UNITED STATES
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
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 9, 2000
SPALDING HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 333-14569 59-2439656
(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
425 MEADOW STREET, CHICOPEE, MASSACHUSETTS 01013
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (413) 536-1200
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ITEM 5. OTHER EVENTS
Spalding Holdings Corporation is issuing a Press Release to report financial
results for the three and nine fiscal months ended September 30, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) The following is filed as an Exhibit to this Report
Exhibit No. Description of Exhibit
99.1 Press Release announcing financial
results for the three and nine months
ended September 30, 2000.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Spalding Holdings Corporation
(Registrant)
By: /S/ DANIEL S. FREY
-----------------------
Daniel S. Frey
Chief Financial Officer
(an officer and authorized signatory)
Date: November 9, 2000
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EXHIBIT 99.1
News Release
425 Meadow Street Daniel S. Frey
Chicopee, MA 01013 Chief Financial Officer
(413) 536-1200
SPALDING HOLDINGS CORPORATION
ANNOUNCES 2000 THIRD QUARTER RESULTS
CHICOPEE, MASSACHUSETTS, NOVEMBER 9, 2000 -- Spalding Holdings Corporation (the
"Company"), the parent of Spalding Sports Worldwide, Inc. ("Spalding"), today
reported improved results for the third quarter ended September 30, 2000 ("2000
Third Quarter") and the nine months ended September 30, 2000 ("2000 Nine
Months").
OPERATING RESULTS CONTINUE TO IMPROVE
-------------------------------------
For the fourth consecutive quarter, when compared to the corresponding quarter
of the prior year, Spalding has reported improvements in gross profit, operating
income and net income (loss).
Income from operations was $2.2 million for the 2000 Third Quarter compared to a
loss of $(12.0) million for the fiscal quarter ended October 2, 1999 ("1999
Third Quarter"). For the 2000 Nine Months, income from operations more than
tripled reaching $30.4 million compared to $9.8 million in the prior year
period. During the 1999 Third Quarter, Spalding recorded a charge of $8.7
million to gross profit due to the write-down of inventories. The net loss
narrowed from $(15.4) million for the 1999 Third Quarter to $(10.0) million for
the 2000 Third Quarter, and from $(21.1) million for the fiscal nine months
ended October 2, 1999 ("1999 Nine Months) to $(11.6) million for the 2000 Nine
Months.
Excluding discontinued product lines, net sales increased by 3% and 6% for the
2000 Third Quarter and 2000 Nine Months, respectively, over the comparable
periods of the prior year. Net sales of product lines eliminated represented
$9.8 million and $34.7 million during the 1999 Third Quarter and 1999 Nine
Months, respectively. As a result of these discontinued product lines, reported
net sales during the 2000 Third Quarter decreased as compared to the 1999 Third
Quarter by $7.8 million to $80.8 million. The 2000 Nine Months reported net
sales decreased by $17.3 million to $316.5 million, as compared to the 1999 Nine
Months. For the 2000 Third Quarter and the 2000 Nine Months, net sales of the
higher margin, premium golf products, such as STRATA(R) and TOP-FLITE(R) XL
2000(R) golf balls, were significantly above prior year levels. These increases
were partially offset by declines in sales of other golf balls and lower
basketball sales.
In the 2000 Third Quarter Spalding's gross profit increased 45% to $41.8 million
as compared to $28.8 million for the 1999 Third Quarter. Gross margin (gross
profit as a % of sales) increased in the 2000 Third Quarter to 52% from 33% in
the 1999 Third Quarter. For the 2000 Nine Months gross profit increased 20% to
$163.7 million from $136.9 million and gross margin increased to 52% from 41% as
compared to the 1999 Nine Months. Included in the 1999 Third Quarter was an
inventory write-down of approximately $8.7 million that was consistent with the
Company's marketing strategy of repositioning its core brands. Excluding the
impact of the write-down, gross margin improved by 9.4 points during the 2000
Third Quarter and 8.1 points for the 2000 Nine Months. The gross margin
improvement reflects the continued shift towards Spalding's high quality golf
products (including STRATA(R) and TOP-FLITE(R) XL 2000(R) golf balls, and BEN
HOGAN(R) irons) and efficiencies generated in the production process.
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ADJUSTED EBITDA SHOWS CONTINUED IMPROVEMENT
-------------------------------------------
Adjusted EBITDA represents earnings before interest, taxes, depreciation,
amortization, extraordinary items, noncash and nonrecurring items and net
currency gains/losses. Adjusted EBITDA is included as a basis upon which the
Company assesses its financial performance, and certain covenants in the
Company's borrowing arrangements are tied to this measure.
Adjusted EBITDA was $9.4 million during the 2000 Third Quarter as compared to
$7.3 million during the 1999 Third Quarter, an increase of $2.1 million, or 29%.
The 2000 Nine Months Adjusted EBITDA increased $3.1 million, or 7%, to $46.3
million as compared to $43.2 million during the 1999 Nine Months.
Availability under the Company's U.S. credit facilities was $41.3 million at
September 30, 2000.
Jim Craigie, Spalding's President & CEO, stated: "Spalding's improved earnings
are the result of our commitment to quality products backed by strong
advertising and promotional campaigns. We are well on our way to rebuilding
Spalding into one of the premier consumer products companies in the sporting
goods industry. Our consumers will continue to benefit from our current high
quality products as well as our exciting new products that are driven by
innovative new technologies.
During the 2000 Third Quarter we introduced our ETONIC(R) Comfort line of golf
shoes. This new shoe line has experienced strong shipments to date and provides
Spalding with a strong product offering at this critical price point in the golf
shoe category. In the 2000 Fourth Quarter we are launching our new line of
TOP-FLITE(R) XL 2000 golf clubs. These clubs have achieved outstanding consumer
test scores and early trade acceptance is strong. Finally, we are very excited
about our new products to be distributed in 2001. These products include our BEN
HOGAN(R) Apex Edge golf clubs and a new STRATA(R) golf ball that will maintain
Spalding's leadership position in the fast growing multi-layer golf ball
segment."
The Company's year to date financial results will be discussed during a
conference call on November 14, 2000 beginning at 11:30 a.m. EDT. All interested
investors may listen to the call through a live audio broadcast which can be
accessed from the United States at 800-553-0358 and at 612-332-0718 from foreign
locations; passcode Spalding Conference. Additionally, a telephone replay of the
conference call will be available from 3:30 p.m. on November 14 through 11:59
p.m. on November 17 at 800-475-6701 from the United States and at 320-365-3844
from foreign locations; passcode 547728.
Founded in 1876, Spalding is a leading manufacturer and licensor of branded
consumer products serving the golf and sporting goods markets under the
SPALDING(R), TOP-FLITE(R), BEN HOGAN(R), STRATA(R), ETONIC(R) AND DUDLEY(R)
brand names. Headquartered in Chicopee, Massachusetts, Spalding markets a broad
range of professional quality recreational and athletic goods, including
products used in golf, basketball, softball, volleyball, soccer and football.
Certain matters discussed in this press release are forward-looking statements
based on the Company's current expectations and estimates as to prospective
events about which the Company can give no firm assurance. These forward-looking
statements are based on management's expectations as of the date hereof, and the
Company does not undertake any responsibility to update any of these statements
in the future. Actual future performance and results could differ from that
contained in or suggested by these forward-looking statements as a result of the
factors set forth in filings with the Securities and Exchange Commission. See
Spalding Holdings Corporation's cautionary statement relating to forward looking
statements filed with the SEC on Form 8-K on November 7, 2000.
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SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
FOR THE THREE AND NINE FISCAL MONTHS ENDED
SEPTEMBER 30, 2000 AND OCTOBER 2, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEP. 30, OCT. 2, SEP. 30, OCT. 2,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES............................................... $80,842 $88,641 $316,493 $333,840
Cost of sales........................................ 39,014 59,843 152,767 196,893
------- ------- ------- -------
GROSS PROFIT............................................ 41,828 28,798 163,726 136,947
Selling, general and administrative expenses......... 43,419 44,205 142,239 134,879
Royalty income, net.................................. (3,796) (3,256) (8,937) (8,205)
Restructuring and other unusual costs................ - (184) - 482
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS........................... 2,205 (11,967) 30,424 9,791
Interest expense, net................................ 15,231 13,784 44,707 41,699
Currency loss (gain), net............................ 1,677 (1,004) 2,989 (331)
Equity in net (income) loss of Evenflo Company, Inc.. - (561) - 248
------- ------- ------- -------
LOSS BEFORE INCOME TAXES................................ (14,703) (24,186) (17,272) (31,825)
Income tax benefit................................... (4,733) (8,753) (5,639) (10,774)
------- ------- ------- -------
NET LOSS ............................................... $(9,970) $(15,433) $(11,633) $(21,051)
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