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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
July 31, 1998
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Date of Report (Date of earliest event reported)
Evenflo & Spalding Holdings Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
333-14569 59-2439656
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(Commission File Number) (IRS Employer Identification No.)
601 South Harbour Island Boulevard, Suite 200, Tampa, Florida 33602-3141
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(Address of principal executive offices) (Zip Code)
(813) 204-5200
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Evenflo & Spalding Holdings Corporation (the
"Company") is hereby filing cautionary statements identifying important factors
that could cause the Company's actual results to differ materially from those
contained in forward-looking statements of the Company made by or on behalf of
the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following is filed as an Exhibit to this Report.
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<CAPTION>
Exhibit No. Description of Exhibit
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<S> <C>
99.1 Press Release
99.2 Cautionary statement for purposes of the
"Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995.
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SIGNATURE
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 hereunto duly authorized.
Evenflo & Spalding Holdings Corporation
(Registrant)
Date: July 31, 1998 By: /s/ W. Michael Kipphut
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W. Michael Kipphut
Vice President and Treasurer
(a Principal Financial Officer
and authorized signatory)
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EXHIBIT 99.1
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NEWS RELEASE
================================================================================
601 S. Harbour Island Boulevard W. Michael Kipphut
P.O. Box 30101 Vice President
Tampa, FL 33630-3101
(813) 204-5200
EVENFLO & SPALDING HOLDINGS CORPORATION
TO SEPARATE ITS BUSINESSES
[EVENFLO LOGO] [SPALDING LOGO] - SPALDING AND EVENFLO WILL BECOME SEPARATE
STAND-ALONE COMPANIES AND BE BETTER
POSITIONED TO IMPLEMENT THEIR LONG-TERM
GROWTH STRATEGIES
- RESTRUCTURING WILL FACILITATE REDUCTION OF
EXISTING DEBT
CHICOPEE, MA, VANDALIA, OH AND NEW YORK, NY, JULY 31, 1998 -- Evenflo & Spalding
Holdings Corporation (E&S), the parent company of Evenflo Company, Inc.
(Evenflo) and Spalding Sports Worldwide (Spalding), today announced that its
Board of Directors has approved a restructuring of the Company. The
restructuring will result in the separation of its two businesses, Evenflo
Company, Inc. and Spalding Sports Worldwide, into two stand-alone companies, the
infusion of $100 million equity into E&S, and the reduction of approximately
$275 million of debt under E&S's senior credit facilities.
The restructuring and the separation will allow both companies to better
implement their strategies and to achieve their growth objectives. Moreover, the
companies will benefit from the centralization of their business functions at
their respective headquarters and from fully dedicated, on-site management
teams. The corporate entity now known as Evenflo & Spalding Holdings Corporation
will be renamed Spalding Holdings Corporation and will include Spalding's
operations in addition to an equity interest of approximately 42% in Evenflo.
The separation will be accomplished through a sale by a Spalding subsidiary of
51% of the outstanding common stock of Evenflo to an affiliate of Kohlberg
Kravis Roberts & Co. (KKR) for $25.5 million, and approximately 7% of Evenflo's
outstanding common stock to Abarco N.V. for $3.3 million. Both KKR and Abarco
N.V. are currently shareholders of E&S. KKR will also acquire shares of noncash
pay preferred stock of Evenflo for $40 million in cash. Evenflo will receive
$120 million of proceeds from certain other debt financings to repay
indebtedness owed to E&S and to pay certain fees and expenses. The proceeds of
these transactions will be used to repay E&S debt under its senior debt
facilities. After giving effect to the recapitalization, Evenflo will have
approximately $35 million of availability for general corporate purposes under a
new $100 million revolving credit facility.
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EVENFLO & SPALDING HOLDINGS CORPORATION
TO SEPARATE ITS BUSINESSES
Page 2
As part of the restructuring, E&S has reached agreement with its bank syndicate
to amend its senior credit facilities by removing certain financial ratio
requirements until December 31, 1999, and to amend certain other covenants. In
addition, KKR has agreed to invest $100 million in exchange for noncash pay
preferred stock of E&S. Proceeds of that investment, together with the proceeds
received from Evenflo, will be used to repay approximately $275 million of debt
under E&S's senior credit facility. After this repayment of debt, E&S's next
scheduled principal payment under the amended senior credit facility will be in
the year 2002.
Kevin T. Martin, President of Spalding Sports Worldwide, said: "As an
independent company, Spalding will be ideally positioned to capitalize upon the
growth opportunities that exist today in golf and sporting goods in general. We
are pleased to enter this new chapter in our history with continued sponsorship
by KKR."
Richard W. Frank, Chairman and Chief Executive Officer of Evenflo Company, Inc.,
said: "This restructuring will provide Evenflo with the means to achieve its
growth objectives in its competitive industry. Evenflo is recognized throughout
the world as a leading innovator and marketer of juvenile products and we intend
to capitalize upon our new financial flexibility to realize the full potential
of our brands."
Michael Tokarz, a KKR executive, said: "Spalding and Evenflo are two
strategically unrelated businesses and with their size and complexity, we
believe that it is to their advantage to operate as separate corporate entities.
We are pleased that we were able to structure a transaction that provides both
companies enhanced financial strength to implement their respective growth
strategies." KKR became Evenflo & Spalding's controlling shareholder in 1996.
While E&S has not finalized its financial statements for the third quarter of
fiscal 1998, it expects to report operating results significantly below levels
of the comparable period of the prior year. The financial results of E&S through
this period are comprised of the results of Spalding, the results of Evenflo,
and expenses associated with its Tampa, Florida, headquarters.
On a stand-alone proforma basis, Evenflo expects to report net sales and
earnings (loss) from operations of $82.5 million and $(1.0) million for the
three months ended June 30, 1998, compared to $98.7 million and $1.6 million for
the comparable period of the prior year. Evenflo's proforma adjusted EBITDA
(earnings (loss) before interest expense, income taxes, depreciation,
amortization, restructuring costs and unusual costs) was $3.5 million for the
three months ended June 30, 1998, compared to $6.8 million for the same period
of the prior year. Evenflo's projected proforma results include the effects of
allocated administrative expenses from E&S and, for 1997, include Gerry Baby
Products Company. The financial results of Evenflo have been impacted by, among
other things, a recently announced inventory reduction program at Toys "R" Us,
Inc., Evenflo's largest customer, as well as higher safety campaign and product
liability costs.
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EVENFLO & SPALDING HOLDINGS CORPORATION
TO SEPARATE ITS BUSINESSES
Page 3
Following completion of the restructuring, which is expected to occur in August
1998, E&S's headquarters in Tampa, Florida, will be closed and its functions
transferred to the separate Spalding and Evenflo operations.
The capital raising initiatives and senior credit facilities amendment described
above are conditioned upon the consummation of the restructuring in its
entirety.
KKR is a private investment firm headquartered in New York and Menlo Park,
California.
Evenflo Company, Inc. is one of the most recognizable producers of infant and
juvenile products under the Evenflo, Gerry and Snugli brand names. Headquartered
in Vandalia, Ohio, Evenflo's product line includes car seats, strollers,
stationary activity centers, gates, high chairs, play yards, cribs, child
carriers, and a wide variety of infant accessories.
Founded in 1876, Spalding Sports Worldwide is a leading manufacturer of products
serving sporting goods markets under the Spalding, Top-Flite, Ben Hogan, Etonic,
and Dudley brand names. Headquartered in Chicopee, Massachusetts, Spalding
markets a broad range of recreational and athletic goods, including products
used in golf, basketball, softball, baseball, volleyball, soccer, tennis,
racquetball, and football.
The information relating to the anticipated results of E&S contained in this
press release is a forward-looking statement based on the expectations of
management as of the date hereof. Since the financial statements of E&S have not
been finalized, management has not prepared a discussion and analysis of such
results and factors in addition to those cited above may have impacted the
results for the period discussed.
# # #
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EXHIBIT 99.2
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about their companies without fear of litigation so long
as those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in such forward-looking
statements. The Company desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is filing
this Form 8-K in order to do so.
Forward looking statements are necessarily dependent upon assumptions,
estimates and data that may be incorrect or imprecise and involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company or any of its
subsidiaries, or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Accordingly, the Company
hereby identifies the following important factors as some of the factors which
could cause the Company's financial results to differ materially from any such
results which might be projected, forecast, estimated or budgeted by the Company
in forward-looking statements:
(a) Heightened competition, including specifically the
intensification of price competition and the introduction of
new products;
(b) Higher selling, general and administrative expenses, including
advertising and promotion;
(c) Significant indebtedness of the Company;
(d) Inability of the Company to reduce its current cost structure;
(e) Continue introduction of products which represent an
improvement over existing products;
(f) Failure to obtain new customers or retain existing customers
or the effects of inventory reductions by key accounts;
(g) Inability to carry out domestic and foreign marketing and
sales plans;
(h) Changes in operating strategy or development plans;
(i) Product recalls and liability claims;
(j) Changes in the Company's capital expenditures plan;
(k) General domestic and foreign economic downturns;
(l) Changes in or failure to comply with government
regulations; and
(m) Adverse publicity and news coverage.
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The foregoing review of factors pursuant to the Private Litigation
Securities Reform Act of 1995 should not be construed as exhaustive or as any
admission regarding the adequacy of disclosures made by the Company prior to
this filing. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by such factors.
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