SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 0-20450
PlayCore, Inc.
(Exact name of registrant as specified in its charter.)
Delaware 36-3808989
- ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
15 West Milwaukee Street, Janesville, Wisconsin 53545
-----------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code (608)741-7183.
-------------
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 twelve 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 ninety days. YES __X__ NO ___
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date: as of November 5, 1999 there
were 7,941,214 shares of Common Stock, par value $.01 per share, outstanding.
<PAGE>
PLAYCORE, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
INDEX
Part I. Financial Information: Page
----
Unaudited Consolidated Balance Sheets -
December 31, 1998 and September 30, 1999 3
Unaudited Consolidated Interim Statements of Operations
and Retained Earnings -
Three Months Ended September 30, 1998
Nine Months Ended September 30, 1998
Three Months Ended September 30, 1999
Nine Months Ended September 30, 1999 4
Unaudited Consolidated Interim Statements of Cash Flows-
Nine Months Ended September 30, 1998 and 5
Nine Months Ended September 30, 1999
Notes to Unaudited Interim Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 14
Signature 15
2
<PAGE>
<TABLE>
PlayCore, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands, except share data)
<CAPTION>
December 31, September 30,
ASSETS 1998 1999
-------------- --------------
Current assets:
<S> <C> <C>
Cash $ 487 $ 724
Accounts receivable, less allowance for doubtful accounts of $801 and $1,226 18,036 27,890
Other receivables 551 1,528
Inventories 11,754 20,622
Prepaid expenses 1,869 3,798
Deferred income taxes 890 2,160
-------------- --------------
Total current assets 33,587 56,722
Property, plant and equipment, net 20,871 26,329
Deferred financing and other costs, net of accumulated amortization of $1,557 and $2,219 3,194 3,375
Identifiable intangible assets, net of accumulated amortization of $843 and $1,083 6,593 6,353
Goodwill, net of accumulated amortization of $5,156 and $6,134 39,195 48,685
-------------- --------------
$ 103,440 $ 141,464
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan $ 9,940 $ 23,785
Accounts payable 5,346 8,842
Accrued income taxes 216 735
Accrued expenses 11,106 15,912
Current portion of long-term debt 7,702 7,977
-------------- --------------
Total current liabilities 34,310 57,251
Long-term debt, net of current portion 42,288 48,892
Convertible subordinated debentures payable to stockholders 7,021 7,258
Deferred income taxes 3,445 3,975
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
no shares issued or outstanding - -
Common stock, $.01 par value, 25,000,000 shares authorized,
11,543,349 and 11,565,599 shares issued 115 116
Class B common stock, $.01 par value, 1,750,000 shares authorized,
no shares issued or outstanding - -
Additional paid-in capital 37,524 37,622
Retained earnings 19,248 26,861
Less 3,634,385 common shares held in treasury, at cost (40,511) (40,511)
-------------- --------------
Total stockholders' equity 16,376 24,088
-------------- --------------
$ 103,440 $ 141,464
============== ==============
Note: The consolidated balance sheet at December 31, 1998 has been derived from the
audited consolidated balance sheet at that date.
See notes to interim consolidated financial statements
</TABLE>
3
<PAGE>
<TABLE>
PlayCore, Inc.
Consolidated Interim Statements of Operations and Retained Earnings
(unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three months Nine months Three months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
1998 1998 1999 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 29,533 $ 91,646 $ 53,143 $ 146,571
Cost of goods sold 16,267 47,814 31,396 82,823
Gross profit 13,266 43,832 21,747 63,748
Operating expenses:
Selling 7,517 19,655 10,956 27,489
General and administrative 2,232 7,389 6,359 15,412
-------------- -------------- -------------- --------------
Amortization of intangible assets 536 1,573 646 1,879
10,285 28,617 17,961 44,780
-------------- -------------- -------------- --------------
Operating income 2,981 15,215 3,786 18,968
Other expense:
Interest expense 1,852 5,800 2,175 6,321
Other, net 122 258 90 239
-------------- -------------- -------------- --------------
Total other expense 1,974 6,058 2,265 6,560
-------------- -------------- -------------- --------------
Income before income taxes 1,007 9,157 1,521 12,408
Income tax expense 475 3,580 605 4,795
-------------- -------------- -------------- --------------
Net income 532 5,577 916 7,613
Retained earnings at beginning of period 19,617 14,572 25,945 19,248
-------------- -------------- -------------- --------------
Retained earnings at end of period $ 20,149 $ 20,149 $ 26,861 $ 26,861
============== ============== ============== ==============
Earnings per share:
Basic $ 0.07 $ 0.71 $ 0.12 $ 0.96
Diluted 0.06 0.59 0.10 0.77
See notes to interim consolidated financial statements
</TABLE>
4
<PAGE>
<TABLE>
PlayCore, Inc.
Consolidated Interim Statements of Cash Flows
(unaudited)
(in thousands)
<CAPTION>
Nine months Nine months
ended ended
September 30, September 30,
1998 1999
-------------- --------------
Operating activities
<S> <C> <C>
Net income $ 5,577 $ 7,613
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of debt discount 274 274
Deferred income taxes 1,195 1,350
Depreciation 1,837 2,324
Amortization of intangible assets 1,573 1,879
Interest converted to convertible subordinated debentures 292 237
Changes in operating assets and liabilities (5,619) (12,436)
-------------- --------------
Net cash provided by operating activities 5,129 1,241
Investing activities
Purchase of property, plant and equipment (2,048) (5,970)
Acquisitions, including transaction costs and net of cash acquired (590) (14,742)
-------------- --------------
Net cash used in investing activities (2,638) (20,712)
Financing activities
Increase in revolving loan 4,360 13,845
Issuances of long-term debt 536 10,323
Debt issuance costs incurred (191) (843)
Proceeds from issuance of common stock 6 99
Payments of long-term debt (7,514) (3,716)
-------------- --------------
Net cash (used in) provided by financing activities (2,803) 19,708
-------------- --------------
(Decrease) increase in cash (312) 237
Cash at beginning of period 677 487
-------------- --------------
Cash at end of period $ 365 $ 724
============== ==============
Supplemental disclosure of cash flows information-
cash paid during period for:
Interest $ 5,607 $ 6,127
Income taxes, net of refunds received 134 2,182
See notes to interim consolidated financial statements
</TABLE>
5
<PAGE>
PlayCore, Inc.
Notes to Interim Consolidated Financial Statements
Unaudited
(in thousands)
September 30, 1999
1. Basis of presentation of unaudited consolidated financial statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for interim financial information. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for year-end financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine months ended September 30, 1999 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1999. For further
information refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
2. Earnings per share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three months Nine months Three months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
1998 1998 1999 1999
------------- ------------- ------------- -------------
Numerator:
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share -
net income $ 532 $ 5,577 $ 916 $ 7,613
Effect of diluted securities -
10% convertible subordinated debentures - 285 113 330
Numerator for diluted earnings per share $ 532 $ 5,862 $ 1,029 $ 7,943
------------- ------------- ------------- -------------
Denominator:
Denominator for basic earnings per share -
weighted average shares 7,909 7,909 7,912 7,911
Effect of diluted securities:
Employee stock options(treasury stock
method) 42 42 407 236
Warrants 620 620 644 634
10% convertible subordinated debentures - 1,298 1,515 1,496
------------- ------------- ------------- -------------
Denominator for diluted earnings per share 8,571 9,869 10,478 10,277
</TABLE>
3. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Finished goods and work in process $ 7,153 $ 10,168
Raw materials 4,601 10,454
------------- -------------
$ 11,754 $ 20,622
============= =============
</TABLE>
6
<PAGE>
PlayCore, Inc.
Notes to Interim Consolidated Financial Statements(continued)
4. Acquisition
On February 16, 1999, the Company acquired all of the capital stock of
Heartland Industries, Inc. (Heartland), a maker of backyard wooden storage
buildings, for approximately $13,605 (including the repayment of certain
indebtedness of Heartland), subject to adjustments as defined in the
Agreement and Plan of Merger. Heartland has a national network of
company-owned sales branches and independent dealers to sell its products,
which include backyard wooden storage buildings and custom-built garages.
The acquisition was accounted for using the purchase method of
accounting and the total purchase cost was allocated first to assets and
liabilities based upon their respective fair market values, with the
remainder allocated to goodwill. The allocation of the purchase price
reflected in the financial statements is based on estimates and may differ
from the final allocation.
5. Segment Reporting
Commercial Consumer Total
---------- -------- -----
Three months ended September 30, 1998
Revenues from external customers $ 24,253 $ 5,280 $ 29,533
Segment profit 1,499 (967) 532
Nine months ended September 30, 1998
Revenues from external customers 56,667 34,979 91,646
Segment profit 3,534 2,043 5,577
Three months ended September 30, 1999
Revenues from external customers 27,252 25,891 53,143
Segment profit 1,672 (756) 916
Nine months ended September 30, 1999
Revenues from external customers 63,840 82,731 146,571
Segment profit 4,948 2,665 7,613
Segment assets 76,902 64,562(a) 141,464
(a) The increase in assets since December 31, 1998 was due to the inclusion
of Heartland's assets.
7
<PAGE>
Management's Discussion and Analysis
of
Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
Certain matters discussed herein are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are forward-looking statements. Such
forward-looking statements are subject to certain risks and uncertainties which
are described in close proximity to such statements and which could cause actual
results to differ materially from those currently anticipated. Readers are urged
to consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are only made as of the
date of this report and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
Results of Operations:
On February 16, 1999, the Company acquired all of the capital stock of Heartland
Industries, Inc. "Heartland", a maker of backyard wooden storage buildings. The
acquisition of Heartland was accounted for using the purchase method. Therefore,
the results of Heartland are included with those of the Company beginning with
the date of acquisition.
Three months ended September 30, 1999, compared to the three months ended
- --------------------------------------------------------------------------------
September 30, 1998.
- ------------------
Net Sales. Net sales increased $23.6 million, or 79.9 percent, to $53.1 million
for the three months ended September 30, 1999, compared to $29.5 million for the
same period a year ago. Sales of the Company's consumer products increased $20.6
million, or 390.4 percent, to $25.9 million for the three months ended September
30, 1999, compared to $5.3 million for the same period a year ago. The increase
in consumer product sales is primarily due to inclusion of Heartland sales for
the three months ended September 30, 1999. Sales of the Company's commercial
products increased by $3.0 million, or 12.4 percent, to $27.3 million for the
three months ended September 30, 1999 as compared to $24.3 million in the same
period a year ago. The increase in commercial products sales was primarily due
to the growth in the overall commercial market which benefited from new
playground equipment safety standards and strong demographic trends.
Gross Profit. Gross profit increased $8.4 million, or 63.9 percent, to $21.7
million but decreased as a percentage of net sales to 40.9 percent for the three
months ended September 30, 1999, compared to $13.3 million and 44.9 percent of
net sales for the same period a year ago. The overall increase in amount and the
decrease in the gross profit margin were primarily caused by the inclusion of
Heartland's wooden storage building sales for the third quarter of 1999.
Heartland's products have a lower profit margin than playground equipment.
8
<PAGE>
Selling Expense. Selling expenses increased $3.5 million, or 45.7 percent, to
$11.0 million but decreased as a percentage of net sales to 20.6 percent for the
three months ended September 30, 1999 as compared to $7.5 million and 25.5
percent of net sales for the same period a year ago. The dollar increase was
primarily due to the inclusion of Heartland's selling expenses for the third
quarter of 1999. The decrease as a percentage of net sales was caused by the
impact of higher sales volume on fixed selling expenses and the lower selling
costs as a percentage of net sales associated with wooden storage building
sales.
General and Administrative Expenses. General and administrative expenses
increased $4.2 million, or 184.9 percent, to $6.4 million and increased as a
percentage of net sales to 12.0 percent for the three months ended September 30,
1999 as compared to $2.2 million and 7.6 percent of net sales for the same
period in 1998. The dollar increase was primarily due to the inclusion of
Heartland's general and administrative expenses in the three months ended
September 30, 1999. The increase as a percentage of net sales was mainly due to
higher general and administrative expenses as a percentage of net sales
associated with wooden storage building sales.
Amortization of Intangible Assets. Amortization of financing fees, goodwill and
other identifiable intangible assets was $0.6 million for the three months ended
September 30, 1999 as compared to $0.5 million for the same period a year ago.
Additional amortization resulted from the goodwill and financing fees associated
with the Heartland acquisition.
Other Expense. Interest expense was $2.2 million for the three months ended
September 30, 1999 as compared to $1.9 million for the same period in 1998. The
increase in interest expense was due to the additional debt that was incurred in
connection with the Heartland acquisition on February 16, 1999.
Nine months ended September 30, 1999, compared to the nine months ended
- --------------------------------------------------------------------------------
September 30, 1998.
- ------------------
Net Sales. Net sales increased $55.0 million, or 59.9 percent, to $146.6 million
for the nine months ended September 30, 1999 as compared to $91.6 million in the
same period a year ago. Sales of the Company's consumer products increased $47.7
million, or 136.5 percent, to $82.7 million for the nine months ended September
30, 1999 as compared to $35.0 million for the same period in 1998. The increase
in sales was attributable to the inclusion of Heartland's sales from February
16, 1999 through September 30, 1999. Sales of the Company's commercial products
increased $7.1 million, or 12.7 percent, to $63.8 million for the nine months
ended September 30, 1999 as compared to $56.7 million for the same period a year
ago. Sales of the Company's commercial products continue to benefit from growth
in the commercial market driven by the impact of new playground equipment safety
standards and strong demographics trends.
Gross Profit. Gross profit increased $19.9 million, or 45.4 percent, to $63.7
million but declined as a percentage of net sales to 43.5 percent for the nine
months ended September 30, 1999 as compared to $43.8 million and 47.8 percent of
net sales for the same period a year ago. The primary reason for the decrease in
gross profit margin was the impact of Heartland's wooden
9
<PAGE>
storage building sales, which have a lower profit margin than consumer and
commercial playground equipment.
Selling Expense. Selling expenses increased $7.8 million, or 39.9 percent, to
$27.5 million but decreased as a percentage of net sales to 18.8 percent for the
nine months ended September 30, 1999 as compared to $19.7 million and 21.4
percent of net sales for the same period a year ago. The dollar increase was
primarily due to the inclusion of Heartland's selling expenses for the period
February 16, 1999 through September 30, 1999. The decrease as a percentage of
net sales was attributable to the impact of higher sales volume on fixed selling
expenses and the lower selling costs as a percentage of net sales associated
with wooden storage building sales.
General and Administrative Expenses. General and administrative expenses
increased $8.0 million, or 108.6 percent, to $15.4 million and increased as a
percentage of net sales to 10.5 percent for the nine months ended September 30,
1999 as compared to $7.4 million and 8.1 percent of net sales for the same
period a year ago. The increase as a percentage of net sales was mostly due to
the impact of higher general and administrative expenses as a percentage of net
sales related to wooden storage building sales.
Amortization of Intangible Assets. Amortization of financing fees, goodwill and
other identifiable intangible assets was $1.9 million for the nine months ended
September 30, 1999 as compared to $1.6 million for the same period in 1998. The
increase in amortization was a result of the goodwill and financing fees
associated with the Heartland acquisition.
Other Expenses. Interest expense increased $0.5 million to $6.3 million for the
nine months ended September 30, 1999 as compared to $5.8 million for the same
period a year ago. The increase in interest expense was due to the additional
debt incurred in connection with the Heartland acquisition.
Seasonality
The Company's historical sales pattern is seasonal and is concentrated in the
period from April 1 through September 30 (approximately 60 percent). The timing
of initial stocking orders and fluctuations in customer demand through the
spring and summer months contribute to this pattern.
Liquidity and Capital Resources
On February 16, 1999, the Company acquired all of the capital stock of Heartland
Industries, Inc. for approximately $13.6 million (including the repayment of
certain indebtedness of Heartland), subject to certain post-closing adjustments,
as provided in the Agreement and Plan of Merger. The acquisition was financed by
amending and restating the Company's existing senior credit facility.
10
<PAGE>
The Company's primary sources of working capital are cash flows from operations
and borrowings under PlayCore Wisconsin, Inc.'s senior credit facility, which
was entered into in March 1997, amended in February 1999, and runs through June
2003. PlayCore Wisconsin, Inc. is a wholly-owned subsidiary of the Company. The
PlayCore Wisconsin facility consists of (a) a $28.0 million revolving credit
facility; (b) a $38.0 million Term A facility and (c) a $9.0 million Term B
facility. The entire facility is guaranteed by PlayCore, Inc. and secured by a
first priority mortgage or security interest in all of PlayCore Wisconsin's
tangible and intangible assets, as well as the pledge of all of the outstanding
shares of PlayCore Wisconsin common stock. In addition, the Company and PlayCore
Wisconsin are subject to certain restrictive covenants, which include, among
other things, a general restriction on the payment of dividends and a limitation
on additional indebtedness.
Borrowing availability under the PlayCore Wisconsin revolving credit facility is
limited to specified percentages of qualified inventories and accounts
receivable, not to exceed $28.0 million. At September 30, 1999, the outstanding
amount of the revolving loan facility was $23.8 million, and the remaining
availability was approximately $1.4 million.
The Company made capital expenditures totaling approximately $6.0 million in the
nine months ended September 30, 1999. Approximately $3.6 million of this total
was spent on an expansion of the GameTime facility in Fort Payne, Alabama. This
expansion provides needed additional capacity to meet projected sales growth and
also allows for better workflow through the facility. The Company continues to
evaluate opportunities for both internal and external growth and believes that
funds generated from operations and its current and anticipated future capacity
for borrowing will be sufficient to fund current business operations as well as
anticipated future capital expenditures and growth opportunities.
Impact of Year 2000
Certain of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, these older
computer programs could misinterpret a date using "00" as the year 1900 rather
than the year 2000. If not corrected, many computer applications with this
defect could fail or create erroneous results.
The Company's Year 2000 compliance is directed by senior management and includes
four main projects.
1. Information technology;
2. Operating equipment with embedded chips or software;
3. Products; and
4. Third party suppliers and customers.
These projects generally include four phases:
1. Assessment - assessing equipment and systems for potential Year
2000 non-compliance;
11
<PAGE>
2. Remediation - developing solutions to correct Year 2000
non-compliance;
3. Testing - testing the developed solutions for effectiveness; and
4. Implementation - implementing the fully tested solutions.
The following chart is a summary of our Year 2000 compliance schedule target
dates:
<TABLE>
Resolution Phases
<CAPTION>
-------------------------------------------------------------------------------------------------------
Assessment Remediation Testing Implementation
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
E Information 100% Complete 100% Complete 100% Complete 100% Complete
X Technology
P -------------------------------------------------------------------------------------------------------
O Operating 100% Complete 100% Complete 100% Complete 100% Complete
S Equipment
U with
R Embedded
E Chips
or software
-------------------------------------------------------------------------------------------------------
T
Y Products 100% Complete 100% Complete 100% Complete 100% Complete
P
E -------------------------------------------------------------------------------------------------------
3rd Party 100% Complete 90% Complete 90% Complete 90% Completion
Suppliers and
customers
Expected Expected Expected
completion date is completion date is completion date is
December 1999 December 1999 December 1999
-------------------------------------------------------------------------------------------------------
</TABLE>
We believe our Year 2000 compliance will be completed on schedule, but the
schedule is based on a number of factors and assumptions. These assumptions
include the accuracy and completeness of responses by third parties to our
inquires and the availability of skilled personnel to complete the compliance
work. The compliance schedule could be adversely impacted if any of the factors
and assumptions are incorrect. We cannot give assurance that our Year 2000
compliance projects will be completed on schedule or that we will not uncover
Year 2000 issues that could create a material impact on the operation of the
Company. In addition, disruptions in the economy generally resulting from Year
2000 issues could also materially and adversely affect
12
<PAGE>
the Company. The Company could be subject to litigation for computer system
failures, equipment shutdowns or improperly dated business records. The amount
of such potential liability and lost revenue cannot be reasonably estimated at
this time.
The Company is in the process of working with third party vendors and customers
to ensure that the Company's systems that interface directly with third parties
are Year 2000 compliant by December 1999. Although management believes a
significant interruption in our suppliers and customers activities (due to Year
2000 issues) is unlikely, such an interruption could have a material impact on
our financial results.
We do not believe that the cost of our Year 2000 compliance will be material to
our financial condition or results of operations. The cost of Year 2000
compliance is not expected to exceed $0.5 million and is being funded through
operating cash flows. To date, we have spent approximately $0.4 million on Year
2000 compliance.
Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
The Company is exposed to market risk related to changes in interest rates. The
Company's earnings are affected by changes in the interest rate as a result of
its borrowings under the senior credit facility. However, at December 31, 1998,
the Company had a swap agreement that effectively converted $20.0 million of the
Company's debt to a fixed rate. If market interest rates for the remaining
borrowings under the senior credit facility average 1 percent or more during the
year ended December 31, 1999 than they did during 1998, the Company's interest
expense would increase, and income before taxes would decrease by approximately
$0.5 million. This analysis does not consider the effects of the reduced level
of overall economic activity that could exist in such an environment. Further,
in the event of a change of such magnitude, management could take actions to
further mitigate its exposure to the change. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no changes in the Company's financial structure.
The Company's swap agreement in place at December 31, 1998 had a notional amount
of $20.0 million and ran through June 11, 2000. The agreement required the
Company to pay interest at a defined fixed rate of 6.11 percent while receiving
interest at a defined variable rate of three-month LIBOR (5.24 percent at
December 31, 1998). This swap effectively converted $20.0 million of the
Company's Term Loan A to a fixed rate. The additional net interest expense
recorded in 1998 as a result of the swap agreement was not material. At December
31, 1998, the swap agreement had a negative fair market value of approximately
$0.3 million as determined by the lender. In connection with the amendment of
the Company's senior credit facility in February 1999, the swap agreement was
terminated. The Company expects to enter into a new swap agreement with a $20.0
million notional amount before the end of the fourth quarter of 1999.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
14
<PAGE>
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 thereunto duly authorized.
PlayCore, Inc.
Date: November 10, 1999 /s/ Richard E. Ruegger
-----------------------------------
Richard E. Ruegger,
Vice President-Finance
and Chief Financial Officer
(Duly authorized officer and Principal
Financial and Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PLAYCORE, INC. AS OF AND FOR
THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 724
<SECURITIES> 0
<RECEIVABLES> 29,116
<ALLOWANCES> 1,226
<INVENTORY> 20,622
<CURRENT-ASSETS> 56,722
<PP&E> 37,602
<DEPRECIATION> 11,273
<TOTAL-ASSETS> 141,464
<CURRENT-LIABILITIES> 57,251
<BONDS> 48,892
0
0
<COMMON> 116
<OTHER-SE> 23,972
<TOTAL-LIABILITY-AND-EQUITY> 141,464
<SALES> 146,571
<TOTAL-REVENUES> 146,571
<CGS> 82,823
<TOTAL-COSTS> 82,823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,321
<INCOME-PRETAX> 12,408
<INCOME-TAX> 4,795
<INCOME-CONTINUING> 7,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,613
<EPS-BASIC> .96
<EPS-DILUTED> .77
</TABLE>
