Officer)
17
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14 AND 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen M. O'Hara, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rawlings Sporting Goods
Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data
18
and have identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 13, 2003
By: /s/ STEPHEN M. O'HARA
-----------------------------------
Stephen M. O'Hara
Chairman of the Board and Chief
Executive Officer
19
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14 AND 15d-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William F. Lacey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rawlings Sporting Goods
Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data
20
and have identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 13, 2003
By: /s/ WILLIAM F. LACEY
-----------------------------------------
William F. Lacey
Vice President and Chief Financial Officer
21