<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 2000
Commission file number: 0-19298
RIDDELL SPORTS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2890400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1450 Broadway, Suite 2001, New York, NY, 10018
(Address of principal executive offices) (Zip code)
(212) 921-8101
(Registrant's telephone number, including area code)
Former address: 50 East 42nd Street, Suite 1808, New York, NY 10017
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes[ X ] No [ ]
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
9,337,957 Common Shares as of May 12, 2000
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RIDDELL SPORTS INC.
INDEX
Page
Form 10-Q Cover Page . . . . . . . . . . . . . . . . . . . . . . . . 1
Form 10-Q Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Part I. Financial Information:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations . . . . . . 4
Condensed Consolidated Statements of Stockholders' Equity . 5
Condensed Consolidated Statements of Cash Flows . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . 9
Part II. Other Information:
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . 12
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders . . . . 12
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains certain statements which are "forward-looking"
statements under the federal securities laws that are based on the beliefs of
management as well as assumptions made by and information currently available
to management. Forward-looking statements appear in Note 5 of Notes to
Condensed Consolidated Financial Statements and throughout Item 2 of Part I,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" concerning Riddell's determination of product liability reserves,
the seasonal patterns of working capital, revenue and operating results in its
business and the estimated cost, prospects and financial impact of its Internet
operations. Certain factors could cause actual results to differ materially
from those in the forward-looking statements including without limitation, (i)
continuation of historical patterns of demand for Riddell's products and
Riddell's ability to meet the demand; (ii) actions by competitors, including
without limitation new product introductions; (iii) the loss of domestic or
foreign suppliers; (iv) changes in business strategy or new product lines,
including its Internet plans and operations, and Riddell's ability to
successfully implement these; (v) the outcome of pending product liability
claims and potential future claims; and (vi) changes in interest rates and
general economic conditions. Riddell does not intend to update these forward-
looking statements.
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Part 1. FINANCIAL INFORMATION; Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTIONS>
RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 31, December 31, March 31,
2000 1999 1999
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,601 $ 513 $ 1,263
Accounts receivable, trade, less allowance for doubtful
accounts ($1,234, $1,863 and $1,227 respectively) . . . . 36,401 32,524 31,223
Inventories (Note 4) . . . . . . . . . . . . . . . . . . . . 39,134 33,388 34,894
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 8,611 7,578 7,012
Other receivables . . . . . . . . . . . . . . . . . . . . . 1,780 2,020 1,499
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . 2,076 2,076 1,253
--------- --------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . 89,603 78,099 77,144
Property, plant and equipment, less accumulated
depreciation ($10,389, $9,723 and $7,833 respectively) . . . 8,361 7,771 7,977
Intangibles and deferred charges, less accumulated
amortization ($18,920, $17,893 and $14,858 respectively) . . 104,925 105,952 108,154
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 2,880 2,514 2,534
--------- --------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . $205,769 $194,336 $195,809
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 14,160 $ 10,318 $ 11,620
Accrued liabilities . . . . . . . . . . . . . . . . . . . . 7,897 11,783 8,033
Customer deposits . . . . . . . . . . . . . . . . . . . . . 4,493 6,090 3,460
--------- --------- ---------
Total current liabilities . . . . . . . . . . . . . . . . 26,550 28,191 23,113
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 155,721 136,097 149,700
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . 2,076 2,076 348
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . 3,107 3,107 3,554
Contingent liabilities (Note 5) . . . . . . . . . . . . . . . . - - -
Stockholders' equity
Preferred stock . . . . . . . . . . . . . . . . . . . . . . - - -
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 93 93 93
Additional paid in capital . . . . . . . . . . . . . . . . . 37,031 36,862 36,849
Accumulated deficit . . . . . . . . . . . . . . . . . . . . (18,809) (12,090) (17,848)
--------- --------- ---------
Total stockholders' equity . . . . . . . . . . . . . . . . 18,315 24,865 19,094
--------- --------- ---------
Total liabilities and stockholders' equity . . . . . $205,769 $194,336 $195,809
========= ========= =========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTIONS>
RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
March 31,
---------------------------------
2000 1999
--------- ---------
<S> <C> <C>
Net revenues:
Net sales, products and reconditioning . . . . . . . . . $ 28,468 $ 23,813
Camps and events . . . . . . . . . . . . . . . . . . . . 10,555 10,133
Royalty income . . . . . . . . . . . . . . . . . . . . . 257 313
--------- ---------
39,280 34,259
--------- ---------
Cost of revenues :
Products and reconditioning . . . . . . . . . . . . . . . 17,077 14,104
Camps and events . . . . . . . . . . . . . . . . . . . . 6,568 6,382
--------- ---------
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 23,645 20,486
--------- ---------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . 15,635 13,773
Selling, general and administrative expenses . . . . . . . . 18,357 16,482
--------- ---------
(Loss) from operations . . . . . . . . . . . . . . . . . . . (2,722) (2,709)
Interest expense . . . . . . . . . . . . . . . . . . . . . . 3,997 3,648
--------- ---------
(Loss) before taxes . . . . . . . . . . . . . . . . . . . . . (6,719) (6,357)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . - -
--------- ---------
Net (loss) . . . . . . . . . . . . . . . . . . . . . . . ($ 6,719) ($ 6,357)
========= =========
Net (loss) per share, basic and diluted . . . . . . . . . . ($0.72) ($0.69)
Weighted average number of common and common
equivalent shares outstanding, basic and diluted . . . . . 9,296 9,259
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTIONS>
RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
Retained
Common Stock Additional earnings Total
--------------------- paid in (Accumulated Stockholders'
Shares Amount capital deficit) equity
-------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the three months ended March 31, 1999:
Balance, January 1, 1999 . . . . 9,259 $ 93 $ 36,849 ($ 11,491) $ 25,451
Net (loss) for the period . . - - - (6,357) (6,357)
-------- -------- ----------- ---------- ----------
Balance, March 31, 1999 . . . . 9,259 $ 93 $ 36,849 ($17 ,848) $ 19,094
======== ======== =========== ========== ==========
For the three months ended March 31, 2000:
Balance, January 1, 2000 . . . 9,263 $ 93 $ 36,862 ($ 12,090) $ 24,865
Stock issued to employees . . 54 - 169 - 169
Net (loss) for the period . . - - - (6,719) (6,719)
-------- -------- ----------- ---------- ----------
Balance, March 31, 2000 . . . . 9,317 $ 93 $ 37,031 ($18,809) $18,315
======== ======== =========== ========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTIONS>
RIDDELL SPORTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
-------------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) . . . . . . . . . . . . . . . . . . . . . . . . $(6,719) ($6,357)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization:
Amortization of debt issue costs . . . . . . . . . . . 216 201
Other depreciation and amortization . . . . . . . . . . 1,477 1,419
Provision for losses on accounts receivable . . . . . . . 162 373
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable, trade . . . . . . . . . . . . (4,039) (3,580)
Inventories . . . . . . . . . . . . . . . . . . . (5,746) (6,131)
Prepaid expenses . . . . . . . . . . . . . . . . . (1,033) (519)
Other receivables . . . . . . . . . . . . . . . . 240 145
Other assets . . . . . . . . . . . . . . . . . . . (366) (850)
Increase (decrease) in:
Accounts payable . . . . . . . . . . . . . . . . . 3,842 (1,124)
Accrued liabilities . . . . . . . . . . . . . . . (3,717) (3,220)
Customer deposits . . . . . . . . . . . . . . . . (1,597) (2,501)
---------- ----------
Net cash used in operating activities . . . . (17,280) (22,144)
---------- ----------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . (1,256) (726)
Other . . . . . . . . . . . . . . . . . . . . . . . . . - (419)
---------- ----------
Net cash used in investing activities . . . . (1,256) (1,145)
---------- ----------
Cash flows from financing activities:
Net borrowings under line-of-credit agreement . . . . . 19,624 22,800
---------- ----------
Net cash provided by financing activities . . 19,624 22,800
---------- ----------
Net increase (decrease) in cash . . . . . . . . . . . . . . 1,088 (489)
Cash, beginning . . . . . . . . . . . . . . . . . . . . . . . 513 1,752
---------- ----------
Cash, ending . . . . . . . . . . . . . . . . . . . . . . . . $1,601 $1,263
========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
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RIDDELL SPORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation
The condensed consolidated financial statements include the accounts of
Riddell Sports Inc. and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. These statements
are unaudited, and in the opinion of management include all adjustments
(consisting only of normal recurring adjustments) necessary for fair
presentation of Riddell's consolidated financial position and the consolidated
results of its operations and cash flows at March 31, 2000 and 1999 and for the
periods then ended. Certain information and footnote disclosures made in
Riddell's last Annual Report on Form 10-K have been condensed or omitted for
these interim statements. Accordingly, these condensed consolidated financial
statements should be read in conjunction with Riddell's Annual Report on Form
10-K for the year ended December 31, 1999. Operating results for the three
months ended March 31, 2000 are not necessarily indicative of the results to be
expected during the remainder of 2000.
2. Earnings per share
Net loss per share amounts have been computed by dividing net loss by the
weighted average number of outstanding common shares. Diluted earnings per
share for the three month periods ended March 31, 2000 and 1999 is equal to
basic earnings per share as both periods had a net loss. Potentially dilutive
securities, which include convertible debt and Common Stock options and
warrants, were not dilutive due to the net losses incurred.
3. Receivables
Accounts receivable include unbilled shipments of approximately
$2,802,000, $1,315,000 and $1,504,000 at March 31, 2000, December 31, 1999 and
March 31, 1999, respectively. It is Riddell's policy to record revenues when
the related goods have been shipped. Unbilled shipments represent receivables
for shipments that have not been invoiced. These amounts relate principally to
partial shipments to customers who are not invoiced until their order is
shipped in its entirety or customers with orders containing other terms that
require a deferral in the issuance of an invoice. Management believes that
substantially all of these unbilled receivables will be invoiced within the
current sales season.
4. Inventories
Inventories consist of the following:
(In thousands) March 31, Dec. 31, March 31,
2000 1999 1999
-------- -------- --------
Finished goods $ 23,340 $ 20,459 $ 22,972
Work-in-process 3,941 3,088 3,032
Raw materials 11,853 9,841 8,890
-------- -------- -------
$ 39,134 $ 33,388 $34,894
======== ======== =======
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RIDDELL SPORTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Litigation matters and contingencies
At March 31, 2000, Riddell was a defendant in 5 product liability suits
relating to personal injuries allegedly related to the use of helmets
manufactured or reconditioned by subsidiaries of Riddell. The ultimate outcome
of these claims, or potential future claims, cannot presently be determined.
Riddell estimates that the uninsured portion of future costs and expenses
related to these claims, and incurred but not reported claims, will amount to
at least $3,800,000 and, accordingly, a reserve in this amount is included in
the Condensed Consolidated Balance Sheet at March 31, 2000, as part of accrued
liabilities and other liabilities. These reserves are based on estimates of
losses and defense costs anticipated to result from such claims, from within a
range of potential outcomes, based on available information, including an
analysis of historical data such as the rate of occurrence and the settlement
amounts of past cases. However, due to the uncertainty involved with estimates
actual results have at times varied substantially from earlier estimates and
could do so in the future. Accordingly there can be no assurance that the
ultimate costs of such claims will fall within the established reserves.
6. Supplemental cash flow information
Cash paid for interest was $6,635,000 and $6,359,000 for the three month
periods ended March 31, 2000 and 1999, respectively. Income tax payments, or
refunds, were not significant for the three periods ended March 31, 2000 and
1999.
During the three month period ended March 31, 2000, Riddell issued shares of
its common stock, valued at $169,000 based on quoted market values at the time
of grant, to certain employees in satisfaction of an accrual for compensation
included in accrued liabilities at December 31, 1999.
7. Segment information:
Net revenues and income or loss from operations for Riddell's three
reportable segments are as follows:
<TABLE>
<CAPTIONS>
Three Months Ended
March 31,
---------------------------------
2000 1999
------------- -------------
(In thousands)
<S> <C> <C>
Net revenues:
Extracurricular products and services $35,906 $30,357
Retail products 3,117 3,589
Trademark Licensing 257 313
------------- -------------
Consolidated total $39,280 $34,259
============= =============
Income (loss) from operations:
Extracurricular products and services ($ 1,297) ($ 2,042)
Retail products (223) 47
Trademark Licensing 60 141
Corporate and unallocated expenses (1,262) (855)
------------- -------------
Consolidated total ($ 2,722) ($ 2,709)
============= =============
</TABLE>
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview and seasonality
Operations for the three-month period ended March 31, 2000 resulted in a
net loss of $6.7 million, or $0.72 per share as compared to a net loss of $6.4
million, or $0.69 per share, for the first quarter of 1999. The higher net
loss in the first quarter of 2000 was the result of increased interest expense
and costs related to our Internet operations.
Operating results before interest and taxes were approximately the same in
both the first quarters of 1999 and 2000. Before Internet expenses of
$425,000, the first quarter of 2000 had a $2,297,000 operating loss, 15%
narrower than the operating loss of $2,709,000 in the first quarter of 1999.
In the first quarter of 2000, Riddell benefitted from increased revenues and
declining selling, general and administrative expenses as a percentage of
revenues, as described in more detail in the discussion which follows this
overview.
The loss in the first quarter of 2000 was anticipated and is consistent
with the seasonality of our business. In recent years our operations have been
most profitable in the second and third quarters, with the third quarter
typically the strongest, while losses have been incurred in the first and
fourth quarters. The factors influencing this seasonal pattern were discussed
in our last Annual Report on form 10-K.
In addition to the $425,000 of Internet costs charged to expenses in the
first quarter of 2000, we incurred approximately $200,000 of Internet-related
capital expenditures during the period. Spending on our Internet operations is
likely to continue throughout 2000 and could approximate $2.0 million for the
year. Our Internet operations are still being developed, and at the present
time we cannot ascertain the financial impact from our Internet operations over
future periods.
Revenues
Revenues in the three-month period ended March 31, 2000 increased 15%, or
$5.0 million, to $39.3 million from $34.3 million in the first quarter of 1999.
The revenue gain came from our extracurricular segment. This segment
markets our team sports and school sprit lines of products and services,
primarily through our direct sales force, to customers such as schools, leagues
and recreational groups. Extracurricular revenues increased 18%, or $5.5
million, to $35.9 million in the first quarter of 2000 from $30.4 million in
the first quarter of 1999. Volume increases generated most of the gain, with
modest price increases also contributing to revenue growth. Sales of team
sports products and services increased 30% or $4.9 million including sales
increases of $1.8 million, or over 200%, in Umbro-branded team soccer
products, and $0.6 million, or 76%, in other athletic uniforms and practice
wear. School spirit products and services revenues increased approximately
$0.7 million, or 5%, for the quarter.
Revenues from the retail segment decreased $0.5 million to $3.1 million in
the first quarter of 2000. The decline was due in part to an internal shift in
the responsibility for certain international customers of athletic equipment to
the extracurricular segment. These customers had accounted for approximately
$350,000 of sales in the year ago period.
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Revenues from trademark licensing were relatively stable at $0.3 million
in the first quarter of both 2000 and 1999.
Gross profit
Gross profit increased to $15.6 million in the first quarter of 2000 from
$13.8 million in the first quarter of 1999. Gross margin rates decreased by
0.4 points to 39.8% in 2000 from 40.2% in the first quarter of 1999.
Gross margins for the extracurricular segment decreased to 39.9% in the
first quarter of 2000 from 40.3% in the first quarter of 1999. Gross margins
for the retail segment decreased to 33.8% in the first quarter of 2000 from
34.5% in the first quarter of 1999. These decreases were principally due to a
shift in product mix as both segments realized revenue increases in product
lines which carry below average margins.
Selling, general and administrative expenses
Overall, selling, general and administrative expenses decreased as a
percentage of revenues to 46.7% of revenues in the first quarter of 2000 from
48.1% in the first quarter of 1999. The improvement is principally due to the
positive operating leverage which occurs as increased revenues improve the
absorption of the fixed portion of expenses. This improvement occurred in
spite of the increased Internet expenses discussed in the overview above.
For the extracurricular segment, selling, general and administrative
expenses decreased as a percentage of revenues to 43.5% of revenues in the
first quarter of 2000 from 47.0% in the first quarter of 1999. This decrease
was due to the reason discussed in the preceding paragraph.
For the retail segment, selling, general and administrative expenses in
the three-month period increased $86,000 from the first quarter of the previous
year due to increased marketing expenditures. This increase combined with the
sales decrease for this segment resulted in an increase in selling, general and
administrative expenses as a percentage of revenues to 41.0% in the first
quarter of 2000 from 33.2% in the first quarter of 1999.
Interest expense
Interest expense increased by $0.4 million to $4.0 million in the first
quarter of 2000 from $3.6 million in the first quarter of 1999. The change
related to interest on our revolving line of credit which increased due to
higher outstanding indebtedness and increases in the prime and Libor interest
rates. Outstanding indebtedness increased in line with working capital demands
related to our line of Umbro-branded team soccer products, which was still its
initial start-up phase in the early part of 1999, and volume growth in other
product lines.
Liquidity and capital resources
The seasonality of our working capital needs is primarily impacted by
three factors. First, a significant portion of the products we sell in the
extracurricular segment are sold throughout the year on dated-payment terms,
with the related receivables becoming due as the new the school year begins,
primarily during the July
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to October period. Second, we incur costs relating to our summer camp business
from the fourth quarter and into the second quarter as we prepare for the
upcoming camp season, while camp revenues are mostly collected in the June to
August period. Lastly, our debt structure impacts our working capital
requirements as the semi-annual interest payments on our $115 million, 10.5%
Senior Notes come due each January and July.
To finance these seasonal working capital demands, we maintain a credit
facility in the form of a revolving line of credit. The outstanding balance on
the credit facility follows the seasonal cycles described above, increasing
during the early part of the operating cycle in the first and second quarters
of each year and then decreasing from the middle of the third quarter and into
the fourth quarter as collections are used to reduce the outstanding balance.
At March 31, 2000 the outstanding balance under the credit facility was
$33.2 million. This compares with outstanding balances of $13.6 million at
December 31, 1999 and $27.2 million at March 31, 1999. The change in the
outstanding balance between March 31, 2000 and December 31, 1999 reflects the
seasonal working capital pattern presented above, while the increase in
outstanding borrowing between March 31, 2000 and March 31, 1999 reflects the
factors discussed above in the paragraph on interest expense.
Our current debt service obligations are significant and, accordingly, our
ability to meet our debt service and other obligations will depend on our
future performance and is subject to financial, economic and other factors,
some of which are beyond our control. Furthermore, due to the seasonality of
our working capital demands described above, year-over-year growth in our
business and working capital could lead to higher debt levels in future
periods. We believe that operating cash flow together with funds available
from our credit facility will be sufficient to fund our current debt service,
seasonal and other current working capital requirements.
In April 2000 we announced that we had canceled a proposed rights offering
to our stockholders and a proposed concurrent offering of additional shares of
our common stock. We had filed a registration statement for the proposed
offering with the intention of using the combined proceeds of approximately
$3.75 million to finance our Internet business and for additional working
capital. We now intend to finance our Internet business using existing capital
resources, and believe that we can do so without changing the speed at which we
implement our internet plans. However, since our Internet operations are still
being developed we do not yet know the ultimate size and scope of these
operations. Consequently, future development of Internet operations could
possibly require additional capital beyond that available from existing
resources.
Year 2000 issues
In prior reports we discussed the nature and progress of our plans to
become Year 2000 ready. In 1999 we completed a program of corrective action
taken to minimize the potential impact of Year 2000 problems. As a result of
actions taken, we have not experienced any material Year 2000 problems, either
with our internal systems or with third parties, such as our customers and
suppliers. While we do not anticipate any Year 2000 problems, we will continue
to monitor our systems and potential Year 2000 issues with third parties
throughout the Year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
11
<PAGE> 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Riddell is a defendant in certain product liability proceedings and from
time to time becomes involved in various claims and lawsuits incidental to its
business including, without limitation, employment related litigation. See
Note 5 of "Notes to Condensed Consolidated Financial Statements".
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit index:
10.1 Amendment No. 3, dated as of March 31, 2000, to Loan,
Guaranty And Security Agreement among Riddell Sports Inc.,
as the Parent Guarantor, Riddell, Inc., All American
Sports Corporation, Varsity Spirit Corporation and Varsity
Spirit Fashions & Supplies, Inc. collectively, as the
Borrower and all other subsidiaries of the Parent
Guarantor, collectively, as the Subsidiary Guarantors, Bank
of America National Trust And Savings Association and
American national Bank and Trust Company of Chicago as the
Lenders, and Bank of America National Trust And Savings
Association, as agent.
27 Financial Data Schedule (submitted in electronic form to
SEC only)
(b) Reports on Form 8-K
None
12
<PAGE> 13
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.
RIDDELL SPORTS INC.
Date: May 12, 2000 By /s/ DAVID MAUER
----------------------------
David Mauer
President and
Chief Executive Officer
Date: May 12, 2000 By /s/ DAVID GROELINGER
----------------------------
David Groelinger
Executive Vice President and
Chief Financial Officer
Date: May 12, 2000 By /s/ LAWRENCE F. SIMON
----------------------------
Lawrence F. Simon
Senior Vice President
(Principal Accounting Officer)
13
<PAGE> 1
AMENDMENT NO. 3
TO LOAN, GUARANTY AND SECURITY AGREEMENT
This AMENDMENT NO. 3 TO LOAN, GUARANTY AND SECURITY AGREEMENT (the
"Amendment") is dated as of March 31, 2000 and entered into by and among
Riddell Sports Inc., a Delaware corporation (the "Parent Guarantor"), each of
Riddell, Inc., an Illinois corporation, All American Sports Corporation, a
Delaware corporation, Varsity Spirit Corporation, a Tennessee corporation, and
Varsity Spirit Fashions & Supplies, Inc., a Minnesota corporation,
(collectively, the "Borrower"), each of the Subsidiary Guarantors (as defined
in the Credit Agreement referred to below), each of Bank of America National
Trust and Savings Association and American National Bank and Trust Company of
Chicago (collectively, the "Lenders") and Bank of America National Trust and
Savings Association, as agent (the "Agent").
RECITALS
WHEREAS, the parties hereto entered into the Loan, Guaranty and
Security Agreement (as amended, amended and restated, supplemented or otherwise
modified, the "Credit Agreement") dated as of April 20, 1999. Capitalized
terms used herein without definition shall have the meanings assigned to them
in the Credit Agreement;
WHEREAS, the parties hereto desire to amend the Credit Agreement as
set forth below; and
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows;
Article I
AMENDMENT TO THE CREDIT AGREEMENT
1.01 Amendments to Section 9.25 of the Credit Agreement. Section
9.25 of the Credit Agreement is hereby amended by deleting the amount
"$19,700,000" as it appears in the fourth line from the top of the table
provided in said Section and inserting the amount "$17,300,000" in lieu
thereof.
Article II
EFFECTIVENESS OF AMENDMENT
2.01 Effectiveness. This Amendment shall become effective on the
opening of business in New York on the Business Day on which the Agent notifies
the Borrower that it has executed a counterpart signature page of this
Amendment, and has received executed counterpart signature pages of this
Amendment from the Borrower, the Parent Guarantor, the Subsidiary Guarantors
and the Lenders.
<PAGE> 2
Article III
MISCELLANEOUS
3.01 Reference to and Effect on the Credit Agreement and the Other
Loan Documents.
(a) This Amendment modifies the Credit Agreement to the extent set forth
herein, is hereby incorporated by reference into the Credit Agreement and is
made a part thereof. On and after the effective date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended by this Amendment.
(b) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
(c) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of,
or operate as a waiver of any right, power or remedy of the Lenders or the
Agent under the Credit Agreement or any of the other Loan Documents. This
Amendment is limited to the precise terms hereof and shall not operate as a
present or future waiver of any similar or other provisions of the Credit
Agreement not expressly provided for herein, nor shall this Amendment prevent
the Agent or the Lenders from exercising any other right, power, remedy or
privilege pursuant to the Credit Agreement.
3.02 No Default or Event of Default. On the date of effectiveness of
the amendments herein, the Parent Guarantor, the Subsidiary Guarantors and the
Borrower shall be deemed to have certified to the Lenders and the Agent that,
after giving effect to the amendments contained herein, on such date no Default
or Event of Default is in existence, and all of their representations and
warranties contained in the Credit Agreement and the other Loan Documents are
true and correct on and as of the date thereof with the same effect as if made
on and as of such date (except to the extent such representations and
warranties expressly refer to an earlier date, in which case they shall be true
and correct as of such earlier date).
3.03 Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute
a part of this Amendment for any other purpose or be given any substantive
effect.
3.04 Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
-2-
<PAGE> 3
3.05 Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute one and the same instrument.
3.06 Guarantor Consent. Without affecting in any way the provisions
of the Guarantee pursuant to which each of the Guarantors waives its right to
consent to changes in the Loan Documents and agrees that its obligations under
the Guarantee remain in full force and effect notwithstanding any such change,
by its signature below, each Guarantor hereby consents to the amendments
provided for herein and agrees that the Guarantee is and remains in full force
and effect and applies to the Credit Agreement and the other Loan Documents as
amended hereby.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
"PARENT GUARANTOR"
Riddell Sports Inc.
By: David Groelinger
----------------------------------------
Title: EVP
"BORROWERS"
Riddell, Inc.
By: David Groelinger
----------------------------------------
Title: EVP
All American Sports Corporation
By: David Groelinger
----------------------------------------
Title: EVP
Varsity Spirit Fashions & Supplies, Inc.
By: David Groelinger
----------------------------------------
Title: EVP
Varsity Spirit Corporation
By: David Groelinger
----------------------------------------
Title: EVP
"SUBSIDIARY GUARANTORS"
Equilink Licensing Corp.
By: David Groelinger
----------------------------------------
Title: EVP
-4-
<PAGE> 5
MacMark Corporation
By: David Groelinger
----------------------------------------
Title: EVP
RHC Licensing Corp.
By: David Groelinger
----------------------------------------
Title: EVP
Ridmark Corporation
By: David Groelinger
----------------------------------------
Title: EVP
Proacq. Corp.
By: David Groelinger
----------------------------------------
Title: EVP
Varsity USA, Inc.
By: David Groelinger
----------------------------------------
Title: EVP
Varsity/Intropa Tours, Inc.
By: David Groelinger
----------------------------------------
Title: EVP
International Logos, Inc.
By: David Groelinger
----------------------------------------
Title: EVP
-5-
<PAGE> 6
"LENDERS"
Bank of America National Trust and Savings
Association, as a Lender
By: IRA A. MERMELSTEIN
----------------------------------------
Title: Vice President
American National Bank and Trust Company of
Chicago
By: M. MARTHA GASKIN
----------------------------------------
Title: VICE PRESIDENT
"AGENT"
Bank of America National Trust and Savings
Association, as the Agent
By: IRA A. MERMELSTEIN
----------------------------------------
Title: Vice President
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FILED AS PART OF
RIDDELL'S QUARTERLY REPORT ON FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,601
<SECURITIES> 0
<RECEIVABLES> 37,635
<ALLOWANCES> 1,234
<INVENTORY> 39,134
<CURRENT-ASSETS> 89,603
<PP&E> 18,750
<DEPRECIATION> 10,389
<TOTAL-ASSETS> 205,769
<CURRENT-LIABILITIES> 26,550
<BONDS> 155,721
0
0
<COMMON> 93
<OTHER-SE> 18,222
<TOTAL-LIABILITY-AND-EQUITY> 205,769
<SALES> 28,468
<TOTAL-REVENUES> 39,280
<CGS> 17,077
<TOTAL-COSTS> 23,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 162
<INTEREST-EXPENSE> 3,997
<INCOME-PRETAX> (6,719)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,719)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,719)
<EPS-BASIC> (0.72)
<EPS-DILUTED> (0.72)
</TABLE>
