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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period from March 3, 1996 to September 30, 1996
Commission File No. 0-921
THE ARNOLD PALMER GOLF COMPANY
(Exact name of registrant as specified in its charter)
Tennessee 062-0331019
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
6201 Mountain View Road, Ooltewah, TN 37363
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Registrant's telephone number, (including area code) (423) 238-5890
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Securities registered pursuant to Section 12(b) of the Act:
None
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(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - par value
$.50 per share
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(Title of Class)
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. X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
---
As of December 18, 1996, the aggregate market value of the voting stock
held by non-affiliates was approximately $9,921,000 (based on the Common Stock
closing price on that date of $4.875 per share).
As of December 18, 1996, 833,333 shares of Series NB Preferred Stock
and 2,926,805 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held February 20, 1997, are incorporated by
reference into Part III of this Form 10-K. Other documents incorporated by
reference in this report are listed in the Exhibit Index.
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PART I
Item 1. Business
General
The Arnold Palmer Golf Company ("APGC" or the "Company") was incorporated in
Tennessee in 1932 and began operations as the Professional Golf Co., Inc. In
1966 it merged with First Flight Co. and in 1975 changed its name to ProGroup,
Inc. In July 1996, the Company changed its name to The Arnold Palmer Golf
Company. APGC manufactures, markets and distributes a full line of golf
products, including Arnold Palmer and First Flight golf equipment, and Hot-Z
golf bags and luggage. APGC owns, subject to certain exceptions, the exclusive
worldwide right to the Arnold Palmer trade name in connection with the Company's
manufacture, sale and distribution of golf products. For purposes of this
report, "the 1996 transition period" and "fiscal 1996, 1995, and 1994" refer to
the seven-month period ended September 30, 1996 and the fiscal years ended March
2, 1996, February 25, 1995 and February 26, 1994, respectively.
Developments During the 1996 Transition Period
Effective March 3, 1996, the Company changed its fiscal year end to September 30
from the Saturday closest to the end of February. Accordingly, the September 30,
1996 operating results of the Company are for a seven-month period. At the July
15, 1996 shareholders meeting, the shareholders approved an amendment to the
Company's charter changing the name of the Company from ProGroup, Inc. to The
Arnold Palmer Golf Company. In August 1996, the Company purchased 625,000 shares
of Series D Preferred Stock of Nevada Bob's Holdings, Inc. for $5.0 million. To
fund this investment, the Company issued 833,333 shares of its Series NB
Preferred Stock to a substantial shareholder and director of the Company.
Principal Products
The Company manufactures and markets golf clubs, golf bags, golf accessories and
luggage.
Markets
The principal market for the products sold by the Company is the United States.
Foreign sales were negligible during the 1996 transition period. Certain golf
equipment is manufactured and distributed on a contract basis to other
wholesalers. Branded golf products are sold to pro shops and retailers.
Methods of Distribution
The Company's products are sold through separate and distinct trade channels:
golf courses and resorts; golf shops not affiliated with golf courses; major
retailers; and special markets. In connection with the sale of the Company's
apparel operations in May 1995, the buyer employed the sales representatives
and sales management personnel previously employed by the Company and the
Company entered into a three year agreement with the buyer to provide sales
representation services with regard to its Hot-Z and Palmer products.
Subsequent to the end of the 1996 transition period, the buyer defaulted on
payment of the final installment of the promissory note issued in conjunction
with the sale of the apparel operations. As a result, the Company was released
from the sales representation agreement, has hired additional sales management
personnel, and certain of its former sales representatives again became
employees of the Company. Accordingly, the Company has resumed the distribution
of its Hot-Z and Palmer products.
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Sources of Supplies or Raw Materials
The Company's major sources of supplies or raw materials are as follows:
Source Raw Material
Mortex International Limited Bag Material/Hardware
C-K Plastics Bag Molded Tops and Bottoms
Summit/Intro-Union Trading Limited Iron Heads, Metal Wood Heads
Exel Shafts
While the Company has not experienced significant delays in receiving supplies
or raw materials, it does recognize the fact that, in some cases, only a limited
number of suppliers are available.
Licenses, Patents, Etc.
As of March 1, 1992, the Company entered into an agreement (the "License
Agreement") with Arnold Palmer Enterprises, Inc. ("Enterprises"), pursuant to
which the Company obtained a license to use the name, likeness and endorsement
of Arnold Palmer ("Palmer"), a director of the Company, in connection with the
advertisement, promotion and sale of golf clubs, bags, balls, gloves and other
products.
The License Agreement grants to the Company an exclusive worldwide right,
subject to certain exceptions, to use words or symbols, photographic
representations, images, likenesses or endorsements of Palmer in connection
with the Company's manufacture, sale and distribution of golf products. The
Company also has the right under the License Agreement to sublicense to third
parties the right to use the licensed trademarks. The License Agreement also
gives the Company the right to acquire the use of the Palmer identification in
connection with the manufacture, sale and distribution of certain other
products upon the termination of certain licensing arrangements with third
party licensees. In exchange for the grant of such license, the Company pays
Enterprises as a royalty a specified percentage of net sales of each different
product category. The Company also pays a minimum annual royalty regardless of
the royalty amount determined as a percentage of product sales. The License
Agreement also sets forth the manner in which the Company and Enterprises
divide sublicensing royalties. In addition to the foregoing, the License
Agreement contains provisions relative to the appearances of Palmer to promote
the licensed products and product usage by Palmer.
During the 1996 transition period, the Company negotiated an extension of the
License Agreement through March 1, 2007.
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Seasonal Business
Golf equipment manufactured and marketed by the Company is largely for warm
weather recreation. The spring quarter of the Company's fiscal year is the
start of the golf season and typically the Company's sales are at their highest
level of the year. Sales for the summer quarter consist largely of reorders,
to fill in customer service levels. The fall and winter quarters generate a
lower level of sales.
Working Capital Practices
It is necessary for the Company and the industry to carry significant amounts of
finished goods inventory during the winter months to meet customer demands in
the spring and summer months.
The Company and the industry provide extended payment terms to customers due to
the seasonal nature of the business in an effort to generate higher sales. Also,
the Company and the industry provide rights to return merchandise in certain
circumstances.
Customers
The Company's three largest customers, Sears, Roebuck and Company, Kmart
Corporation, and Wal-Mart Stores, Inc., accounted for 10%, 9% and 7%,
respectively, of the Company's total sales during the 1996 transition period.
Backlogs
With regard to continuing operations, the Company's backlog of unshipped orders
was approximately $2,115,000 on September 30, 1996, and approximately $4,749,000
on March 2, 1996.
Government Contracts
No material portion of the Company's business is subject to renegotiation of
profits on termination of contracts or subcontracts at the election of the
Government.
Competitive Conditions
The Company principally competes through customer service, pricing and the
quality of the products sold. One negative factor pertaining to the competitive
position of the Company is that the number of suppliers for raw materials such
as shafts and club heads for making golf clubs is limited. Another negative
factor is the proliferation of competitive products available resulting in keen
price competition in the golf industry. Among the Company's competitors are
numerous companies that have substantially greater financial resources,
manufacturing capabilities, and larger design, sales and marketing staffs than
the Company.
Research
No material amount was spent by the Company during the 1996 transition period,
fiscal 1996, 1995, or 1994 on Company-sponsored research and development
activities. No material amount was spent in such years on customer-sponsored
research activities relating to the development of new products, services or
techniques or the improvement of existing products, services or techniques.
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Environmental Matters
Compliance with federal, state and local provisions which have been enacted or
adopted regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, has not had, and is not expected
to have any material adverse effect upon the capital expenditures, earnings or
competitive position of the Company.
Employees
The Company employed 245 people as of September 30, 1996.
Operations and Sales to Foreign Countries
The Company markets its products on a limited basis in foreign countries. The
revenue derived from such foreign sales was less than 1% of net sales for the
1996 transition period, fiscal 1996, 1995 and 1994. Foreign sales are not
expected to be material during the 1997 fiscal year ending September 30, 1997.
Item 2. Properties
The Company owns or leases materially important properties as follows:
(a) 6201 Mountain View Road, Ooltewah, Tennessee, is a leased
building of cinder block and wood construction containing
approximately 95,000 square feet. The Company leases
approximately 20,000 square feet of office space to house its
main administrative offices.
(b) Hotze Road, Pocahontas, Arkansas, is an owned facility consisting
of a building of metal structure containing 72,000 square feet.
This facility is used for manufacturing golf bags and warehousing
raw materials.
(c) 2100 West Fifth Street, Lumberton, North Carolina, is an owned
facility consisting of a building of brick and frame structure
containing 66,000 square feet. This facility is idle and
currently for sale.
(d) 1512 Sholar Avenue, Chattanooga, Tennessee, is a leased building
of cinder block and concrete construction containing 47,400
square feet. This building is used for manufacturing golf clubs,
warehousing and shipping.
(e) 195 Highway 62 West, Pocahontas, Arkansas, is a leased building
of cinder block and concrete construction containing 52,345
square feet. This building is used for warehousing and shipping.
(f) 300 Tanger Boulevard, Suite 405, Branson, Missouri, is a leased
unit in a building of cinder block and concrete construction,
said unit containing 2,900 square feet. This facility is used for
retail sales.
(g) 3300 Ruckriegel Parkway, Louisville, Kentucky, is a leased
building of cinder block and concrete construction containing
approximately 4,600 square feet. This building is used to house
the administrative offices of the Company's National Golf
Suppliers division.
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Item 3. Legal Proceedings
Except as set forth below, the Company is not a party to any material pending
legal proceedings, other than ordinary routine litigation incidental to the
business, nor is any of its property the subject of any such proceedings.
On March 25, 1996, Richard E. Wenz, the former CEO of the Company, filed a
lawsuit against Arthur P. Becker, formerly Chairman of the Board and currently a
Board member of the Company, in the United States District Court for the
Southern District of New York. The lawsuit arises out of the publication in the
June 12, 1995 edition of Fortune magazine of certain statements relating to Mr.
Wenz's relationship with the Company which were attributed to Mr. Becker.
The complaint alleges a cause of action against Mr. Becker for defamation per se
and seeks compensatory damages of at least $10 million, plus punitive damages in
an unspecified amount. Pursuant to the provisions of the Amended and Restated
By-Laws of the Company and the applicable provisions of the Tennessee Business
Corporation Act, the Company has agreed to indemnify Mr. Becker from liability
which he may incur as a result of the lawsuit. The Company has also agreed to
advance certain costs of defense of the lawsuit to Mr. Becker.
On May 21, 1996, Mr. Wenz amended his complaint by adding Time, Inc., the
publisher of Fortune magazine, as an additional defendant in the lawsuit. The
cause of action alleged against Time, Inc. is also for defamation per se, arises
out of the same June 12, 1995 article, and also seeks compensatory damages of at
least $10 million.
On April 15, 1996, Mr. Becker filed his answer to the original complaint. The
answer denied all allegations of wrongdoing and set forth 15 affirmative
defenses. On June 11, 1996, Mr. Becker filed his answer to the amended
complaint, repeating his denials of all wrongdoing and repeating the 15
affirmative defenses. On or about June 12, 1996, Time, Inc. filed its answer,
also denying all wrongdoing, and setting forth nine affirmative defenses.
As of this date, only limited discovery has taken place and no trial date has
been set. Accordingly, it is premature to speculate upon the ultimate resolution
or outcome of the lawsuit. Mr. Becker intends to defend the suit vigorously.
The Company is also involved in litigation with Richard E. Wenz, former
President and Chief Executive Officer of the Company, in which Mr. Wenz has
alleged the Company has breached the terms of Mr. Wenz's employment agreement
and separation agreement with the Company. The Company does not expect the
resolution of the suit to have a material adverse effect on the operating or
financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the last quarter of the 1996 transition period
to a vote of security holders, through the solicitation of proxies or otherwise.
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PART II
Item 5. Market for the Company's Common Stock and Related Security Holder
Matters.
MARKET PRICES
The Company's common shares trade on The Nasdaq Stock Market under the symbol
"APGC." Based upon transfer agent records, the Company's common shares were held
by approximately 1,600 shareholders as of December 18, 1996.
A quarterly summary of the high and low market prices per common share for the
1996 transition period and fiscal 1996 and 1995 as reported by Nasdaq is shown
below:
1996 Transition Period Fiscal 1996 Fiscal 1995
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Quarter Ended: High Low High Low High Low
------ ------ ----- ----- ------ -----
May $6.125 $4.250 $8.50 $5.00 $13.75 $9.50
August 7.500 4.625 5.75 3.75 10.25 5.75
November* 6.625 5.500 6.00 3.50 10.25 5.50
February n/a n/a 6.50 3.75 9.00 5.75
*Due to the change in year end to September 30, 1996, the quarter ended November
for the 1996 transition period includes only the month of September.
DIVIDENDS
Payment of dividends is at the discretion of the Company's Board of Directors
and depends, among other factors, on earnings, capital requirements for planned
growth and the operating and fiscal condition of the Company. No dividends were
paid during the 1996 transition period, fiscal 1996 and fiscal 1995.
Item 6. Selected Financial Data.
1996 Fiscal Year Ended 1992
Transition ------------------------------------------------------- Transition
Period 1996 1995 1994 1993 1991 Period
------ ---- ---- ---- ---- ---- ------
(In Thousands, Except Per Share Amounts)
Statement of Operations Information:
Net sales $ 18,456 $ 21,185 $ 24,621 $ 24,726 $ 18,697 $ 18,623 $ 4,425
Net loss from continuing operations $ (2,294) $ (5,625) $ (9,460) $ (1,054) $ (1,016) $ (702) $ (2,617)
Balance Sheet Information:
Total assets $ 24,934 $ 18,560 $ 31,271 $ 40,258 $ 36,435 $ 27,275 $ 25,060
Long-term obligations and
redeemable preferred stock $ 20,996 $ 4,671 $ 7,473 $ 3,621 $ 572 $ 2,409 $ 651
Per Common Share Data:
Net loss per share from continuing
operations $ (.80) $ (2.15) $ (3.73) $ (.42) $ (.42) $ (.30) $ (1.11)
Dividends per share $ 0 $ 0 $ 0 $ 0 $ 0 $ .10 $ 0
Common shares outstanding at end of
period 2,927 2,635 2,539 2,537 2,517 2,353 2,353
The Company changed its fiscal year end from one ending on the Saturday closest
to the end of February to one ending September 30, effective September 30, 1996.
Therefore, the 1996 transition period relates to the seven-month period ended
September 30, 1996. Selected financial data for fiscal 1996, 1995, 1994, and
1993 relates to the years ended March 2, 1996, February 25, 1995, February 26,
1994, and February 27, 1993, while fiscal 1991 relates to the year ended
September 28, 1991. The 1992 transition period relates to the five-month period
ended February 22, 1992 which occurred when the Company changed its fiscal year
end from one ending on the Saturday closest to the end of September to February
22.
In May 1995, the Company sold its Duckster apparel line of business. The
results of discontinued operations have been reported separately from the
results of continuing operations.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Financial Condition
Subsequent to September 30, 1996, the Company entered a new financing
arrangement which converted $12.0 million of the Company's borrowings on its
line of credit to a long term note. As a result, as of September 30, 1996 the
Company had working capital of $10.7 million and a current ratio of three to
one. This compares to working capital of $1.3 million as of fiscal year end
March 2, 1996.
Borrowings under the Company's $15 million line of credit increased $2.7
million during the 1996 transition period. The increase in borrowings was
necessary to fund the increase in accounts receivable of $1.8 million and the
Company's net loss of $2.3 million for the transition period. The Company
generally relies upon internally generated cash and short-term borrowings to
satisfy working capital and capital expenditure requirements. Borrowings under
the Company's line of credit as of September 30, 1996 were $12.8 million.
Generally, borrowings under the line increase from December to April because
the Company builds inventory through the winter to support its spring shipping
season, and certain fall and winter sales programs offer extended repayment
terms to May.
Subsequent to September 30, 1996 the Company agreed to terms with a bank
which, effective December 30, 1996, converted $12 million of the current
revolver debt to a three year unsecured term loan with a maturity date of
December 31, 1999. The unsecured term loan will bear interest at the fixed
rate of 8.25% with interest payable monthly in arrears.
In addition to converting $12 million of existing indebtedness to a three year
term loan, the bank will also provide an unsecured revolving credit facility of
$12 million, which will mature on December 29, 1997. At the option of the
borrower, this revolving credit facility will bear interest at prime minus 0.50%
or one, two or three month LIBOR plus 2.0%. Both the long term loan and
revolving credit facility require no financial covenants, and are
unconditionally guaranteed by a major shareholder and director (the
"Guarantor"). The Company anticipates that this new financing arrangement
totaling $24 million will satisfy working capital and capital expenditure
requirements through 1997. Prior to the effective date of this $24 million
financing arrangement, the Company entered into a $1.1 million promissory note
with the Guarantor to provide short-term funding until the effective date of the
new $24 million arrangement. The Company expects to repay the $1.1 million no
later than January 31, 1997, the maturity date of the promissory note. The
Company's Board of Directors is considering appropriate compensation to be paid
to the Guarantor in consideration of his guarantee of the new credit facility.
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Results of Operations
Comparison of the Seven-Month Periods Ended September 30, 1996 and September 30,
1995
For purposes of this Form 10-K, the 1996 transition period covers the seven
month period beginning March 3, 1996 and ending September 30, 1996. This
transition period resulted from the Company changing its fiscal year end from
the Saturday closest to the end of February, to September 30, as approved by a
vote of the Board of Directors on July 14, 1996.
Net sales from continuing operations for the seven month transition period
ending September 30, 1996, increased $3.7 million or 25.0% compared to the same
period in 1995. As shown in the table below, the Company's significant growth
was in golf club sales, which increased $3.9 million to $10.0 million, and
accounted for 54.0% of the Company's total net sales for the 1996 transition
period.
Sales By Product Line
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($'s in millions)
Seven Months Ended September
----------------------------
1996 1995 % Change
---- ---- --------
Clubs $ 10.0 $ 6.1 + 63.9%
Bags 7.3 8.1 - 9.9%
Outlet .6 .4 + 50.0%
Other .6 .2 + 200.0%
----- ----- --------
Total $ 18.5 $ 14.8 + 25.0%
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Sales By Market Segment
----------------------
($'s in millions)
Seven Months Ended September
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1996 1995 % Change
---- ---- --------
Pro $ 9.6 $ 6.8 + 41.2%
Retail 7.7 7.4 + 4.1%
Outlet .6 .4 + 50.0%
Other .6 .2 + 200.0%
----- ----- --------
Total $ 18.5 $ 14.8 + 25.0%
----- ----- --------
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The decrease in bag sales of $.8 million is attributable to a decline in retail
bag sales of 26.5% from 1995 sales of $3.4 million. Pro bag sales were $4.8
million compared to $4.7 million in 1995.
The most favorable sales increase for the Company was a $2.8 million increase
in its pro business segment, which increased to $9.6 million in the 1996
transition period from $6.8 million in 1995. Essentially all the increase in
the pro business segment was in golf club sales. The increase in club sales was
primarily in the off-course golf equipment stores. Pro sales accounted for
51.9% of the Company's total sales in the 1996 transition period compared to
45.9% in the comparable 1995 period. Net margins on total sales increased to
27.9% compared to 25.5% in 1995, which is attributable to the more favorable
product mix and higher margins in pro clubs. While total bag net margins
remained constant with prior year at 28.8%, total club margins increased to
32.3% compared to 29.7% in 1995. A decrease in retail club margins to 28.1% in
1996 from 32.2% in 1995, was offset by a significant increase in pro club
margins of 40.0% in 1996, compared to 29.4% in 1995.
Selling and marketing expenses increased $1.7 million for the 1996 transition
period. A substantial portion of the increase was in advertising and
promotion, as the Company was not investing significant resources in this area
in the prior year. Additionally, commission and royalty expenses were greater
than prior year due to sales growth. General and administrative expenses
increased $1.2 million over 1995. The increase was primarily due to
expenditures relative to the Company's ongoing training and implementation of
its new fully integrated management information system, public relations
expenses and an increase in legal expenses due to the acquisition of National
Golf Suppliers, the Company's investment in Nevada Bob's Holdings, Inc. and
continued legal expenses related to litigation between the Company and its
former President and Chief Executive Officer.
Interest expense decreased 38.8% to $1.1 million for the 1996 transition
period. This was due to a decrease in non-cash interest expense relating to
amortization of the Company's subordinated debt discount and subordinated
notes. Interest expense was also reduced due to the sale of certain properties
and the retirement of related debt.
Other income for the 1996 transition period increased approximately $0.8 million
over the same prior year period, most of which was royalty income from the
Company's licensing agreement for its patented hosel design (PHD) technology.
In the 1996 transition period, the Company also recognized $0.2 million in
other income related to the increase in the net pension asset recognized on the
balance sheet. None was recognized in the seven months ending September 30,
1995.
The Company recorded a $.9 million charge against other income for the 1996
transition period. The Company was due to receive $1.2 million on October 10,
1996, as final payment for the sale of its Duckster apparel division to DeLong
Sportswear. In September 1996, the Company became aware that DeLong Sportswear
would default on the $1.2 million payment, and in lieu of payment accepted
manufacturing equipment, certain apparel items and other consideration
beneficial for the Company with a fair market value of approximately $0.3
million. The charge against other income reflects the writedown of the note
plus accrued interest to $0.3 million.
Due to operating losses for the 1996 transition period, no tax provision was
necessary.
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Comparison of Years Ended March 2, 1996, and February 25, 1995
Net sales from continuing operations for fiscal year 1996 decreased by $3.4
million, to $21.2 million, compared with fiscal year 1995. Club sales decreased
$2.4 million or 19.6% for fiscal year 1996 compared to fiscal year 1995. The
decrease in club sales was attributable primarily to the retail line of golf
equipment, due to a decrease in demand for these products from mass
merchandisers during fiscal 1996. Pro club sales were relatively unchanged from
fiscal 1995. Sales of golf bags decreased approximately $1.0 million in fiscal
1996 compared to fiscal 1995. The decrease in bag sales was primarily in our pro
line, which is sold to on-course golf shops and off-course golf equipment
stores. In early fiscal 1996, the decision was made by former management to
import a greater portion of our pro bag line. The features and quality of the
imported bags were not consistent with the bags historically manufactured by the
Company. As a result, the bags were not well received in the market place, thus
the decline in the pro segment of our bag line. During the latter part of fiscal
1996, the Company returned to domestic production of its high end pro bags.
Gross profit as a percent of net sales increased to 15.1% from 13.1% in fiscal
1995. The increase resulted primarily from reductions in manufacturing
variances. Losses from continuing operations were $5.6 million on net sales of
$21.2 million in fiscal 1996, compared to losses from continuing operations of
$9.5 million on net sales of $24.6 million in fiscal 1995.
Selling expenses decreased by $1.8 million or 28.4% for fiscal year 1996
compared to the previous year. When the Company sold its Duckster apparel
division in May 1995, the sales force became employees of DeLong Sportswear.
However, through a sales representative agreement between DeLong Sportswear and
the Company, they continued to sell the Company's pro line of golf clubs and
bags with compensation being on a commission basis. The result for the Company
was substantially reduced expenses for salaries and fringe benefits. Other
selling expenses such as royalties, were less due to reduced sales volume in
fiscal 1996. Additionally, lower expenditures for advertising and promotions
were factors in the decrease in selling expenses.
General and administrative expenses decreased $1.9 million or 43.1% in fiscal
1996. Most of the decrease was related to lower salaries and fringe benefits due
to the disposal of Duckster, which necessitated a reduction in general and
administrative overhead. Other components of the decrease were reduced legal
fees and other professional services.
Interest expense increased 119%, or $1.6 million, in fiscal 1996 compared to
fiscal 1995. Substantially all the increase was non-cash interest related to
amortization of subordinated debt discounts, subordinated notes and accrued
interest thereon.
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Other income increased $1.1 million in fiscal year 1996 compared to fiscal year
1995. Royalty income increased by $0.4 million, gain on asset dispositions
increased $0.4 million, and the Company reported $0.1 million of rental income
during fiscal 1996.
Due to operating losses for fiscal 1996, no tax provision was necessary.
Comparison of Years Ended February 25, 1995, and February 26, 1994
Net sales from continuing operations for fiscal year 1995 decreased slightly by
$105,000, to $24.6 million, compared with fiscal year 1994. Retail sales
increased 38% resulting from a 48% increase in club sales and a 20% increase in
bag sales. Sales to golf courses and golf shops decreased 28% to $10.2 million
from $14.1 million in fiscal 1994. The decrease was primarily in club sales
while bag sales were relatively unchanged. Gross profit as a percent of net
sales decreased to 13.6% in fiscal 1995 from 29.5% in the prior year. Large
inventory write-downs and manufacturing inefficiencies, especially in the
Company's bag production facilities, were the primary reasons for the decrease.
The Company's new management took a more aggressive approach to selling prior
season inventories in order to turn them into cash more quickly than in prior
years. During fiscal 1995, the Company took steps to outsource a portion of its
bag production in order to decrease manufacturing variances.
Selling expenses increased by $1.4 million or 28.8% for fiscal year 1995
compared to the previous year. Advertising expenses for clubs comprised the
majority of the increase along with increases in expenditures for playing pro
contracts and salesmen's commissions on retail sales.
General and administrative expenses increased $.4 million or 9.8% in fiscal
1995. Increased legal and professional services, employee relocation costs and a
full year of funding the Company's 401(k) plan were the major factors in the
increase.
Interest expense increased 127%, or $.8 million, in fiscal 1995 compared to
fiscal 1994. Increased long-term borrowings from the issuance of $5.0 million of
subordinated debt and higher interest rates on the Company's short-term line of
credit and term loan caused the increase.
During fiscal year 1995, the Company recorded an income tax provision of
$735,000. The income tax provision was principally the result of recording a
valuation allowance against previously recognized deferred tax assets due to the
uncertainty of the realization of the related benefits.
Impact of Inflation and Changing Prices
Management believes that the impact of inflation and other changes in prices
during the 1996 transition period and fiscal 1996, 1995 and 1994 had no material
effect on the Company's financial condition or operating results.
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Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements and Schedules
Report of Independent Public Accountants
Balance Sheets as of September 30, 1996, March 2, 1996, and February
25, 1995
Statements of Operations for the Seven-Month Period Ended September 30,
1996 and the Years Ended March 2, 1996, February 25, 1995, and
February 26, 1994
Statements of Stockholders' Equity (Deficit) for the
Seven-Month Period Ended September 30, 1996 and the Years Ended March
2, 1996, February 25, 1995, and February 26, 1994.
Statements of Cash Flows for the Seven-Month Period Ended September 30,
1996 and the Years Ended March 2, 1996, February 25, 1995, and
February 26, 1994.
Notes to Financial Statements
Financial Statement Schedules
See Part IV, Item 14(a)2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of The Arnold Palmer Golf Company:
We have audited the accompanying balance sheets of THE ARNOLD PALMER GOLF
COMPANY (a Tennessee corporation) as of September 30, 1996, March 2, 1996, and
February 25, 1995, and the related statements of operations, stockholders'
equity (deficit) and cash flows for the seven-month period ended September 30,
1996, and the years ended March 2, 1996, February 25, 1995, and February 26,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Arnold Palmer Golf Company
as of September 30, 1996, March 2, 1996, and February 25, 1995, and the results
of its operations and its cash flows for the seven-month period ended September
30, 1996 and the years ended March 2, 1996, February 25, 1995, and February 26,
1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
January 3, 1997
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14
THE ARNOLD PALMER GOLF COMPANY
F/K/A
PROGROUP, INC.
BALANCE SHEETS
SEPTEMBER 30, 1996, MARCH 2, 1996, AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS)
September 30, March 2, February 25,
ASSETS 1996 1996 1995
- ------------------------------------------------------ ------------ ------- ------------
CURRENT ASSETS:
Cash $ 47 $ 10 $ 34
Accounts receivable, less allowance for doubtful
accounts of $720, $758, and $1,049 at
September 30, 1996, March 2, 1996, and
February 25, 1995, respectively 5,630 3,776 7,184
Note receivable from sale of Duckster 0 1,126 0
Inventories 9,491 9,896 15,101
Prepaid expenses and other 913 759 478
------- ------- -------
Total current assets 16,081 15,567 22,797
------- ------- -------
PROPERTY, PLANT, AND EQUIPMENT, NET 1,445 1,188 3,778
------- ------- -------
OTHER ASSETS:
Investment in Nevada Bob's Holdings, Inc. 5,000 0 0
Non-current assets of discontinued operations 271 265 2,423
Goodwill 532 85 85
Other 1,605 1,455 2,188
------- ------- -------
Total other assets 7,408 1,805 4,696
------- ------- -------
$24,934 $18,560 $31,271
======= ======= =======
The accompanying notes are an integral part of these financial statements.
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15
THE ARNOLD PALMER GOLF COMPANY
F/K/A
PROGROUP, INC.
BALANCE SHEETS
SEPTEMBER 30, 1996, MARCH 2, 1996, AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDERS' September 30, March 2, February 25,
EQUITY (DEFICIT) 1996 1996 1995
- ------------------------------------------------------------ ------------- ------------- -------------
CURRENT LIABILITIES:
Current maturities of long-term obligations $ 112 $ 71 $ 407
Short-term borrowings from bank 796 10,096 11,829
Accounts payable 2,139 1,718 4,120
Accrued liabilities 2,288 2,409 3,629
------- ------- -------
Total current liabilities 5,335 14,294 19,985
------- ------- -------
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES 15,884 4,600 7,066
------- ------- -------
COMMITMENTS AND CONTINGENCIES
(NOTE 11)
REDEEMABLE PREFERRED STOCK, $.50 par
value, 833,333 shares authorized, issued, and
outstanding (liquidation preference of $5,000 plus
accumulated dividends)
5,000 0 0
------- ------- -------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.50 par value, 10,000,000 shares
authorized; 2,926,805, 2,634,991, and
2,539,366 shares issued and outstanding
September 30, 1996, March 2, 1996, and
February 25, 1995, respectively 1,463 1,317 1,270
Additional paid-in capital 5,991 4,794 4,118
Accumulated deficit (8,739) (6,445) (1,168)
------- ------- -------
Total stockholders' equity (deficit) (1,285) (334) 4,220
------- ------- -------
$24,934 $18,560 $31,271
======= ======= =======
The accompanying notes are an integral part of these financial statements.
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16
THE ARNOLD PALMER GOLF COMPANY
F/K/A
PROGROUP, INC.
STATEMENTS OF OPERATIONS
FOR THE SEVEN-MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND THE
YEARS ENDED MARCH 2, 1996, FEBRUARY 25, 1995, AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996 Fiscal Years
Transition ----------------------------------
Period 1996 1995 1994
---------- -------- -------- --------
NET SALES $ 18,456 $ 21,185 $ 24,621 $ 24,726
COST OF SALES 13,301 17,983 21,280 17,427
-------- -------- -------- --------
Gross profit 5,155 3,202 3,341 7,299
SELLING EXPENSES 4,466 4,559 6,368 4,959
GENERAL AND ADMINISTRATIVE EXPENSES 2,405 2,573 4,520 4,105
-------- -------- -------- --------
(1,716) (3,930) (7,547) (1,765)
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense, net (1,129) (2,965) (1,354) (596)
Writedown of note receivable (894) 0 0 0
Gain on pension curtailment 0 0 0 394
Royalty and sub-license income, net 937 974 569 280
Other, net 508 296 (393) 43
-------- -------- -------- --------
(578) (1,695) (1,178) 121
-------- -------- -------- --------
Loss from continuing operations before income taxes (2,294) (5,625) (8,725) (1,644)
BENEFIT (PROVISION) FOR INCOME TAXES 0 0 (735) 590
-------- -------- -------- --------
LOSS FROM CONTINUING OPERATIONS (2,294) (5,625) (9,460) (1,054)
-------- -------- -------- --------
DISCONTINUED OPERATIONS (NOTE 12):
Income (loss) from discontinued operations, net of tax
benefit of $513 in 1994 0 348 (6,082) (920)
Loss on disposal of discontinued operations 0 0 (1,244) 0
-------- -------- -------- --------
0 348 (7,326) (920)
-------- -------- -------- --------
NET LOSS $ (2,294) $ (5,277) $(16,786) $ (1,974)
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE FROM:
Continuing operations $ (.80) $ (2.15) $ (3.73) $ (.42)
Discontinued operations 0 0.13 (2.88) (.36)
-------- -------- -------- --------
$ (.80) $ (2.02) $ (6.61) $ (.78)
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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17
THE ARNOLD PALMER GOLF COMPANY
F/K/A
PROGROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SEVEN-MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND THE
YEARS ENDED MARCH 2, 1996, FEBRUARY 25, 1995, AND FEBRUARY 26, 1994
(IN THOUSANDS)
RETAINED
COMMON STOCK ADDITIONAL EARNINGS
------------------ PAID-IN (ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT) TOTAL
------ ------ ------- -------- -----
BALANCE AT FEBRUARY 27, 1993 2,517 $ 1,258 $ 2,125 $ 17,592 $ 20,975
Net loss 0 0 0 (1,974) (1,974)
Exercise of stock options 20 10 170 0 180
----- -------- -------- -------- --------
BALANCE AT FEBRUARY 26, 1994 2,537 1,268 2,295 15,618 19,181
Net loss 0 0 0 (16,786) (16,786)
Exercise of stock options 2 2 17 0 19
Issuance of warrants for 1,158
shares of common stock 0 0 1,806 0 1,806
----- -------- -------- -------- --------
BALANCE AT FEBRUARY 25, 1995 2,539 1,270 4,118 (1,168) 4,220
Net loss 0 0 0 (5,277) (5,277)
Issuance of warrants for 232 shares
of common stock 0 0 139 0 139
Issuance of common stock 96 47 537 0 584
----- -------- -------- -------- --------
BALANCE AT MARCH 2, 1996 2,635 1,317 4,794 (6,445) (334)
Net loss 0 0 0 (2,294) (2,294)
Conversion of subordinated convertible
note into 192 shares
of common stock 192 96 863 0 959
Issuance of common stock 100 50 334 0 384
----- -------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1996 2,927 $ 1,463 $ 5,991 $ (8,739) $ (1,285)
===== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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THE ARNOLD PALMER GOLF COMPANY
F/K/A
PROGROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE SEVEN-MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND THE
YEARS ENDED MARCH 2, 1996, FEBRUARY 25, 1995, AND FEBRUARY 26, 1994
(IN THOUSANDS)
Fiscal Years
1996 Transition --------------------------
Period 1996 1995 1994
--------------- ---- ---- ----
OPERATING ACTIVITIES:
Net loss $ (2,294) $ (5,277) $(16,786) $ (1,974)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 140 400 761 791
Amortization 433 1,674 71 0
Deferred income tax provision (benefit) 0 0 476 (1,103)
Gain on pension curtailment 0 0 0 (394)
(Gain) loss on disposal of property, plant, and equipment (98) (100) 114 5
Loss on disposal of discontinued operations 0 0 1,244 0
Writedown of note receivable 894 0 0 0
Other 0 0 348 0
Changes in assets and liabilities, net of effects from purchase of
National Golf Suppliers:
Accounts receivable (1,778) 3,409 4,909 (2,078)
Income taxes receivable 0 0 259 876
Inventories 489 2,479 605 (340)
Prepaid expenses and other (481) 452 1,117 (1,327)
Accounts payable 251 (2,400) (40) 308
Accrued liabilities (12) (1,577) 1,420 924
-------- -------- -------- --------
Net cash used in operating activities (2,456) (940) (5,502) (4,312)
-------- -------- -------- --------
INVESTING ACTIVITIES:
Additions to property, plant, and equipment (291) (150) (400) (905)
Proceeds from sale of property, plant, and equipment 125 3,855 117 0
Investment in Nevada Bob's Holdings, Inc. (5,000) 0 0 0
Payments received on note receivable 0 1,600 0 0
Other 0 0 0 (122)
-------- -------- -------- --------
Net cash provided by (used in) investing activities (5,166) 5,305 (283) (1,027)
-------- -------- -------- --------
FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings from bank 2,700 (1,733) 1,168 2,326
Proceeds from debt issuance and related warrants 0 0 5,000 0
Proceeds from term debt 0 0 0 3,000
Principal payments on long-term obligations (41) (2,656) (418) (167)
Issuance of common stock 0 0 19 180
Issuance of redeemable preferred stock 5,000 0 0 0
-------- -------- -------- --------
Net cash provided by (used in) financing activities 7,659 (4,389) 5,769 5,339
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH 37 (24) (16) 0
CASH, BEGINNING OF PERIOD 10 34 50 50
-------- -------- -------- --------
CASH, END OF PERIOD $ 47 $ 10 $ 34 $ 50
-------- -------- -------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments (refunds) during the period for:
Interest $ 613 $ 1,085 $ 1,088 $ 544
-------- -------- -------- --------
Income taxes, net $ 0 $ (5) $ (534) $ (365)
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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THE ARNOLD PALMER GOLF COMPANY
F/K/A
PROGROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(For purposes of these financial statements and notes to these financial
statements, the "1996 transition period" relates to the seven-month period
ended September 30, 1996 while "fiscal 1996, 1995, and 1994" pertains to the
years ended March 2, 1996, February 25, 1995, and February 26, 1994,
respectively. All monetary amounts are expressed in thousands of dollars
unless contrarily evident.)
1. NATURE OF OPERATIONS
The Arnold Palmer Golf Company (the "Company") manufactures, markets and
distributes golf products, including Arnold Palmer and First Flight golf
equipment and Hot-Z golf bags and luggage. The Company's principal market
is the United States. The Company owns, subject to certain exceptions, the
exclusive worldwide right to the Arnold Palmer trade name in connection
with the Company's manufacture, sale and distribution of golf products.
The Company sells primarily to retailers and golf specialty stores and
grants credit to customers based on defined payment terms. Three large
retail customers accounted for 25%, 32%, 36%, and 23% of net sales from
continuing operations for the 1996 transition period and fiscal 1996, 1995,
and 1994, respectively.
During the July 1996 shareholders' meeting, the Company changed its name to
The Arnold Palmer Golf Company from ProGroup, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DISCONTINUED OPERATIONS
As discussed in Note 12, on May 5, 1995, the Company sold its Duckster line
of headwear, outerwear, and shirts. Consistent with the provisions of
Accounting Principles Board Opinion No. 30, the results of
discontinued operations have been reported separately from the results of
continuing operations, and a provision was made in fiscal 1995 for the
estimated loss on the disposal of the Duckster line of business.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost includes
material, labor and factory overhead. Market is net realizable value for
finished goods. For raw materials and work-in-process, market is
replacement cost.
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20
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost, less accumulated
depreciation and amortization. Expenditures for maintenance and repairs
are charged to expense as incurred. The property, plant, and equipment
balances consisted of the following at September 30, 1996, March 2, 1996,
and February 25, 1995:
September 30, March 2, February 25,
1996 1996 1995
------------- ------------- ------------
Land $ 70 $ 75 $ 479
Buildings and improvements 661 824 3,599
Machinery and equipment 2,764 2,727 2,611
Furniture and fixtures 425 263 829
Construction in progress 275 42 173
------------- ------------- ------------
4,195 3,931 7,691
Less accumulated depreciation and
amortization (2,750) (2,743) (3,913)
------------- ------------- ------------
$ 1,445 $ 1,188 $ 3,778
============= ============= ============
Included in non-current assets of discontinued operations for the 1996
transition period and fiscal 1996 and 1995 are $271, $265 and $2,111 of
property, plant, and equipment stated at the lower of cost or estimated net
realizable value.
Depreciable assets are depreciated principally using the straight-line
method for financial reporting purposes and accelerated methods for income
tax purposes over the estimated useful lives of the related assets. The
estimated useful lives used in computing annual depreciation provisions are
as follows:
Years
-------
Buildings and improvements 5 to 31
Machinery and equipment 3 to 10
Furniture and fixtures 3 to 10
GOODWILL
Goodwill of $85 relates to a business acquired before November 1, 1970,
and is not required to be amortized. The remaining goodwill is being
amortized on a straight-line basis over 15 years.
ADVERTISING EXPENSES
The Company expenses production costs of advertising the first time the
advertising takes place, except for direct-response advertising, which is
capitalized and amortized over its expected period of future benefits.
20
21
At September 30, 1996, March 2, 1996, and February 25, 1995, the Company
reported $61, $287 and $321, respectively, of advertising as other
non-current assets in the accompanying balance sheets. Advertising expense
for the 1996 transition period and for the years ended 1996, 1995, and 1994
was $883, $547, $1,988, and $1,465, respectively.
INCOME TAXES
The Company uses the asset and liability approach to accounting for
deferred income taxes based on currently enacted tax rates and differences
in financial reporting and income tax basis of assets and liabilities.
FISCAL YEAR
During the 1996 transition period, the Company's Board of Directors
elected to change the Company's year end to September 30, effective
September 30, 1996. The previous periods reported are based on a
52-53-week period ending on the Saturday closest to the end of February.
NET LOSS PER SHARE
The computation of net loss per share is based on the weighted average
number of common shares outstanding during the period after adding common
stock equivalents having a dilutive effect. The weighted average number of
shares and equivalents outstanding for the 1996 transition period and for
fiscal 1996, 1995, and 1994 are 2,852,213, 2,615,619, 2,537,876, and
2,521,674, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the
1996 transition period financial statement presentation.
3. ACQUISITION OF NATIONAL GOLF SUPPLIERS, INC.
In June 1996, the Company issued 100,000 shares of its common stock in
exchange for certain assets and liabilities of National Golf Suppliers,
Inc. ("NGS"), a wholesaler of golf club component parts located in
Louisville, KY, at a purchase price of $384.
The acquisition of NGS has been accounted for under the purchase method of
accounting. Accordingly, the operating results of NGS have been included
in the Company's results of operations from the date of acquisition. The
excess of the aggregate purchase price over the fair value of net assets
acquired has been recorded as goodwill in the September 30, 1996 balance
sheet and is being amortized on a straight-line basis over a 15 year
period. The impact of the
21
22
acquisition on pro forma net loss and loss per share, as if the
acquisition had taken place at the beginning of fiscal 1996, was not
significant for the 1996 transition period and fiscal 1996.
4. INVENTORIES
Inventories as of September 30, 1996, March 2, 1996, and February 25, 1995,
consisted of the following:
September 30, March 2, February 25,
1996 1996 1995
------------- -------- ------------
Raw materials $ 4,344 $ 4,270 $ 4,521
Work-in-process 221 372 1,474
Finished goods 4,926 5,254 9,106
------------- -------- ------------
$ 9,491 $ 9,896 $ 15,101
============= ======== ============
5. INVESTMENT IN NEVADA BOB'S HOLDINGS, INC.
In August 1996, the Company purchased 625,000 mandatory redeemable,
convertible shares of Series D Preferred Stock ("Series D Shares") of
Nevada Bob's Holdings, Inc. ("NBHI") for $5,000. The shares are
convertible to common shares of NBHI at any time at the currently effective
conversion rate, as defined, and will automatically convert to common shares
if NBHI successfully completes an initial public offering of at least
$20,000. If the Series D Shares are not converted to common shares of NBHI
by August 21, 2000, NBHI shall redeem 33 1/3% of the shares annually over a
three year period at 150% of the original cost per share plus any declared
but unpaid dividends. This investment is classified as held-to-maturity
and is accounted for using the cost method of accounting. As this
transaction was entered into shortly before September 30, 1996, the Company
estimates that the carrying amount of the investment approximates fair
value at September 30, 1996.
6. SHORT-TERM BORROWINGS
Short-term borrowings consist of advances under a $15,000 line of credit
agreement with a bank. The line of credit is guaranteed by a significant
shareholder and director (the "Guarantor").
There are no financial covenants under the line of credit. Advances under
the line of credit bear interest at LIBOR plus 2 points (7.562% at
September 30, 1996) on the first $6 million outstanding, 7.844% on the next
$3.7 million outstanding and 7.656% on the next $1 million outstanding.
Outstanding amounts in excess of $10.7 million bear interest at the prime
rate less .50% (7.75% at September 30, 1996). The weighted average
interest rate for advances under the line of credit as of September 30,
1996, March 2, 1996, and February 25, 1995 was approximately 7.7%, 7.6%,
and 8.5%, respectively. Interest is payable monthly. Total advances
outstanding under the line of credit were $12,796 at September 30, 1996.
The line of credit was scheduled to mature in July 1997. Subsequent to
September 30, 1996, the Company and the bank agreed to convert $12,000 of
the line of credit to term debt due December 1999 and enter a new line of
credit agreement for $12,000 due December 1997, providing a total of
$24,000 in financing, which will be guaranteed by the Guarantor. As a
result of these new agreements, $12,000 of the amount outstanding under the
line of credit at September 30, 1996 has been classified as long-term in the
accompanying balance sheet. Between September 30, 1996 and the effective
date of this new agreement, the Company borrowed $1,100 from the Guarantor,
which will be repaid no later than January 31, 1997.
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7. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following at September 30, 1996,
March 2, 1996, and February 25, 1995:
September 30, March 2, February 25,
1996 1996 1995
------------- -------- ------------
Term loan with bank, due in monthly installments
of $45 (including interest at 9.5%) through
November 2000; paid in fiscal 1996 from
proceeds on the sale of related property, plant,
and equipment $ 0 $ 0 $ 2,590
Capital lease obligation, due in monthly
installments of $9 (including interest at 10.0%)
through December 2000; assumed by purchaser
of related property, plant, and equipment in
fiscal 1996 0 0 456
Subordinated notes ($5,000 face amount) to related
parties, net of discount of $1,175
at September 30, 1996 and $1,340 and $1,589 in
1996 and 1995, interest payable monthly at
6.0% (effective interest rate of 15.9%), due
November 2, 1999 3,825 3,660 3,411
Subordinated convertible note to Guarantor,
interest payable quarterly at the prime rate plus
2%; converted to common stock in the 1996
transition period 0 850 850
Other obligations 171 161 166
------------- -------- ------------
3,996 4,671 7,473
Less: current maturities (112) (71) (407)
------------- -------- ------------
3,884 $ 4,600 $ 7,066
======== ============
Portion of line of credit classified
as long-term (Note 6) 12,000
-------------
$ 15,884
=============
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24
In November 1994, the Company completed a private placement of $5,000 in
subordinated notes. The holders of the $5,000 subordinated notes (which
include an officer and certain directors of the Company) also received warrants
to purchase up to 1,000,000 shares of common stock of the Company at $5.50 per
share. The estimated fair value of the warrants was recorded as additional
paid-in capital. Due to the fact that no liquid market exists for the
subordinated notes, it is not practical to estimate their fair value.
Future scheduled maturities of long-term obligations as of September 30,
1996, were as follows:
1997 $ 112
1998 50
1999 9
2000 15,825
8. INCOME TAXES
Income tax benefit (provision) from continuing operations consists of:
1996 Fiscal Years
Transition -----------------------
Period 1996 1995 1994
---------- ---- ---- ----
Current $ 0 $ 0 $ 0 $ 0
Deferred 0 0 (735) 590
---------- ---- ----- ----
$ 0 $ 0 $(735) $590
========== ==== ===== ====
There was no current income tax provision or benefit recorded during the
1996 transition period and fiscal 1996, 1995, and 1994 due to the losses
sustained by the Company. The provision for income taxes in fiscal 1995
resulted principally from recording a valuation allowance against
previously recognized deferred tax assets due to the uncertainty of the
realization of the related benefits.
24
25
Deferred income tax assets and liabilities reflect the impact of temporary
differences between the amounts of assets and liabilities for financial
reporting and income tax reporting purposes. Temporary differences and
carryforwards which give rise to deferred tax assets and liabilities at
September 30, 1996, March 2, 1996, and February 25, 1995, are as follows:
September 30, March 2, February 25,
1996 1996 1995
------------- -------- ------------
Deferred tax assets:
Tax loss carryforwards $ 9,148 $ 8,127 $ 5,176
Inventory and receivables reserves 288 752 1,274
Other accruals and reserves 772 581 1,356
------------- -------- ------------
10,208 9,460 7,806
------------- -------- ------------
Deferred tax assets valuation allowance (9,296) (8,516) (6,603)
------------- -------- ------------
Deferred tax liabilities:
LIFO to FIFO change 379 470 627
Prepaid expenses 63 119 131
Excess tax depreciation 72 35 141
Other 398 320 304
------------- -------- ------------
912 944 1,203
------------- -------- ------------
Net deferred tax asset $ 0 $ 0 $ 0
============= ======== ============
At September 30, 1996, the Company had federal tax loss carryforwards of
approximately $24,000 which expire in years 2009 through 2011 if not
utilized earlier.
The difference between the benefit (provision) for income taxes and the
amount computed by multiplying the loss from continuing operations before
income taxes by the statutory rate is summarized as follows:
1996 Fiscal Years
Transition -----------------------
Period 1996 1995 1994
---------- ---- ---- ----
Expected tax benefit $ 780 $ 1,913 $ 2,966 $ 559
Change in valuation allowance (780) (1,913) (3,791) 0
State income taxes, net of federal income tax
benefit 0 0 349 66
Other, net 0 0 (259) (35)
---------- ---- ---- ----
Benefit (provision) for income taxes
from continuing operations $ 0 $ 0 $ (735) $ 590
========== ======= ======= =====
A valuation allowance was recorded related to the entire amount of losses
from discontinued operations in fiscal 1995; accordingly, no income tax
provision or benefit was recognized for discontinued operations in 1995.
25
26
9. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has noncontributory defined benefit pension plans covering
substantially all salaried and hourly employees. The plans provide
benefits based on years of service and compensation levels. In the opinion
of management, the Company's funding policy is consistent with the
requirements of the Employee Retirement Income Security Act of 1974. Plan
assets are invested primarily in common stocks and corporate debt
securities.
Pension income for the 1996 transition period and for fiscal 1996, 1995,
and 1994 included the following components:
1996 Fiscal Years
Transition -----------------------
Period 1996 1995 1994
---------- ---- ---- ----
Service cost $ 36 $ 86 $ 97 $ 199
Interest cost on projected benefit
obligation 199 365 376 371
Actual (return) loss on plan assets (342) (1,047) 177 (456)
Net amortization and deferral (35) 430 (932) (592)
---------- ------ ------ ------
Net pension income $ (142) $ (166) $ (282) $ (478)
========== ====== ====== ======
The following table sets forth the funded status of the plans as of
September 30, 1996, March 2, 1996, and February 25, 1995:
September 30, March 2, February 25,
1996 1996 1995
------------- -------- ------------
Actuarial present value of benefit obligation:
Vested benefit obligation $ 4,347 $ 4,774 $ 4,104
Nonvested benefit obligation 0 0 0
------------- -------- ------------
Accumulated benefit obligation $ 4,347 $ 4,774 $ 4,104
============= ======== ============
Projected benefit obligation $ 4,429 $ 5,034 $ 4,338
Plan assets at fair value 5,972 6,011 5,634
------------- -------- ------------
Plan assets in excess of projected benefit
obligation 1,543 977 1,296
Unrecognized net (gain) loss (229) 242 (155)
Unrecognized prior service cost 171 180 196
Unrecognized initial net asset (378) (434) (538)
Additional liability (59) (123) 0
------------- -------- ------------
Net pension asset recognized on the balance
sheets $ 1,048 $ 842 $ 799
============= ======== ============
26
27
The following assumptions were used to measure the net periodic pension
income and the projected benefit obligation:
1996 Fiscal Years
Transition -----------------------
Period 1996 1995 1994
---------- ---- ---- ----
Discount rate used to determine the projected
benefit obligation 7.5% 7.25% 8.0% 7.0%
Rate of increase in future compensation levels
used to determine the projected benefit
obligation 5.0% 5.0% 5.0% 5.0%
Expected long-term rate of return on plan assets
used to determine net periodic pension
income 9.0% 9.0% 9.5% 9.5%
During fiscal 1994, the Company curtailed the benefits under its defined
benefit plans. Under this curtailment, nonunion employees that are not at
least age 50 with at least five years of service will accrue no further
benefits under the plans. As a result of this partial curtailment, a gain
of $394 has been reflected in the net amortization and deferral component
of pension income for fiscal 1994. This gain is separately classified in
other income in the accompanying statement of operations.
401(K) PROFIT-SHARING PLAN
During fiscal 1994, the Company established a 401(k) profit-sharing plan
covering substantially all employees at least 21 years of age with six
months of service. The plan allows for employees to contribute a portion
of their compensation, subject to certain limitations. The Company may
make discretionary contributions to the plan. Total discretionary
contributions during the 1996 transition period and fiscal 1996, 1995, and
1994 were $20, $39, $91, and $7, respectively.
10. CAPITAL STOCK
STOCK ISSUANCES
As consideration to the Guarantor for his guarantee of the line of credit
in January 1995, the Company issued an $850 subordinated convertible note
and a warrant to purchase up to 390,000 common shares of the Company. The
cost of the guarantee was set up as a deferred asset and amortized to
interest expense over the life of the note. Additionally, the Guarantor
was given preemptive rights through January 27, 2000 with respect to future
issuances by the Company sufficient to enable the Guarantor to maintain his
fully diluted common stock ownership percentage. In March 1996, the $850
subordinated note plus accrued interest was converted to 191,814 shares of
common stock under the terms of the note.
In March 1995, the Company entered into a revolving credit facility with the
Guarantor (this line was subsequently replaced by the line of credit
discussed in Note 6). For each $100 drawn under this facility, the
Guarantor was issued 3,750 shares of the Company's common stock. Under
this facility, the Guarantor was issued 80,625 shares in fiscal 1996.
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STOCK OPTION PLANS
The Company has incentive stock option plans which were adopted under a
1981 plan and a 1992 plan for its officers and key employees which provide
for issuance of options to purchase up to 500,000 and 324,032 common
shares, respectively. The plans are administered by the Executive
Committee of the Board of Directors.
The Company accounts for the plans under Accounting Principles Board
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined consistent with
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"), the
Company's net loss and loss per share would have been increased to the
following pro forma amounts:
1996
Transition Fiscal
Period 1996
---------- ------
Net loss: As reported $ (2,294) $ (5,277)
Pro Forma (2,490) (5,364)
Loss per share: As reported $ (0.80) $ (2.02)
Pro Forma (0.87) (2.05)
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to February 26, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
At September 30, 1996, the total number of shares available for options was
as follows:
Reserved for:
Outstanding stock options 656,532
Stock options authorized but not granted 7,400
-------
663,932
=======
Stock options are exercisable at the market price on the date of grant and
expire on various dates through 2006. Stock options generally vest ratably
over a 3 year period from the date of grant or date of hire.
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29
Stock option activity during the 1996 transition period and years ended
March 2, 1996, February 25, 1995, and February 26, 1994, is as follows:
1996
Transition Period Fiscal 1996
--------------------- -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- -------- ---------- --------
Outstanding at beginning of period 596,532 $ 6.53 425,732 $ 8.68
Granted 80,000 5.38 241,000 4.09
Exercised 0 0.00 0 0.00
Canceled or expired (20,000) 7.63 (70,200) 11.23
---------- ----------
Outstanding at end of period 656,532 6.36 596,532 6.53
========== ==========
Exercisable at end of period 362,199 $ 8.11 348,865 $ 8.19
========== ==========
Fiscal 1995 Fiscal 1994
--------------------- -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- -------- ---------- --------
Outstanding at beginning of period 533,232 $ 8.90 502,032 $ 8.50
Granted 40,000 10.19 56,200 12.46
Exercised (2,500) 7.12 (20,000) 9.03
Canceled or expired (145,000) 9.92 (5,000) 8.10
---------- ----------
Outstanding at end of period 425,732 8.68 533,232 8.90
========== ==========
Exercisable at end of period 385,732 $ 8.41 394,777 $ 8.56
========== ==========
Of the options outstanding at September 30, 1996, 301,000 have exercise
prices between $3.75 and $5.38, with a weighted average exercise price of
$4.20 and a weighted average remaining contractual life of 9.4 years. Of
these options, 10,000 are exercisable at a weighted average exercise price
of $5.38. The remaining 355,532 options have exercise prices between $7.12
and $10.93, with a weighted average exercise price of $8.18 and a weighted
average remaining contractual life of 1.7 years. All of these options are
exercisable.
The fair value of option grants is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in the 1996 transition period and fiscal 1996,
respectively: risk-free interest rates of 6.30 and 5.40 percent; expected
dividend yields of 0 percent; expected lives of one year after vesting;
expected volatility of 73 percent. The weighted average fair value of
options granted during the 1996 transition period and fiscal 1996 is $2.13
and $2.09, respectively.
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30
STOCK PURCHASE WARRANTS
The Company, in conjunction with the November 1994 issuance of the $5,000
subordinated notes (Note 7), issued warrants to purchase 1,000,000 shares
of common stock at an exercise price of $5.50. Each warrant may be
exercised with $5.50 in cash or principal value of the notes at any time
during the life of the warrants, which expire on November 3, 1999.
In connection with the January 1995 guarantee of the Company's line of
credit (Note 6), the Guarantor was issued a warrant to purchase up to
390,000 common shares at $6.25 per share. These warrants expire January
27, 2000. In March 1995, all 390,000 warrants were immediately vested and
subject to a reset price of $5.00 per share.
PREFERRED STOCK
On July 18, 1995, the Company's shareholders approved an amendment to the
Restated Articles of Incorporation to create and authorize the issuance of
up to 1 million shares of preferred stock, having a par value of $.50 per
share. The designation, powers, preferences, and rights of the shares
shall be determined by the Company's Board of Directors prior to issuance.
No shares of this preferred stock have been issued.
REDEEMABLE PREFERRED STOCK
In August 1996, the Company issued 833,333 shares of its newly created
Series NB Preferred Stock ("NB Shares") for $5,000 to the Guarantor to fund
the Company's investment in NBHI (Note 5). The NB Shares have a stated
value of $6 per share and are convertible at any time to common stock on a
one to one ratio. The NB Shares are entitled to cumulative dividends equal
to 30% of the earnings realized by the Company from its investment in
NBHI's Series D Shares. The NB Shares shall have a preference in
liquidation of $5,000 plus accumulated dividends and are required to be
redeemed upon sale or redemption of the Series D Shares of NBHI. As this
transaction was entered into shortly before September 30, 1996, the Company
estimates that the carrying amount of redeemable preferred stock
approximates fair value at September 30, 1996.
11. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has entered into various operating leases for buildings and
office equipment. Rent expense was approximately $405, $433, $355, and
$301 for the 1996 transition period and fiscal years 1996, 1995 and 1994,
respectively. Approximate future minimum rental commitments for the next
five years for noncancelable operating leases as of September 30, 1996,
were as follows:
1997 $708
1998 652
1999 606
2000 332
2001 179
LITIGATION
On March 25, 1996, Richard E. Wenz, the former CEO of the Company, filed a
lawsuit against Arthur P. Becker, formerly Chairman of the Board and
currently a Board member, in the United
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States District Court for the Southern District of New York. The lawsuit
arises out of the publication in the June 12, 1995 edition of Fortune
magazine of certain statements relating to Mr. Wenz's relationship with the
Company which were attributed to Mr. Becker.
The complaint alleges a cause of action against Mr. Becker for defamation
per se and seeks compensatory damages of at least $10 million, plus
punitive damages in an unspecified amount. Pursuant to the provisions of
the Amended and Restated By-Laws of the Company and the applicable
provisions of the Tennessee Business Corporation Act, the Company has
agreed to indemnify Mr. Becker from liability which he may incur as a
result of the lawsuit. The Company has also agreed to advance certain
costs of defense of the lawsuit to Mr. Becker.
On May 21, 1996, Mr. Wenz amended his complaint by adding Time, Inc., the
publisher of Fortune magazine, as an additional defendant in the lawsuit.
The cause of action alleged against Time, Inc. is also for defamation per
se, arises out of the same June 12, 1995, article, and also seeks
compensatory damages of at least $10 million.
On April 15, 1996, Mr. Becker filed his answer to the original complaint.
The answer denied all allegations of wrongdoing and set forth 15
affirmative defenses. On June 11, 1996, Mr. Becker filed his answer to the
amended complaint, repeating his denials of all wrongdoing and repeating
the 15 affirmative defenses. On or about June 12, 1996, Time, Inc. filed
its answer, also denying all wrongdoing, and setting forth nine affirmative
defenses.
As of this date, only limited discovery has taken place and no trial date
has been set. Accordingly, it is premature to speculate upon the ultimate
resolution or outcome of the lawsuit. Mr. Becker intends to defend the
suit vigorously.
The Company is party to certain other legal proceedings incidental to its
business. In the opinion of management, based in part on the advice of
legal counsel, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position or results of
operations.
ROYALTY COMMITMENTS
The Company pays royalties under a license agreement with Arnold Palmer
Enterprises, Inc., a company controlled by a shareholder and a member of
the Company's Board of Directors. The Company has the right to sub-license
its rights under this agreement. The agreement expires March 1, 2007, but
may be extended for successive five-year periods. Under the terms of the
agreement, the Company will pay royalties of 1% to 5% of net sales of
specified products and a portion of sub-licensing royalties. The Company
has committed to pay minimum royalties ranging from $600 in 1997 to $750 in
2007. During the 1996 transition period and fiscal 1996, 1995 and 1994,
the Company incurred royalty expense under this agreement of approximately
$442, $500, $524, and $340, respectively.
12. DISCONTINUED OPERATIONS - SALE OF DUCKSTER
On May 5, 1995, the Company sold its Duckster line of headwear, outerwear,
and shirts for approximately $3,000 in cash and a $2,726 installment
promissory note, of which $1,126 remains outstanding at September 30, 1996.
The Company also retained approximately $4,200 in existing accounts
receivable.
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The sale resulted in an estimated loss on disposal of $1,244, which has
been included as a component of discontinued operations in 1995. Duckster
revenues for fiscal 1996, 1995, and 1994 were $4,649, $15,485, and
$20,170, respectively.
The $1,126 note receivable which was scheduled for repayment on October
10, 1996 has not been paid. In lieu of payment, the holder has agreed to
turn over certain manufacturing equipment and other consideration to the
Company, which the Company believes has a fair value of approximately $300.
As a result, the Company has written the note receivable and related
accrued interest receivable down $894, and has classified the remaining
balance in other non-current assets in the accompanying balance sheet.
13. CHANGE IN FISCAL YEAR
During the 1996 transition period, the Company changed its fiscal year end
to September 30 from the Saturday closest to the end of February.
Accordingly, the September 30, 1996 results of operations are for a
seven-month period.
Following are selected financial data for the seven-month periods ended
September 30, 1996 and 1995:
1996 1995
------- -----------
(Unaudited)
Net sales $18,456 $ 14,777
Gross profit 5,155 3,765
Loss from continuing operations (2,294) (1,446)
Income from discontinued operations 0 348
Net loss (2,294) (1,098)
Loss per share from continuing
operations (0.80) (0.55)
Loss per share (0.80) (0.42)
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Item 9. Disagreements on Accounting and Financial Disclosure. No event described
in Item 304 of Regulation S-K has occurred.
PART III
Item 10. Directors and Executive Officers of the Company.
(a) Directors
The information found in the section titled Election of Directors in
the Company's 1997 Proxy Statement is incorporated herein by reference.
(b) Executive Officers
The following lists the names of all executive officers of the Company,
their ages, their positions with the Company and the year in which they
were first elected to these positions:
John T. Lupton. Age 70. Mr. Lupton was named Chairman of the
Board of Directors and Chief Executive Officer of APGC in March, 1995.
Mr. Lupton is the former Chairman of JTL Corp., a bottler of Coca-Cola
and related products, and a private investor.
George H. Nichols. Age 57. Mr. Nichols has been President and
Chief Operating Officer of APGC since January, 1996. Prior to joining
the Company, Mr. Nichols was Chairman, President, and Chief Executive
Officer of Square Two Golf, Inc. from April, 1991 to October, 1995.
Robert R. Winskowicz. Age 36. Mr. Winskowicz has been Senior
Vice President - Sales and Marketing since January 1996. Prior to
joining the Company, Mr. Winskowicz was Regional Sales Manager of
MacGregor Golf from March 1994 until December 1995. Mr. Winskowicz
served as National Account Manager at Dep Corporation from August 1992
through March 1994, and was Regional Sales Manager of Alberto Culver
from December 1990 until August 1992.
Claire V. Bradford. Age 42. Ms. Bradford has been Vice
President - Sales and Staff Services since December, 1995. She joined
the Company as Director of Human Resources in December 1992. Prior to
joining the Company, Ms. Bradford was a consultant in human resources
management for Suter & Associates, a private consulting firm, and
Director of Human Resources for MEDCORP, a private medical management
company from 1991 to 1992.
Frederick J. Frazier, III. Age 32. Mr. Frazier has been Vice
President and General Manager - Golf Club Division since November 1993.
He joined the Company in July, 1993 as Director of Marketing - Golf
Clubs. Prior to joining the Company, Mr. Frazier was Business Manager
of Winchester Ammunition and Director of marketing at RAM Golf Corp.
Dexter Scudder Graybeal. Age 56. Mr. Graybeal has been Vice President
- Special Markets since April, 1994. He has been employed by
the Company since March of 1972 in various capacities including
Regional and National Sales Manager, Director of Sales, Vice President
- Sales and Vice President/General Manager - Arnold Palmer Golf Co.
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34
David J. Kirby. Age 47. Mr. Kirby has been Vice President -
Finance since February, 1996. He joined the Company as Cost Accountant
in January, 1993, and was named Controller in November 1994. Prior to
1993, Mr. Kirby served as Financial Analyst and Controller at Balsam
Corporation.
Item 11. Executive Compensation.
The information found in the section titled Executive Compensation and Other
Information in the Company's 1997 Proxy Statement is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information found in the section titled Voting Securities and Principal
Holders Thereof in the Company's 1997 Proxy Statement is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
The information found in the sections titled Certain Transactions and Agreements
with Certain Executive Officers in the Company's 1997 Proxy Statement is
incorporated herein by reference.
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PART IV
Item 14. Exhibits. Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The financial statements are set forth in the Index to
Financial Statements and Schedules found in Part II, Item 8.
2. Financial Statement Schedules:
Report of Independent Public Accountants
Schedule II -- Valuation and Qualifying Accounts
3. Exhibits:
See the Exhibit Index on page 40 of this Form 10-K.
(b) The Registrant did not file any reports on Form 8-K during the
last quarter of the 1996 transition period.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of The Arnold Palmer Golf Company:
We have audited, in accordance with generally accepted auditing standards, the
financial statements included in Part II, Item 8 of this Form 10-K and have
issued our report thereon dated January 3, 1997. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole.
Schedule II is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
January 3, 1997
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SCHEDULE II
THE ARNOLD PALMER GOLF COMPANY
F/K/A
PROGROUP, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE SEVEN-MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND THE
YEARS ENDED MARCH 2, 1996, FEBRUARY 25, 1995, AND FEBRUARY 26, 1994
(IN THOUSANDS)
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO
DESCRIPTION BEGINNING COST AND OTHER BALANCE AT END
OF PERIOD EXPENSES ACCOUNTS(1) DEDUCTIONS(2) OF PERIOD
- ----------------------------------------------------- ---------- ---------- ----------- ------------- --------------
For the seven-month period ended September 30, 1996:
Allowance for doubtful accounts $ 758 $ 373 $ 35 $ (446) $ 720
======== ======== ======== ======== ========
For the year ended March 2, 1996:
Allowance for doubtful accounts $ 1,049 $ 0 $ 20 $ (311) $ 758
======== ======== ======== ======== ========
For the year ended February 25, 1995:
Allowance for doubtful accounts $ 478 $ 1,226 $ 112 $ (767) $ 1,049
======== ======== ======== ======== ========
For the year ended February 26, 1994:
Allowance for doubtful accounts $ 399 $ 250 $ 58 $ (229) $ 478
======== ======== ======== ======== ========
(l) Recoveries on accounts written off.
(2) Accounts written off.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned who are duly authorized to do so.
THE ARNOLD PALMER GOLF COMPANY
Date: January 3, 1997 By /s/ John T. Lupton
---------------------------------
(John T. Lupton)
Chief Executive Officer
Date: January 3, 1997 By /s/ George H. Nichols
---------------------------------
(George H. Nichols)
President (Chief Operating Officer)
Date: January 3, 1997 By /s/ David J.Kirby
---------------------------------
(David J. Kirby)
Vice President Finance (Chief Financial
Officer)
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Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date:
----------------------------------------
(Arthur P. Becker) Director
Date:
----------------------------------------
(Robert H. Caldwell) Director
Date: January 3, 1997 /s/ David S. Gonzenbach
----------------------------------------
(David S. Gonzenbach) Director
Date: January 3, 1997 /s/ James L.E.Hill
----------------------------------------
(James L.E. Hill) Director
Date:
----------------------------------------
(Richard Horton) Director
Date: January 3, 1997 /s/ John T.Lupton
----------------------------------------
(John T. Lupton) Chairman of the Board
Date: January 3, 1997 /s/ George H. Nichols
----------------------------------------
(George H. Nichols) Director
Date:
----------------------------------------
(Arnold D. Palmer) Director
Date: January 3, 1997 /s/ Joel W. Richardson, Jr.
----------------------------------------
(Joel W. Richardson, Jr.) Director
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THE ARNOLD PALMER GOLF COMPANY
EXHIBIT INDEX
Exhibit
Number Description
3.1* Amended and Restated Charter of The Arnold Palmer Golf Company
3.2** Amended and Restated Bylaws of ProGroup, Inc.
10.1 $1,100,000 Promissory Note of the Company to John T. Lupton
dated December 6, 1996.
10.2 $12,000,000 Master Note of the Company to The Northern Trust
Company dated December 30, 1996.
10.3 $12,000,000 Term Note of the Company to The Northern Trust
Company dated December 30, 1996.
22*** Subsidiaries of the Company
24 Consent of Arthur Andersen LLP, independent accountants
27 Financial Data Schedule (for SEC use only)
* Incorporated by reference herein from the Company's Form
10-Q for the quarter ended August 31, 1996.
** Incorporated by reference herein from the Company's Form
10-K for the year ended February 25, 1995.
*** Incorporated by reference herein from the Company's Form
10-K for the transition period ended February 22, 1992.
40