FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1996.
Commission File Number: 0-24450
RAWLINGS SPORTING GOODS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
43-1674348
(I.R.S. Employer Identification No.)
1859 Intertech Drive, Fenton, Missouri 63026
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(314) 349-3500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting Common Stock
held by nonaffiliates of the registrant as of September 9, 1996
was $76,975,270.
The number of shares of the registrant's Common Stock,
$.01 par value, outstanding as of September 9, 1996, was
7,697,527 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1996 Annual Report are
incorporated by reference into Item 1 of Part I and Items 5, 6,
7, and 8 of Part II of this report. Portions of the registrant's
proxy statement for the annual meeting are incorporated by
reference into Items 10, 11, 12 and 13 of Part III of this
report.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 2. Properties 16
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of
Security Holders 19
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters 19
Item 6. Selected Financial Data 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 20
PART III
Item 10. Directors and Executive Officers of the
Registrant 21
Item 11. Executive Compensation 21
Item 12. Security Ownership of Certain Beneficial
Owners and Management 21
Item 13. Certain Relationships and Related Transactions 21
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 22
<PAGE>
PART I
ITEM 1. BUSINESS.
General
Rawlings Sporting Goods Company, Inc. ("Rawlings" or
the "Company" is a leading supplier of team sports equipment in
North America and, through its licensee, of baseball equipment
and uniforms in Japan. Under the RAWLINGS (Registered Trademark)
brand name, the Company provides an extensive line of equipment
and team uniforms for the sports of baseball, basketball and
football. The Company's products are sold through a variety of
distribution channels, including mass merchandisers, sporting
goods retailers and institutional sporting goods dealers. The
Company has the exclusive right, for which it pays royalty fees,
to use the logos of certain sports organizations and events on
selected products, including the logos of baseball's National and
American Leagues, All-Star Game and World Series games and the
National Collegiate Athletic Association (the "NCAA") for the
sports of football and basketball. In addition, Rawlings'
products are endorsed by more than 80 college coaches, more than
18 major sports organizations and numerous athletes, including
more than 116 Major League Baseball players. These persons or
entities have entered into agreements with the Company under
which they are paid or provided products for endorsing Rawlings'
products or for permitting the Company to use their names or
logos.
Rawlings was founded in 1887 and since then, the
Company has established a long-standing tradition of innovation
in team sports equipment and uniforms, including the development
and introduction of the first football shoulder pads in 1902, the
original deep pocket baseball glove in 1920 and double knit nylon
and cotton uniforms for Major League Baseball in 1970. More
recently, the Company introduced new more flexible hockey
protective equipment in 1996, an improved one size fits all
batter's helmet in 1995 and the "Jammer" (Registered Trademark)
basketball warm-up jacket in 1991. Today, Rawlings manufactures
and distributes a broad array of team sports equipment and
products, including baseball gloves, baseballs, baseball bats,
batter's helmets, catcher's and umpire's protective gear,
basketballs, footballs, football shoulder pads and other
protective gear, hockey gloves and protective gear, team uniforms
and various team sports accessories. In addition, licensees of
the Company sell numerous products including athletic shoes,
retail active wear apparel, socks and golf equipment, using the
RAWLINGS(Registered Trademark) brand name and logo.
<PAGE>
Since 1977, the Company has been the exclusive supplier
of baseballs to the National and American Leagues, the All Star
Game and the World Series games, with agreements expiring in
2000. In 1996, Rawlings agreed in principle to extend its
exclusive rights to the All Star Game and World Series games
through 2000. As part of the extension of the licensing
agreements for the All Star and World Series games from 1996 to
2000, Rawlings received additional exclusive rights to the
Divisional Playoffs, League Championship Series, Interleague play
and nonexclusive rights to vinyl baseballs with Club logos and
for the above outlined events. In 1994, Rawlings obtained the
exclusive right to sell baseballs to each of the 18 Minor
Leagues. In 1996, Rawlings and Major League Baseball agreed in
principle to extend the exclusive right to sell baseballs to each
of the 18 Minor Leagues through 2000. The Company is the leading
supplier of baseball gloves to Major and Minor League players
Since 1986, Rawlings has been the exclusive supplier of
basketballs for the NCAA Men's and Women's Division I, II and III
tournament championship games, including the Final Four. In
1996, Rawlings' rights as the exclusive supplier of basketballs
for the NCAA Men's and Women's Division I, II and III tournament
championship games including the Final Four, was extended through
2002. Since 1987, Rawlings has been the exclusive supplier of
footballs for the NCAA Division IAA, II and III championship
games with a contract expiring in 2001.
Between 1967 and July 1994, the business of Rawlings
(the "Rawlings Business") was conducted as a division of Figgie
International, Inc. (the "former parent").
In July 1994, the former parent transferred the net
assets of the Rawlings Business to the Company in exchange for
$35.0 million in cash and the net cash proceeds generated from
the initial public offering of the Company's stock. Unless
otherwise indicated, references to Rawlings or the Company
include its predecessor.
Products and Markets
The following is a summary of net revenues for the
principal product lines and licensing arrangements of the
Rawlings Business during the two fiscal years ended August 31,
1996, the twelve months ended August 31, 1994 and the eight
months ended August 31, 1994:
<PAGE>
Net Revenues by Principal Product Line
(amounts in millions)
(unaudited)
Eight
Months Ended
August 31,
Years Ended August 31,
1996 /1/ 1995 /1/ 1994 /1/ 1994
Equipment
Baseball $ 88.3 $ 86.9 $ 82.8 $44.3
Basketball 24.2 23.3 20.5 13.9
and football
Apparel 14.3 10.2 8.3 5.1
International 7.7 9.5 9.5 7.6
Licensing 6.9 6.2 6.6 5.6
Miscellaneous 8.3 8.0 8.3 4.7
Net Revenues $149.7 $144.1 $136.0 $81.2
_______________
/1/ The Company changed its fiscal year end from December 31, to
August 31 after its initial public offering in July 1994.
Equipment
Baseball. The Company is a leading supplier of
baseball equipment in North America and, through its licensee, in
Japan. The Company's products in this area include baseball
gloves, baseballs, batter's helmets, catcher's and umpire's
protective equipment, aluminum and wood baseball bats, batter's
gloves and miscellaneous accessories.
Rawlings believes it is the leading supplier and offers
the broadest selection of baseball gloves in North America. The
Company offers more than 100 styles, which are often customized
to meet customer preferences. Its gloves range in retail price
from $5.99 for beginners to more than $159.99 for the HEART OF
THE HIDE(Registered Trademark) series, which are used by more
Major League Baseball players than any other brand. Rawlings
developed the original deep pocket glove in 1920. The Company
designed this glove in consultation with Bill Doak, a spitball
throwing southpaw with the St. Louis Cardinals, establishing the
Company's tradition of developing innovative products in
consultation with players and coaches. Rawlings has continued to
be a leader in baseball glove design and innovation <PAGE> and has
patented a number of designs, including the TRAP-EZE(Registered
Trademark) pocket design featuring a modified web giving the
appearance of a six-finger glove, the FASTBACK(Registered
Trademark) closed back design, the BASKET-WEB(Registered
Trademark) pocket design which features interwoven strips forming
a natural break on the back to assist in closing the glove and,
most recently, in 1994, the Pad Lock design which uses an
adjustable inner cushion pad and velcro wrist strap to stabilize
the hand inside the glove.
Rawlings believes it is the leading supplier of
baseballs in North America. It offers 14 types of baseballs,
which differ by their design and the materials used in their
construction, including different types of centers, winding
materials and covers which can be made of rubber, vinyl or
different qualities of leather. Rawlings' baseballs range from
lower-priced rubber balls to the professional baseballs that are
sold to National and American League teams. Rawlings' baseballs
are systematically weighed, measured, tested and inspected to
ensure that they meet Rawlings' quality standards. The National
League, American League, All Star and World Series baseballs are
covered with alum-tanned leather produced at Rawlings' leather
tannery in Tullahoma, Tennessee and hand-sewn at Rawlings'
manufacturing facility in Turrialba, Costa Rica. The Company
manufactures its professional baseballs in strict accordance with
the rigorous specifications established by Major League Baseball
to ensure comparability of players' statistics over time.
Since 1977, Rawlings has sold the official baseballs
used in all National and American League games and has furnished
the official baseballs for the All-Star Game and the World Series
games on an exclusive basis. As the official baseball of the
major leagues, Rawlings' baseballs are in demand from consumers
in the collectors' and memorabilia market. The value of an
autographed baseball is enhanced if it is an official National or
American League baseball. Effective in 1994, Rawlings received
the exclusive right to sell the official baseball to all of the
Minor League teams. Rawlings also sells an official baseball, in
certain cases on an exclusive basis, to a number of leagues
including the National Junior College Athletic Association, the
National Association of Intercollegiate Athletics, the Men's
Senior Baseball League, Little League Baseball and a number of
international baseball organizations.
Rawlings believes that it is the leading supplier of
baseball protective equipment in North America. In 1995, the
Company introduced a one size fits all batter's helmet that
received the award for most innovative product design at the 1995
National Sporting Goods Association trade show.
Rawlings believes that it is the second leading
supplier of wood baseball bats sold in North America. The
Company sells <PAGE> bats to a number of Major League and Minor League
teams. The Rawlings line of bats is manufactured at its
Dolgeville, New York facility under the RAWLINGS(Registered
Trademark) and ADIRONDACK(Registered Trademark) names. The
Company also introduced a line of aluminum baseball bats in
fiscal 1996.
Basketball, Football and Hockey. Rawlings sells 19
different types of basketballs, including full-grain, composite
and synthetic leather and rubber basketballs for men and women in
both the youth and adult markets. Since 1986, Rawlings has been
the exclusive supplier of basketballs for the NCAA Men's and
Women's Division I, II and III championship games (including the
Final Four). In 1996, the Company and the NCAA agreed in
principle to extend the basketball contract through 2002. In
1992, Rawlings became an official sponsor of the Women's
Basketball Coaches Association in an effort to capitalize on the
growth in women's team sports. The Company is also the official
supplier of basketballs to the National Junior College Athletic
Association and the National Association of Intercollegiate
Athletics.
Rawlings sells 20 different types of footballs,
including full-grain and split leather, vinyl and rubber for both
the youth and adult markets. In addition, the Company sells
professional and college football shoulder pads, other protective
gear (other than football helmets) and accessories. Since 1987,
Rawlings has been the exclusive supplier of footballs to the NCAA
Division IAA, II and III championships games. The football
contract with the NCAA expires in 2001. Rawlings also supplies
the official football to the National Association of
Intercollegiate Athletics.
In 1996, the Company developed a full line of
protective hockey equipment. The Company's hockey products are
intended to be marketed to consumers of ice, roller and street
hockey products. Rawlings also sells 12 models of hockey gloves.
In January 1994, the Company introduced The Zipper hockey glove
featuring a replaceable palm that reduces the need to repair or
replace the glove. Historically, the Company had sold hockey
gloves only in Canada; as such, revenues from hockey gloves sold
in Canada are included in the international net revenues. In
1994, Rawlings began selling its hockey glove line in the United
States with these net revenues included in miscellaneous in the
net revenues by principal product line table on page 3.
Apparel
Rawlings has been selling team uniforms for
approximately 100 years. Several Major League Baseball teams and
players purchase their uniforms from the Company. Apparel
comprised 9.6% of the net revenues of the Company in the year
ended August 31, 1996. The Company believes it has significant
growth opportunities related to apparel. The Company believes it
will <PAGE> continue to increase sales to institutional customers,
particularly high school, collegiate and amateur sports
organizations. The Company believes that the reorganization of
its manufacturing capabilities underway at its apparel facility
in Licking, Missouri and the relocation of production of certain
stock products to Costa Rica will enable the Company to improve
its service and delivery, while reducing costs. In late 1996, the
Company committed to a contract to expand its stock clothing
capacity in Costa Rica. This expansion is expected to result in
further cost reduction and margin improvement in stock apparel.
International
The Company's international net revenues (which
excludes licensing revenue and includes sales in Puerto Rico)
constituted approximately 5.1% of its total net revenues in the
year ended August 31, 1996. Rawlings currently distributes its
products in more than 45 countries primarily through independent
distributors. Of the Company's international net revenues in the
year ended August 31, 1996, approximately 64% came from direct
sales in Canada.
The Company works closely with foreign sports
organizations to build participation levels in American team
sports outside of the United States. The Company supplies
baseball, basketball and football equipment and team uniforms to
international sports organizations, including the Federation of
International Basketball Associations, the International Little
League and the International Baseball Association, and to leagues
in a number of non U.S. countries including those where Rawlings
supplies baseballs (Australia, Spain, Germany and Puerto Rico),
basketballs (Finland, Germany, Greece and Puerto Rico) and
footballs (Switzerland). Rawlings also assists sports
federations outside the United States by advising them on growth
strategies and, in certain instances, participating on the boards
of such federations. Due to the growing international popularity
of American team sports, the Company believes that opportunities
exist to increase its international net revenues. In particular,
the Company believes there is an opportunity to increase sales of
its baseball and basketball equipment in Latin America and
intends to increase its sales and marketing efforts in that
region. In 1995, the Company opened a sales office in Miami,
Florida to target Latin American markets. Net revenues in Latin
America increased approximately 30% in the year ended August 31,
1996.
<PAGE>
Licensing
In the year ended August 31, 1996, the Company
generated $6.9 million of licensing revenues on approximately
$175 million of sales made by third parties in Japan and the
United States of products on which the RAWLINGS(Registered
Trademark) brand name appeared under licensing agreements with
the Company. Rawlings has licensed the use of its brand name
since the mid-1970s when it licensed a Japanese company to use
the RAWLINGS(Registered Trademark) brand name on clothing sold in
Japan. Since then, Rawlings has licensed its name to Asics
Corporation, a leading Japanese sporting goods company, for use
on all types of baseball equipment, team uniforms and practice
clothing sold in Japan. The Company also licenses to another
Japanese company the use of the RAWLINGS(Registered Trademark)
brand name on retail active wear sold in Japan.
In the United States, Rawlings currently has licensing
agreements with 14 companies which are using the
RAWLINGS(Registered Trademark) brand name on various products
including sportswear, shoes, golf clubs, golf accessories, sports
bags, socks and infant and toddler games. The Company retains the
right under its licensing agreements to sample and inspect all
licensed products to ensure that products bearing the
RAWLINGS(Registered Trademark) brand name meet the Company's
quality standards. The Company intends to aggressively license
the RAWLINGS(Registered Trademark) brand name to strategically
extend the name to other related quality products and to new
geographic areas. The Company believes that such strategic
licensing will enhance the Company's image, consumer recognition
and sales of all of its products.
Miscellaneous
Rawlings derives net revenues from its five outlet
stores and from its leather tanning facility. The outlet stores
sell seconds, irregular quality and discontinued items.
Approximately 74% of the items sold at the Company's outlet
stores are Rawlings' products and the balance are sports-related
products purchased from third parties. Approximately 39% of the
leather tanned at Rawlings' tanning facility is sold to third
parties for use in a variety of products.
Sales, Marketing and Distribution
Rawlings' products are sold worldwide. In the United
States, Rawlings sells directly to approximately 3,800 customers
including local sporting goods stores, institutional dealers
(entities that service the sports equipment needs of high school,
collegiate and amateur sports organizations), regional sporting
goods chains (such as Dick's and Modell's), national sporting
goods chains (such as Oshman's Sporting Goods), sporting goods
megastores (such as Sports Authority and Sportmart) and mass
merchandisers (such as K-Mart and Wal-Mart). In recent years,
sales to sporting <PAGE> goods megastores and mass merchandisers have
accounted for an increasing amount of the net revenues of
Rawlings. Sales to the ten largest customers of Rawlings
constituted approximately 29% of the total net revenues of
Rawlings in the year ended August 31, 1996 including one customer
(Wal-Mart) which accounted for approximately 11% of 1996
revenues.
The Company has 32 direct sales employees and 70
manufacturers' representatives who sell its products in the
United States and Canada. The Company has two separate sales
forces, one to service national accounts and one to service
institutional dealers and local sporting goods stores. The
southeast region of the United States is handled by a
manufacturer's representatives organization. In addition, three
employees service professional and college teams, coaches and
athletes. The Company primarily utilizes distributors to sell
products overseas, except in Japan, which is covered by licensing
agreements. Rawlings' products are distributed from its
warehouse in Springfield, Missouri and public warehouses in
Southern California and Ontario, Canada.
The Company utilizes a variety of promotional
techniques to build brand awareness. Since 1958, Rawlings has
annually presented the RAWLINGS GOLD GLOVE AWARD(Registered
Trademark) to the best fielder at each position in each of the
National and American Leagues. The RAWLINGS GOLD GLOVE
AWARD(Registered Trademark) is the most prestigious award a
baseball player can receive for his fielding abilities. In
addition, Rawlings promotes its products through the Rawlings
Sports Caravan. The Rawlings Sports Caravan is comprised of a
tandem tractor trailer containing exhibits on the evolution of
baseball, basketball and football equipment and uniforms, and a
workshop in which demonstrations on the manufacture and repair of
baseball gloves, balls and bats are performed. The Rawlings
Sports Caravan is available to the Company's retail customers for
promotional activities such as new store openings. In addition,
the Caravan appears at sports events such as spring training,
opening day games, the All-Star Game, the World Series games and
the Baseball Hall of Fame induction ceremony. The Company also
promotes its products through product endorsements by numerous
professional athletes, coaches and sports organizations. The
Company makes available to retailers various co-op advertising
programs and participates in selected joint marketing and
advertising programs.
Affiliations and Endorsements
Rawlings has the right to use the logos of several
professional and amateur sports organizations and events on
certain of its products. These arrangements include: The
National League of Professional Baseball Clubs (National League
games); The American League of Professional Baseball Clubs
(American League games); Major League Baseball Promotional
Corporation (All-Star, World Series, Divisional Playoffs, League
Championship Series and <PAGE> Interleague play games); the NCAA
(basketball and football championships and Final Four games); the
18 Minor Leagues (Minor League games); the Women's Basketball
Coaches Association; the National Association of Intercollegiate
Athletics; the National Junior College Athletic Association; and
the Men's Senior Baseball League.
In addition, the Company's products are endorsed by
numerous athletes, including more than 100 Major League Baseball
players such as Albert Belle, Ken Griffey, Jr., Randy Johnson and
Cal Ripken, Jr. The Company's products also carry endorsements
from approximately 80 college coaches including football's Terry
Bowden and Pat Sullivan and basketball's Denny Crum, Rick Pitino,
Nolan Richardson, Marian Washington and Kay Yow. The Company's
products are also endorsed by Steve Young of the San Francisco
49ers.
The Company believes that endorsements by professional
athletes and college coaches and affiliations with sports
organizations enhance the Company's image and improve sales of
its products. The Company's strategy is to obtain a broad array
of endorsements and affiliations from national and regional
sports organizations, college coaches and professional athletes
in order to position its products to appeal to regional customer
preferences, as well as to achieve national recognition. The
Company believes this strategy is more effective than seeking
more expensive endorsements from fewer athletes and coaches.
The licensing agreements with Major League Baseball
Promotional Corporation and the 18 Minor Leagues, under which
Rawlings is licensed to produce the baseballs used in the
All-Star, World Series, Divisional Playoffs, League Championships
Series and Interleague play games, the official baseballs for the
Minor League games and the NCAA basketball contract, provide that
the Agreements will be subject to termination upon a change of
control of Rawlings, as defined in the agreements, unless the
change of control is approved by the Major League Baseball
Promotional Corporation, the Minor Leagues or the NCAA.
Manufacturing, Product Procurement and Raw Materials
Sales of Rawlings manufactured products constituted
approximately 40% of its net revenues in the year ended August
31, 1996 and the balance derived from the sale of product
manufactured by third parties in Asia and from licensing fees.
The third party sourced products are manufactured according to
the Company's specifications by third-party manufacturers located
outside the United States, including the Philippines, China,
Thailand, Taiwan, Korea and Indonesia. The Company's five
largest suppliers accounted for 54% of all of the raw materials
and finished goods <PAGE> purchased by Rawlings in the year ended August
31, 1996. The Company seeks to establish and build close working
relationships with its third-party manufacturers that emphasize
service, quality, reliability, loyalty and commitment. The
Company continually monitors its sourced products to ensure they
meet the Company's quality standards. The Company's arrangements
with its non U.S. suppliers are subject to the risks of doing
business abroad. The Company believes that the loss of any one
or more of its non U.S. manufacturers would not have a long-term
material adverse effect on the Company's business and results of
operations because other manufacturers are available to fulfill
the Company's requirements.
Rawlings operates five manufacturing facilities in the
United States and Costa Rica where it makes baseballs, apparel,
baseball gloves, footballs, injection molded accessories, tanned
leather and wood baseball bats. In late 1994 the Company began
relocating production of stock apparel to its Costa Rica factory
to reduce operating costs. In late 1996, the Company committed
to expansion of capacity of its Costa Rica facility for
additional stock apparel manufacturing. The increased off-shore
production will help the Company reduce costs over the next few
years in the apparel product category.
Rawlings obtains its raw materials from various sources
which it considers to be adequate for fulfilling its
requirements. To assure access to the highest quality leather for
its baseballs, the Company acquired its Tennessee leather tanning
facility in 1985. The Company depends upon a limited number of
vendors for leather for its HEART OF THE HIDE(Registered
Trademark) baseball gloves and full-grain footballs. If any of
these sources of raw materials were unavailable to the Company,
the Company's operations could be adversely affected until
alternative sources were found in the necessary quantities.
Trademarks and Patents
The RAWLINGS(Registered Trademark) brand name and logo
and the red "R"(Registered Trademark) logo as well as a number of
product trademarks, including FINEST IN THE FIELD(Registered
Trademark), RAWLINGS GOLD GLOVE AWARD(Registered Trademark) and
THE MARK OF A PRO (Registered Trademark), are considered material
to Rawlings' business. As of August 31, 1996, Rawlings held 42
U.S. and non U.S. patents, and had 6 U.S. patent applications and
54 non U.S. patent applications pending. Although Rawlings
believes that collectively its patents are important to its
business, the loss of any one patent would not have a material
adverse effect on the Company's business and results of
operations.
<PAGE>
Competition
Rawlings competes with numerous national and
international companies which manufacture and distribute broad
lines of sporting goods and related equipment and sports clothing
as well as numerous manufacturers and suppliers of a limited
variety of such products. Certain of the Company's competitors
offer sports equipment not sold by the Company. Some of the
Company's competitors are larger, and have substantially greater
financial and other resources, than Rawlings. The Company's
principal competitors include Wilson Sporting Goods Company (a
wholly owned subsidiary of Amer Group Ltd.), Diamond Baseball
Company, the Spalding Division of Spalding & Evenflo Companies,
Inc. and Mizuno Company Limited in the baseball product line;
Wilson Sporting Goods Company, the Spalding Division of
Spalding_& Evenflo Companies, Inc. and Riddell Sports Inc. in the
basketball and football lines; and Russell Corporation in the
apparel line. While Rawlings is one of the leading manufacturers
and distributors of team sports equipment in North America,
competition in the sporting goods industry is intense and is
based upon quality, price, product features and brand
recognition. In addition, the competitive barriers to entry into
the sporting goods industry in general are not significant.
Seasonality
Information on seasonality is incorporated by reference from
the Management Discussion and Analysis Section on 12 through 16
of the Company's 1996 Annual Report to stockholders.
Employees
As of August 31, 1996, Rawlings employed approximately
1,808 people on a full-time basis, of whom 744 were based in the
United States and 1,064 were based in Costa Rica. Of the total
number of employees, approximately 1,645 were engaged in
manufacturing, 122 were engaged in marketing and sales and 41
were engaged in administration. Approximately 393 of Rawlings'
domestic employees are represented by the Amalgamated Clothing &
Textile Workers Union AFL-CIO-CLC or the Local 682 of the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, under collective bargaining agreements
which expire in 1996 and 1997, respectively. Rawlings believes
that relations with its employees are good and that the
collective bargaining agreements will be extended without
material changes from the current contract.
<PAGE>
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS, FINANCIAL
CONDITION OR BUSINESS
In order to take advantage of the safe harbor provisions for
forward-looking statements adopted by the Private Securities
Litigation Reform Act of 1995, the Company is hereby identifying
important risks, uncertainties and other factors that could
affect the Company's actual results of operations, financial
condition or business and could cause the Company's actual
results of operations, financial condition or business to differ
materially from its historical results of operations, financial
condition or business, or the results of operations, financial
condition or business contemplated by forward-looking statements
made herein or elsewhere orally or in writing, by, or on behalf
of, the Company. Except for the historical information contained
herein, the statements made in this Report on Form 10-K are
forward-looking statements that involve such risks, uncertainties
and other factors that could cause or contribute to such
differences including, but not limited to, those described below.
Dependency on Baseball. Sales of baseball-related products
constituted approximately 59% of the total net revenues of
Rawlings in the year ended August 31, 1996. Adverse publicity or
news coverage regarding professional or amateur baseball, strikes
or other stoppages in play by athletes or umpires could create
fan disaffection that could have a material adverse effect on the
Company's sales. Similarly, poor weather conditions during
baseball season could have a material adverse effect on the
Company's sales.
Dependence on Foreign Manufacturing. The Company's
dependence on foreign manufacturing is described above under
"Manufacturing, Product Procurement and Raw Materials" which is
subject to the risks of doing business abroad, such as changes in
import duties, trade restrictions, work stoppages, labor laws,
political instability, foreign currency fluctuations and other
factors which could have a material adverse effect on the
Company's business and results of operations.
Seasonality. Customers historically have placed orders with
the Company for baseball-related products beginning in July for
shipment beginning in October (pre-season orders). Because the
Company's sales of baseball-related products exceed those of its
other products, Rawlings' business is seasonal, with its highest
net revenues and profitability historically recognized between
November 1 and April 30, which may shift in the future due to the
trends discussed in "Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Seasonality."
<PAGE>
Reliance on Certain Customers. Sales to the ten largest
customers of Rawlings constituted approximately 29% of the total
net revenues of Rawlings in the year ended August 31, 1996,
including one customer, Wal-Mart, which accounted for
approximately 11% of 1996 revenues. Although the Company has
long-established relationships which many of its customers, the
Company does not have long-term supply contracts with them. A
decrease in business from any of its major customers could have a
material adverse effect on the Company's results of operations
and financial condition.
Litigation. Like similar manufacturing companies, the
Company is subject to various federal, state and local
environmental laws relating to air emissions, water discharges
and the storage, handling, disposal and remediation of petroleum
and hazardous substances. In addition, the Company is from time
to time subject to product liability claims and proceedings
involving its patents which have not historically had a material
adverse effect on the Company. See "Legal Proceedings."
Credit Agreement Restrictions. The Company's Credit
Agreement with its existing lenders contains certain restrictions
on the Company, including requirements as to the maintenance of
net worth and certain financial ratios, payment of cash
dividends, incurrence of additional indebtedness and the
limitation of capital expenditures and there can be no assurance
that the Company will be able to achieve and maintain compliance
with those restrictions or obtain waivers to any non-compliance.
See "Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Liquidity and Capital
Resources."
Additional Factors. Additional risks and uncertainties that
may affect future results of operations, financial condition or
business of the Company include, but are not limited to: (i)
interest in collectible sports memorabilia and the financial
condition of memorabilia resellers; (ii) demand for the Company's
products; (iii) the effect of economic and industry conditions on
prices for the Company's products and its cost structure; (iv)
negative reports by brokerage firms, industry and financial
analysts regarding the Company or its products which may have the
effect of reducing the reputation, goodwill or customer demand
for, or confidence in, the Company's products; and (v) the
ability to attract and retain capital for growth and operations
on competitive terms.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
Carl J. Shields 55 Chairman of the Board, Chief Executive
Officer and President
Howard B. Keene 54 Chief Operating Officer
Paul E. Martin 36 Chief Financial Officer
Randy D. Black 44 Vice President, Marketing
Ted C. Sizemore 51 Vice President, Baseball Development and
International Sales
J. Michael
Thompson 38 Vice President, Sales
Carl J. Shields has served as President of the Company
since February 1994 and as Chairman of the Board and Chief
Executive Officer of the Company since July 8, 1994. From
September 1993 to February 1994, Mr. Shields served as Vice
President, Sales/Marketing of Rawlings. From 1988 to September
1993, Mr. Shields served as Vice President, Sales for Rawlings.
From 1986 to 1988, Mr. Shields was Director of Marketing for
DeLong Sportswear. From 1985 to 1986, Mr. Shields served as Vice
President, Sales and Marketing for Loudon Sportswear. From 1980
to 1985, Mr. Shields served as Director of Sales for Bike
Athletic Company. From 1976 to 1980, Mr. Shields served as
Northeast and Midwest Regional Sales Manager for Russell
Corporation.
Howard B. Keene has served as Chief Operating Officer
since April 1995. From November 1992 to March 1995, Mr. Keene
served as Vice President, Foreign Activity and Procurement of
Rawlings. From February 1990 to November 1992, Mr. Keene served
as International Purchasing Consultant for all divisions of
Figgie International, Inc. He was President of Rawlings from
1987 to February 1990. From 1973 to 1987, Mr. Keene held various
positions at Rawlings, primarily in product procurement.
Paul E. Martin has served as Chief Financial Officer of
the Company since June 1995. From February 1993 to May 1995, Mr.
Martin served as Director of External Reporting and Analysis for
Pet Incorporated, a public company that manufactured prepared
foods with $1.5 billion in revenues. From January 1992 to
January 1993, Mr. Martin served as Chief Financial Officer of
CPC-Rexcel, Inc., a highly leveraged public company that
manufactured packaging materials with $50 million in revenues.
During Mr. Martin's tenure the company attempted to restructure
its substantial debt levels. The company decided to discontinue
its efforts to restructure the debt and filed for bankruptcy
protection in November 1992. From 1982 to 1991, Mr. Martin was
employed in progressively responsible positions, including Senior
Audit Manager, by Arthur Andersen LLP.
<PAGE>
Randy D. Black has served as Vice President, Marketing
of Rawlings since July 1994. From November 1993 to July 1994,
Mr. Black headed the sports apparel division for the Pro-Line Cap
Company, where he was responsible for establishing a new brand of
sportswear distributed through sporting goods dealers. From
December 1992 to November 1993, Mr. Black served as President of
Varsity Excellence, a division of Dougherty Manufacturing
Company, Inc. Prior to December 1992, Mr. Black held a variety
of marketing and management positions during his seventeen years
at Bike Athletic Company most recently as Vice President of Sales
and Marketing.
Ted C. Sizemore has served as Vice President, Baseball
Development and International Sales of Rawlings since 1984, with
primary responsibility for maintaining and strengthening the
Company's relationship with sports organizations, players and
coaches. Prior to 1984, Mr. Sizemore was a Major League Baseball
player who played second base for a number of teams, including
the Los Angeles Dodgers, the St. Louis Cardinals and the
Philadelphia Phillies. Mr. Sizemore received Rookie of the Year
honors with the Los Angeles Dodgers in 1969.
J. Michael Thompson has served as Vice President, Sales
of Rawlings since July 1994. Mr. Thompson joined Rawlings in
1984 as a sales representative and was promoted in 1989 to
western regional sales manager.
<PAGE>
ITEM 2. PROPERTIES.
The following table sets forth certain information as
of August 31, 1996 relating to Rawlings' principal properties:
Approximate Owned or
Location Purpose/Products Size (sq. ft.) Leased
Ava, Missouri
(two adjoining Manufacturing of baseball 90,000 Leased
facilities) gloves, batter's helmets, 60,000 Leased
footballs and injection molded
accessories
Dolgeville, New York
(three properties) Manufacturing of wood 80,500 Owned
baseball bats and
footballs
Fenton, Missouri Corporate headquarters 25,000 Leased
(For a term
expiring in 2001)
Licking, Missouri
(two facilities) Manufacturing of team 55,400 Owned
uniforms 55,000 Leased (On a
month to month
basis)
Springfield, Warehouse/distribution 83,500 Owned
Missouri center
Tullahoma, Leather tanning 69,000 Owned
Tennessee
Turrialba, Manufacturing of baseballs 33,000 Owned
Costa Rica
In August 1996, the Company committed to an expansion
of the Turrialba, Costa Rica facility. This expansion when
completed will increase the size of the Turrialba, Costa Rica
facility to approximately 52,000 square feet.
In addition, Rawlings leases approximately 5,600 square
feet of office space in Fenton, Missouri for research and
development activities and an average of 5,000 square feet for
each of its five outlet stores. Rawlings also leases space for
its five regional sales offices.
The Company believes that its facilities are suitable
for their present and intended purposes and adequate for the
Company's current and expected levels of operations.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
Environmental Matters
The Company is subject to various federal, state and
local environmental laws, including those relating to air
emissions, water discharges, and the storage, handling, disposal
and remediation of petroleum and hazardous substances. The
Company has not been identified as a potentially responsible
party under the federal Superfund law or, except with respect to
a completed drum removal action described below, comparable state
laws at any of its properties or in connection with its shipments
of waste from any of its facilities to off-site disposal
locations.
Pursuant to a consent order with the New York State
Department of Environmental Conservation (the "NYSDEC"), the
Company has completed a drum removal project in the vicinity of
the kiln operations at its Adirondack facility in Dolgeville, New
York (the "Adirondack Facility"). The Company currently makes
wood baseball bats at the Adirondack Facility. The presence of
the drums resulted in the listing of the Adirondack Facility on
the NYSDEC's registry of inactive hazardous waste disposal sites.
Upon completion of this project, the NYSDEC declared the matter
closed and reclassified the Adirondack Facility as a site for
which no further remedial action or monitoring is required under
the state Superfund law. The Company plans to take action to
delist the Adirondack Facility entirely from the state Superfund
list.
In consultation with NYSDEC, the Company is now in the
process of addressing contamination relating to past petroleum
and waste storage practices at the Adirondack Facility. To date,
activities have included drum and underground storage tank
removal projects and the investigation of releases of wood pitch
into the surrounding soil and surface water from a retort
facility that is no longer operational. The retort operation was
conducted by a third party unrelated to Rawlings before Rawlings
began its operations at the Adirondack Facility.
The NYSDEC's Bureau of Spill Prevention and Response
approved the Company's work plan to delineate the extent of soil
and groundwater contamination detected after removal of certain
of the aforementioned underground storage tanks and a work plan
to determine the source and extent of the contamination resulting
from releases of the wood pitch. The Company has completed
on-site work under these approved work plans and NYSDEC has
notified the Company that no further work needs to be done in
connection with three of the former underground storage tank
areas. One other former underground storage tank area is still
being reviewed by NYSDEC and the Company is aggressively pursuing
closure of that remaining former underground storage tank site as
well as the former retort area.
<PAGE>
While the Company's share of the cost of investigating
and remediating the contamination at the Adirondack Facility
described above cannot be finally determined until the nature of
any future required work is better defined, the Company accrued
$1.6 million in the year ended December 31, 1993 relating to
environmental investigation and remediation, based upon
discussions with the Company's environmental consultants. It is
possible but unlikely that additional expenses may be incurred,
but the Company is unable to estimate any additional amount
beyond that already accrued because there are a number of options
regarding the remaining open areas, depending upon future
negotiations between NYSDEC and the Company. The Company
believes that any additional expenses beyond the amount accrued
will not have a material adverse effect on the Company's
financial condition, results of operation or cash flow. Based
upon work that has been completed, the Company believes that the
remaining accrued investigatory, remediation and monitoring costs
will be incurred over the next several years. Under the relevant
environmental laws, the Company is potentially liable as an owner
of the property for the entire costs of investigating and
remediating the environmental issues at the Adirondack Facility.
While the Company believes that other parties including insurers
may be liable for some or all of those costs, there can be no
assurance that such parties will bear these costs and therefore
the Company has not assumed any recovery from such third parties
in estimating its potential liabilities.
The Company has applied for and obtained certain
appropriate environmental permits applicable to the ongoing
operations at its Adirondack Facility, after substantial
discussions with NYSDEC and other environmental regulatory
authorities. Based on these discussions and the Company's review
of the NYSDEC enforcement policies and practices, the Company
believes it is unlikely that any penalties or fines will be
imposed for past unpermitted operations. In addition, pursuant
to an informal agreement with the NYSDEC, the Company is in the
process of removing an on-site accumulation of wood shavings.
The Company believes that the agreed upon removal may obviate any
potentially applicable solid waste permit requirements.
Litigation and Other Liabilities
On November 22, 1995, a class action complaint was
filed in the United States District Court for the Eastern
Division of the Eastern District of Missouri by Henry G. Jakobe,
Jr. against the Company. The complaint also names as defendants
Mr. Carl J. Shields, Chairman, CEO and President of the Company,
and Howard B. Keene, Chief Operating Officer of the Company. The
complaint alleges, among other things, that the defendants
violated the <PAGE> federal securities laws by making false and
misleading statements regarding the impact of the Major League
Baseball strike on the Company's business. The plaintiff seeks
an unspecified amount of damages, reimbursement of costs and
expenses of the litigation, including attorney fees, and other
unspecified relief.
The nature of the Company's products has subjected it
to product liability claims from time to time which have not had
a material adverse effect on the Company. In addition, the
Company is from time to time subject to proceedings involving its
patents which have not had a material adverse effect on the
Company. The Company expects that it will be subject to product
liability claims and proceedings involving its patents in the
future due to the nature of its products. The Company did not
assume any litigation or product liability of the Rawlings
Business relating to incidents that occurred prior to July 8,
1994. A possibility exists, however, that the Company could be
liable for liabilities of the Rawlings Business not assumed by
the company in the July 8, 1994 net asset transfer under a theory
of successor liability. While the former parent has agreed to
indemnify the Company for such liabilities, as well as certain
other obligations that relate to the assets and liabilities of
the Rawlings Business, there can be no assurance that the former
parent will be able to fulfill these indemnification obligations
to the Company if required to do so.
The Company intends to vigorously defend the
shareholder litigation and all product liability matters. The
Company believes that these matters will not have a material
adverse effect on the Company's financial condition, results of
operations or cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security
holders through the solicitation of proxies or otherwise during
the quarter ended August 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information regarding the market for the Company's
common stock, quarterly marked price ranges, dividends declared
and shareholders of record is incorporated by reference from page
25 of the Company's 1996 Annual Report to Stockholders.
<PAGE>
The information regarding dividend restrictions is
incorporated by reference from pages 21 and 22 of the Company's
1996 Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by Item 6 is incorporated by
reference from the Selected Financial Data section on page 11 of
the Company's 1996 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required by Item 7 is incorporated by
reference from the Management Discussion and Analysis Section on
pages 12 to 15 of the Company's 1996 Annual Report to
Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 is incorporated by
reference from the "Consolidated Statements of Income",
"Consolidated Balance Sheets", "Consolidated Statements of
Stockholders' Equity", "Consolidated Statements of Cash Flows",
"Notes to Consolidated Financial Statements" and "Report of
Independent Public Accountants" on pages 16 to 19 of the
Company's 1996 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Identification of Directors
Information with respect to the members of the Board of
Directors is set forth under the caption "Election of Directors"
in the Company's proxy statement to be filed pursuant to
Regulation 14A, which information is incorporated herein by
reference.
(b) Identification of Executive Officers
Information with respect to the executive officers of
the Company is set forth under the caption "Executive Officers of
the Registrant" contained in Part I, Item 1 of this report, which
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by Item 11 is set forth under the
captions "Compensation of Directors" and "Executive Compensation"
in the Company's proxy statement to be filed pursuant to
Regulation 14A, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information required by Item 12 is set forth under the
captions "Principal Stockholders" and "Stock Ownership of
Directors, Nominees for Directors and Executive Officers" in the
Company's proxy statement to be filed pursuant to Regulation 14A,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this Item is set forth under
the caption "Certain Transactions" in the Company's proxy
statement to be filed pursuant to Regulation 14A, which
information is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a)(1) Financial Statements: The financial
statements filed as a part of this report are
listed in Part II, Item 8.
(a)(2) Financial Statement Schedules: None.
<PAGE>
(a)(3) Exhibits
3.1 Certificate of Incorporation, included as Exhibit
3.1 to the Company's Registration Statement on
Form S-1 (File No. 33-77906), is hereby
incorporated herein by reference.
3.2 By-Laws, included as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (File No.
33-77906), is hereby incorporated herein by
reference.
3.3 By-Law amendment.
4.1 Rights Agreement dated as of July 1, 1994 between
the Company and Boatmen's Trust Company as Rights
Agent, included as Exhibit 4.1 to the Company's
Form 10-Q for the quarter ended June 30, 1994, is
hereby incorporated herein by reference.
4.2 Credit Agreement dated as of July 8, 1994 among
the Company, The First National Bank of Chicago,
as agent, and certain lenders named therein,
included as Exhibit 4.2 to the Company's Form 10-Q
for the quarter ended June 30, 1994, is hereby
incorporated herein by reference.
4.3 Amendment No. 1 dated March 24, 1995 to the Credit
Agreement by and among Rawlings Sporting Goods
Company, Inc., The First National Bank of Chicago,
as agent, and certain lenders named therein,
included as Exhibit 4.1 to the Company's Form 10-Q
for the quarter ended February 28, 1995, is hereby
incorporated herein by reference.
4.4 Amendment No. 2 dated August 31, 1995 to the
Credit Agreement by and among Rawlings Sporting
Goods Company, Inc., The First National Bank of
Chicago, as agent, and certain lenders named
therein included as Exhibit 4.3 to the Company's
Form 10-K for the year ended August 31, 1995 is
hereby incorporated herein by reference.
4.5 Amendment No. 3 dated September 23, 1996 to the
Credit Agreement by and among Rawlings Sporting
Goods Company, Inc., The First National Bank of
Chicago, as agent, and certain lenders named
therein.
<PAGE>
10.1 Assets Transfer Agreement dated as of July 8, 1994
by and among Figgie, Figgie Licensing Corporation,
Figgie International Real Estate, Inc., Figgie
Properties, Inc. and the Company, included as
Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended June 30, 1994, is hereby
incorporated herein by reference.
10.2 Transitional Services Agreement dated as of
July 8, 1994 between Figgie and the Company,
included as Exhibit 10.2 to the Company's Form
10-Q for the quarter ended June 30, 1994, is
hereby incorporated herein by reference.
10.3 Tax Sharing and Separation Agreement dated July 8,
1994 between the Company and Figgie, included as
Exhibit 10.3 to the Company's Form 10-Q for the
quarter ended June 30, 1994, is hereby
incorporated herein by reference.
*10.4 The Company's 1994 Long-Term Incentive Plan,
included as Exhibit A to the Company's proxy
statement dated December 9, 1994, is hereby
incorporated herein by reference.
*10.5 The Company's 1994 Non-Employee Directors' Stock
Plan, included as Exhibit B to the Company's proxy
statement dated December 9, 1994, is hereby
incorporated herein by reference.
10.6 Amendment Agreement between Rawlings Sporting
Goods Company and Asics Corporation, dated
January 21, 1991, included as Exhibit 10.6 to the
Company's Registration Statement on Form S-1 (File
No. 33-77906), is hereby incorporated herein by
reference.
*10.7 Form of Indemnity Agreement entered into with
Directors and executive officers, included as
Exhibit 10.7 to the Company's Form 10-K for the
fiscal year ended August 31, 1994, is hereby
incorporated herein by reference.
*10.8 Form of Severance Agreement entered into with
executive officers included as Exhibit 10.8 to the
Company's Form 10-K for the year ended August 31,
1995 is hereby incorporated herein by reference.
13. Annual Report to Stockholders for the Fiscal Year
Ended August 31, 1996.
<PAGE>
21. Subsidiaries of the Company included as Exhibit 21
to the Company's Form 10-K for the fiscal year
ended August 31, 1994 is incorporated herein by
reference.
23. Consent of Arthur Andersen LLP.
(b) Reports on Form 8-K
There are no reports filed on Form 8-K for the quarter
ended August 31, 1996.
*Management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 14(c) of this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RAWLINGS SPORTING GOODS COMPANY, INC.
Date: November 26, 1996 By: \s\ Paul E. Martin
Paul E. Martin
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed by the following persons
on behalf of the Company and in the capacities and on the date
indicated.
SIGNATURE DATE
By: \s\ Carl J. Shields November 26, 1996
Carl J. Shields
Chairman, CEO and President
By: \s\ Andrew N. Baur November 26, 1996
Andrew N. Baur
Director
By: \s\ Linda L. Griggs November 26, 1996
Linda L. Griggs
Director
By: \s\ Michael McDonnell November 26, 1996
Michael McDonnell
Director
By: \s\ Michael J. Roar November 26, 1996
Michael J. Roarty
Director
By: \s\ William C. Robinson November 26, 1996
William C. Robinson
Director
AMENDMENTS TO THE BYLAWS OF
RAWLINGS SPORTING GOODS COMPANY, INC.
On October 24, 1996, the Board of Directors of Rawlings
Sporting Goods Company, Inc., a Delaware corporation (the
"Corporation") adopted the following resolutions which amended
the Bylaws of the Corporation:
RESOLVED, that the Bylaws of the Corporation are
hereby amended by inserting the following new Section
2.11 immediately after the present Section 2.10:
SECTION 2.11. CONDUCT OF MEETINGS. The
date and time of the opening and the closing
of the polls for each matter upon which the
stockholders will vote at a meeting shall be
announced at the meeting by the person
presiding over the meeting. The Board of
Directors of the Corporation may, to the
extent not prohibited by law, adopt by
resolution such rules and regulations for the
conduct of the meetings or any meeting of
stockholders as it shall deem appropriate.
Except to the extent inconsistent with such
rules and regulations, the chairman of the
meeting of stockholders may prescribe such
rules, regulations and procedures and do all
such acts as, in the judgment of such
chairman, are appropriate for the proper
conduct of the meeting. Such rules,
regulations or procedures, whether adopted by
the Board of Directors or prescribed by the
chairman of the meeting, may, to the extent
not prohibited by law, include, without
limitation, the following: (i) the
establishment of an agenda for the meeting;
(ii) the maintenance of order at the meeting;
(iii) limitations on attendance at or
participation in the meeting to stockholders
of record of the Corporation, their duly
authorized proxies and such other persons as
shall be determined by the chairman of the
meeting or the Board of Directors; (iv)
restrictions on entry to the meeting after a
specified time; (v) limitations on the time
allotted to questions or comments by
participants, and (vi) the matters addressed
by Section 3.03(c). Unless otherwise
determined by the Board of Directors or the
chairman of the meeting, meetings of
stockholders shall not be required to be held
in accordance with any rules of parliamentary
procedure.
<PAGE>
Unless otherwise determined by
the Board of Directors, the chairman of the
meeting shall be the Chairman of the Board of
Directors.
* * *
WHEREAS, the Board of Directors of the Corporation
desire to amend the Bylaws of the Corporation with
respect to the advance notification requirements
pertaining to matters brought before an annual meeting
of stockholders by the stockholders of the Corporation;
and
WHEREAS, the Board of Directors believe that an
amendment to the Bylaws of this nature should not
become effective until after proper notice thereof is
provided to the stockholders of the Corporation, which
notice will be provided in the proxy statement for the
Annual Meeting of Stockholders to be held on January
16, 1997,
NOW, THEREFORE, BE IT RESOLVED, that effective
upon the adjournment of the Annual Meeting of
Stockholders to be held January 16, 1997, that the
Bylaws of the Corporation are hereby amended by (i)
deleting the second paragraph of present Section 3.02
in its entirety and (ii) deleting the section heading
of present Section 3.02 in its entirety and
substituting in lieu thereof the following section
heading:
SECTION 3.02. NUMBER, QUALIFICATIONS
AND TERM OF OFFICE.
FURTHER RESOLVED, that effective upon the
adjournment of the Annual Meeting of Stockholders to be
held January 16, 1997, the Bylaws of the Corporation
are hereby amended by inserting the following new
Section 3.03 immediately after the present Section 3.02
and by appropriately renumbering the sections currently
designated as Sections 3.03 through 3.14:
SECTION 3.03. NOMINATION OF DIRECTORS AND
PRESENTATION OF BUSINESS AT ANNUAL STOCKHOLDER
MEETINGS.
(a) Nominations of persons for
election to the Board of Directors and the
proposal of business to be considered by the
stockholders may be made at an annual
<PAGE>
meeting of stockholders (i) pursuant to the
Corporation's notice of meeting, (ii) by or
at the direction of the Board of Directors,
or (iii) by any stockholder who was a
stockholder of record at the time of the
giving of notice provided for in this Section
3.03, who is entitled to vote thereon at the
meeting and who complied with the notice
procedures set forth in this Section 3.03.
(b) For nominations or other
business to be properly brought before an
annual meeting by a stockholder pursuant to
clause (iii) of paragraph (a) of this Section
3.03, the stockholder must have given timely
notice thereof in writing to the Secretary of
the Corporation. To be timely, a
stockholder's notice shall be delivered to
the Secretary at the principal executive
offices of the Corporation not less than
sixty (60) days prior to the first
anniversary of the preceding year's annual
meeting; PROVIDED, that in the event that the
date of the annual meeting is advanced by
more than thirty (30) days or delayed by more
than sixty (60) days from such anniversary
date, notice by the stockholder to be timely
must be so delivered not later than the close
of business on the later of (i) the 60th day
prior to such annual meeting, or (ii) the
10th day following the date on which public
announcement of the date of such meeting is
first made. Such stockholder's notice shall
set forth as to each person whom the
stockholder proposes to nominate for election
or reelection as a director: (i) the name
and address of the stockholder who intends to
make the nomination and of the person or
persons to be nominated; (ii) a
representation that such stockholder is a
holder of record of stock of the Corporation
entitled to vote in the election of directors
at such meeting and intends to appear in
person or by proxy at the meeting to nominate
the person or persons specified in the
notice; (iii) the name and address of such
stockholder, as it appears on the
Corporation's books, and of the beneficial
owner (as such term is defined in 17 C.F.R.
Section 240.13d-3 ("Rule 13d-3") under the
Securities Exchange Act of 1934 ("Exchange
Act")), if any, on whose behalf the
nomination is made; (iv) the class and number
of shares of the Corporation which are owned
beneficially (as such term is defined in
<PAGE>
Rule 13d-3 under the Exchange Act) and of
record by the nominating stockholder and each
nominee proposed by such stockholder; (v) a
description of all arrangements or
understandings between the stockholder and
each nominee and any other person (naming
such persons) pursuant to which the
nomination or nominations are to be made by
the stockholder; (vi) such other information
regarding each nominee proposed by such
stockholder as would have been required to be
included in a proxy statement filed pursuant
to 17 C.F.R. Section 240.14a-1 ET SEQ.
("Regulation 14A") as then in effect under
the Exchange Act had the nominee been
nominated, or intended to be nominated, by
the Board of Directors; and (vii) the consent
of each nominee to serve as a director of the
Corporation if so elected. As to any other
business that the stockholder proposes to
bring before the meeting, a stockholder's
notice to the Secretary shall set forth as to
each matter: (i) a brief description of the
business desired to be brought before the
annual meeting; (ii) a representation that
such stockholder is a holder of record of
stock entitled to vote on the business
proposed by such stockholder and intends to
appear in person or by proxy at the meeting
to present the proposed business to be
brought before the meeting; (iii) the name
and address of the stockholder proposing such
business, as it appears on the Corporation's
books, and of the beneficial owner (as such
term is defined in Rule 13d-3 under the
Exchange Act), if any, on whose behalf the
business is proposed; (iv) the class and
number of shares of the Corporation which are
owned beneficially (as such term is defined
in Rule 13d-3 under the Exchange Act) and of
record by the stockholder; (v) the reason for
conducting such business at the meeting and
any material interest of the stockholder or
such beneficial owner in such business; and
(vi) all other information with respect to
each such matter as would have been required
to be included in a proxy statement filed
pursuant to Regulation 14A as then in effect
under the Exchange Act had proxies been
solicited by the Board of Directors with
respect thereto. Notwithstanding anything in
this paragraph (b) to the contrary, in the
event that the number of directors to be
elected to the Board of Directors is
increased and there is no public announcement
naming
<PAGE>
all of the nominees for director or
specifying the size of the increased Board of
Directors made by the Corporation at least
seventy (70) days prior to the first
anniversary of the preceding year's annual
meeting, a stockholder's notice shall also be
considered timely, but only with respect to
nominees for any new positions created by
such increase, if it shall be delivered to
the Secretary at the principal executive
offices of the Corporation not later than the
close of business on the 10th day following
the day on which such public announcement is
first made by the Corporation.
(c) Only such persons who are
nominated in accordance with the procedures
set forth in this Section 3.03 shall be
eligible to serve as directors, and only such
business shall be conducted at an annual
meeting of stockholders as shall have been
brought before the meeting in accordance with
the procedures set forth in this Section
3.03. The chairman of the meeting of
stockholders shall have the power and duty to
determine whether a nomination or any
business proposed to be brought before the
meeting was made in accordance with the
procedures set forth in this Section 3.03
and, if any proposed nomination or business
is not in compliance with this Section 3.03,
to declare that such defective nominations or
proposal shall be disregarded.
(d) For purposes of this Section 3.03,
"public announcement" shall mean disclosure
in a press release reported by the Dow Jones
News Service, Associated Press or comparable
national news service or in a document
publicly filed by the Corporation with the
Securities and Exchange Commission pursuant
to Sections 13, 14 or 15(d) of the Exchange
Act.
(e) Notwithstanding the foregoing
provisions of this Section 3.03, (i) if any
class or series of stock has the right,
voting separately by class or series, to
elect directors at an annual or special
meeting of stockholders, such directors shall
be nominated and elected pursuant to the
terms of such class or series of stock; and
(ii) a stockholder shall also comply with all
applicable
<PAGE>
requirements of the Exchange Act
and the rules and regulations thereunder with
respect to the matters set forth in this
Section 3.03. To the extent this Section
3.03 shall be deemed by the Board of
Directors or the Securities and Exchange
Commission, or adjudged by a court of
competent jurisdiction, to be inconsistent
with the rights of shareholders to request
inclusion of a proposal in the Corporation's
proxy statement pursuant to 17 C.F.R. Section
240.14a-8 ("Rule 14a-8") under the Exchange
Act, such rule shall prevail.
# # #
AMENDMENT NO. 3 TO CREDIT AGREEMENT
This Amendment No. 3 to Credit Agreement (the "Amendment
Agreement") is entered into as of September 23, 1996 by and among
Rawlings Sporting Goods Company, Inc. (the "Borrower"), the
undersigned lenders (the "Lenders") and The First National Bank
of Chicago, as agent (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Lender and the Agent entered into
that certain Credit Agreement dated as of July 8, 1994 and
amended as of March 24, 1995 and August 31, 1995 (the "Credit
Agreement"); and
WHEREAS, the Borrower, the Lenders and the Agent have agreed
to further amend the Credit Agreement on the terms and conditions
herein set forth.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to
such terms in the Credit Agreement, as amended hereby.
2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 Article I of the Credit Agreement is hereby
amended by (a) deleting the definitions of "Aggregate
Available Commitment", "Borrowing Date" and "Notes" in their
entirety and replacing them with the following:
"Aggregate Available Commitment" means, at any
time, the Aggregate Revolving Credit Commitment at such
time MINUS the Facility Letter of Credit Obligations
outstanding at such time and the aggregate principal
amount of the Swing Line Loans outstanding at such
time.
"Borrowing Date" means a date on which an Advance
or a Swing Line Loan is made or a Facility Letter of
Credit is issued hereunder.
"Notes" means any one or more of the Revolving
Credit Notes or the Swing Line Notes.
and (b) adding the following definitions thereto:
"Swing Line Bank" means First Chicago or any
other Lender as a successor Swing Line Bank.
<PAGE>
"Swing Line Commitment" means the obligations of
the Swing Line Bank to make Swing Line Loans up to a
maximum principal amount of $5,000,000 at any one time
outstanding.
"Swing Line Loan" means a swing line loan made
available to the Borrower by the Swing Line Bank
pursuant to Section 2.21 hereof.
"Swing Line Note" means a promissory note, in
substantially the form of Exhibit E hereto, duly
executed by the Borrower and payable to the order of
the Swing Line Bank in the amount of its Swing Line
Commitment, including any amendment, restatement,
modification, renewal or replacement of such Swing Line
Note.
2.2 Article II of the Credit Agreement is hereby
amended as follows:
(a) Section 2.1(b) is hereby amended by adding
the following after the reference to "Revolving Credit
Loans" on the second line thereof:
", Swing Line Loans"
(b) Section 2.4(b) is hereby amended by adding
the following at the end of the proviso thereto:
PLUS (iii) the aggregate principal amount of
the outstanding Swing Line Loans
(c) Section 2.20.1(b) is hereby amended by
deleting clause (iii) thereof in its entirety and
replacing it with the following:
(iii) the sum at any time of (A) the
aggregate amount of Facility Letter of Credit
Obligations, (B) the aggregate principal balance
of outstanding Revolving Credit Advances and
(C) the aggregate principal balance of Swing Line
Loans exceed the amount of the Aggregate Revolving
Credit Commitment;
(d) Section 2.21 is hereby added as follows:
2.21. SWING LINE LOANS.
2.21.1 AMOUNT OF SWING LINE LOANS.
Subject to the terms and conditions set forth
in this Agreement, at any time prior to the
earlier of (x) the Facility Termination Date
and (y) the termination of the obligation of
the Lenders to make Loans hereunder, the
Swing
<PAGE>
Line Bank agrees to make swing line
loans to the Borrower from time to time, in a
minimum amount of $100,000 and in increments
of $25,000 in excess thereof and in an
aggregate amount not to exceed the Swing Line
Commitment (each, individually, a "Swing Line
Loan" and collectively, the "Swing Line
Loans"); provided, however, that at no time
shall the sum of (a) the principal amount of
outstanding Revolving Credit Loans, PLUS
(b) the outstanding Facility Letter of Credit
obligations, PLUS (c) the principal amount of
outstanding Swing Line Loans exceed the
Aggregate Revolving Credit Commitment.
Subject to the terms of this Agreement, the
Borrower may borrow, repay and reborrow Swing
Line Loans at any time prior to the earlier
of (x) the Facility Termination Date and
(y) the termination of the obligation of the
Lenders to make Loans hereunder.
2.21.2 BORROWING NOTICE. The
Borrower shall give the Agent and the Swing
Line Bank telephonic notice, not later than
11:00 a.m. (Chicago Time) on the Borrowing
Date of each Swing Line Loan, specifying
(a) the applicable Borrowing Date (which
shall be a Business Day), and (b) the
aggregate amount of the requested Swing Line
Loan.
2.21.3 MAKING OF SWING LINE LOANS.
Not later than 1:30 p.m. (Chicago time) on
the applicable Borrowing Date, the Swing Line
Bank shall make available its Swing Line
Loan, in funds immediately available in
Chicago, to the Agent at its address
specified on the signature pages to this
Agreement; provided, that each of the
conditions set forth in Section 4.2 shall be
satisfied (with the making of a Swing Line
Loan deemed to be an Advance for the purposes
of such Section 4.2). The Agent will
promptly make the funds so received from the
Swing Line Bank available to the Borrower at
the Agent's aforesaid address.
2.21.4 REPAYMENT OF SWING LINE LOANS.
The Borrower may at any time pay, without
penalty or premium, all outstanding Swing
Line Loans upon notice to the Agent and the
Swing Line Bank. In addition, the Agent
(a) may at any time in its sole discretion
with respect to any outstanding Swing Line
Loan, or (b) shall on the fifth Business Day
after the Borrowing Date of any Swing Line
Loan which, after giving effect thereto,
caused the aggregate principal amount of all
outstanding Swing Line Loans to be greater
than $500,000, require the Lenders (including
the Swing Line Bank) to make Revolving Loans
pursuant to Section 2.1 hereof to repay such
outstanding Swing Line Loans. Not later than
1:30 p.m. (Chicago
<PAGE>
time) on the date of any
notice received pursuant to this
Section 2.21.4, each Lender shall make
available its required Revolving Loan in
funds immediately available in Chicago to the
Agent at its address specified on the
signature pages to this Agreement. Unless a
Lender shall have notified the Swing Line
Bank, prior to its making any Swing Line
Loan, that any applicable condition precedent
set forth in Section 4.1 or 4.2 had not then
been satisfied, such Lender's obligation to
make Revolving Loans pursuant to this
Section 2.21.4 to repay Swing Line Loans
shall be unconditional, continuing,
irrevocable and absolute and shall not be
affected by any circumstance, including,
without limitation, (i) any set-off,
counterclaim, recoupment, defense or any
other rights which such Lender may have
against the Agent, the Swing Line Bank or any
other Person, (ii) the occurrence or
continuance of a Default or Unmatured Default
or any termination of the obligation of the
Lenders to make Revolving Loans pursuant to
Section 7.2 hereof or otherwise, (iii) any
adverse change in the condition (financial or
otherwise) of the Borrower, or (iv) any other
circumstances, happening or event whatsoever.
In the event that any Lender fails to make
payment to the Agent of any amount due under
this Section 2.21.4, the Agent shall be
entitled to receive, retain and apply against
such obligation the principal and interest
otherwise payable to such Lender hereunder
until the Agent received such payment from
such Lender or such obligation is otherwise
fully satisfied. In addition to the
foregoing, if for any reason any Lender fails
to make a Revolving Loan required to be made
by it pursuant to this Section 2.21.4, such
Lender shall be deemed, at the option of the
Agent, to have unconditionally and
irrevocably purchased from the Swing Line
Bank, without recourse or warranty, an
undivided interest and participation in the
applicable Swing Line Loan in the amount of
such Revolving Loan, and such interest and
participation may be recovered from such
Lender together with interest thereon at the
Federal Funds Effective Rate for each day
during the period commencing on the date of
demand and ending on the date such amount is
received. On the Facility Termination Date,
the Borrower shall repay in full the
outstanding principal balance of the Swing
Line Loans.
2.21.5 RATE OPTIONS FOR SWING LINE
LOANS. The Swing Line Loans shall at all
times bear interest at the Floating Rate.
2.3 Article V of the Credit Agreement is hereby
amended by deleting Section 5.8 in its entirety and
replacing it with the following:
<PAGE>
5.8. LITIGATION AND CONTINGENT OBLIGATIONS. There
is no litigation, arbitration, proceeding, inquiry or
governmental investigation (including, without
limitation, by the Federal Trade Commission) pending
or, to the knowledge of any of their officers,
threatened against or affecting the Rawlings Business,
the Borrower or any Subsidiary or any of their
respective properties (a) as of the date of this
Agreement, except as set forth on Schedule 5.8, and no
such matter set forth herein could reasonably be
expected to have a Material Adverse Effect or to
prevent, enjoin or unduly delay the making of the Loans
or Advances under this Agreement, or (b) after the date
of this Agreement which could reasonably be expected to
have a Material Adverse Effect or to prevent, enjoin or
unduly delay the making of the Loans or Advances under
this Agreement. As of the date of this Agreement,
neither the Borrower nor any Subsidiary has any
material contingent obligations except as set forth on
Schedule 5.8.
2.4 Article VI of the Credit Agreement is hereby
amended as follows:
(a) Section 6.28.2 is hereby amended by deleting
the table set forth therein in its entirety and
replacing it with the following:
PERIOD MAXIMUM RATIO
Each Fiscal Quarter Ending
November 30 or February 28 65%
Each Fiscal Quarter Ending
May 31 or August 31 55%
(b) Section 6.28.3 is hereby amended by deleting
such section in its entirety and replacing it with the
following:
6.28.3. FIXED CHARGE COVERAGE RATIO. As
of the last day of each Fiscal Quarter, maintain a
Fixed Charge Coverage Ratio for the four Fiscal
Quarters then ended of not less than the ratio set
forth below for the corresponding measurement
date:
MEASUREMENT DATE MINIMUM RATIO
8/31/96 1.75:1
11/30/96 1.75:1
2/28/97 1.75:1
5/31/97 2.00:1
and the last day of each
Fiscal Quarter thereafter
<PAGE>
2.5 Exhibit E is hereby added in the form of the
Exhibit E attached as Annex 1 hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
3.1 The Borrower represents and warrants that the
execution, delivery and performance by the Borrower of this
Amendment Agreement have been duly authorized by all
necessary corporate action and that this Amendment Agreement
is a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its
terms, except as the enforcement thereof may be subject to
(a) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally and (b) general principles of
equity (regardless of whether such enforcement is sought in
a proceeding in equity or at law).
3.2 The Borrower hereby certifies that each of the
representations and warranties contained in the Credit
Agreement is true and correct in all material respects on
and as of the date hereof as if made on the date hereof,
except to the extent that any such representation or
warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall be true and
correct on and as of such earlier date.
4. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT.
4.1 Upon the effectiveness of this Amendment
Agreement, each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like
import and each reference to the Credit Agreement in each
Loan Document shall mean and be a reference to the Credit
Agreement as amended hereby.
4.2 Except as specifically amended above, all of the
terms conditions and covenants of the Credit Agreement and
the other Loan Documents shall remain unaltered and in full
force and effect and shall be binding upon the Borrower in
all respects and are hereby ratified and confirmed.
4.3 The execution, delivery and effectiveness of this
Amendment Agreement shall not operate as a waiver of (a) any
right, power or remedy of any Lender or the Agent under the
Credit Agreement or any of the Loan Documents, or (b) any
Default or Unmatured Default under the Credit Agreement.
5. COSTS AND EXPENSES. The Borrower agrees to pay on
demand all reasonable fees and out-of-pocket expenses of counsel
for the Agent in connection with the preparation, execution and
delivery of this Amendment Agreement.
<PAGE>
6. CHOICE OF LAW. THIS AMENDMENT AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW
OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
7. EXECUTION IN COUNTERPARTS. This Amendment Agreement
may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. This
Amendment Agreement shall become effective as of the date first
above written; provided, that the Agent has received
(a) counterparts of this Amendment Agreement duly executed by the
Borrower and each Lender and (b) an executed copy of a Swing Line
Note in favor of the initial Swing Line Bank.
8. HEADINGS. Section headings in this Amendment Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Amendment Agreement for any other
purposes.
[signature pages to follow]
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders
have executed this Amendment Agreement as of the date first above
written.
RAWLINGS SPORTING GOODS COMPANY, INC.
By: ______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: ______________________________
Name:
Title:
THE BANK OF NEW YORK
By: ______________________________
Name:
Title:
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By: ______________________________
Name:
Title:
COMERICA BANK
By: ______________________________
Name:
Title:
KEYBANK NATIONAL ASSOCIATION
By: ______________________________
Name:
Title:
<PAGE>
ANNEX 1
EXHIBIT E
FORM OF
SWING LINE NOTE
$_________________ Dated: ____________
FOR VALUE RECEIVED, the undersigned (the "Borrower") HEREBY
PROMISES TO PAY to the order of _______________________________
(the "Lender") the principal sum of ___ Million United States
Dollars ($_______) or, if less, the aggregate unpaid principal
amount of the Swing Line Loans made by the Lender to the Borrower
pursuant to Section 2.21 of the Credit Agreement (as hereinafter
defined), on or before the Facility Termination Date; together, in
each case, with interest on any and all principal amounts remaining
unpaid hereunder from time to time outstanding. Interest upon the
unpaid principal amount hereof shall accrue at the rates, shall be
calculated in the manner and shall be payable on the dates set
forth in the Credit Agreement. After maturity, whether by
acceleration or otherwise, accrued interest shall be payable upon
demand. Both principal and accrued interest shall be payable in
accordance with the Credit Agreement to The First National Bank of
Chicago, as Agent (the "Agent") on behalf of the Lender, at its
office set forth in the Credit Agreement in immediately available
funds. The Swing Line Loans made by the Lender to the Borrower
pursuant to the Credit Agreement and all payments on account of
principal hereof shall be recorded by the Lender and, prior to any
transfer thereof, endorsed on Schedule A attached hereto which is
part of this Swing Line Note or otherwise in accordance with its
usual practices; provided, however, that the failure to so record
shall not affect the Borrower's obligations under this Swing Line
Note.
This Swing Line Note is a Note referred to in, and is entitled
to the benefits of, the Credit Agreement dated as of July 8, 1994
and amended as of March 24, 1995, August 31, 1995 and September 23,
1996 by and among the Borrower, the financial institutions
signatory thereto (including the Lender) and the Agent (as further
amended, modified or supplemented from time to time, the "Credit
Agreement") and the other Loan Documents. Capitalized terms used
but not otherwise defined herein shall have the respective meanings
ascribed thereto in the Credit Agreement. The Credit Agreement,
among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and
also for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Swing Line Note.
<PAGE>
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT
OF LAWS PROVISIONS, OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
RAWLINGS SPORTING GOODS COMPANY,
INC.
By: __________________________
Name:
Title:
<PAGE>
SCHEDULE A
Swing Line Note
dated _________________
payable to the order of
[LENDER]
PRINCIPAL PAYMENTS
AMOUNT OF UNPAID
PRINCIPAL PRINCIPAL NOTATION
DATE REPAID BALANCE MADE BY
FINANCIAL HIGHLIGHTS
The following table sets forth selected historical consolidated
financial data for the business conducted by Rawlings Sporting
Goods Company, Inc. (Rawlings or the Company) for the years ended
August 31, 1996, 1995 and 1994, the eight months ended August 31,
1994 and each of the three years ended December 31, 1993.
<TABLE>
EIGHT
MONTHS
AMOUNTS IN YEARS ENDED AUGUST 31, ENDED
THOUSANDS PRO AUGUST YEARS ENDED DECEMBER 31,
EXCEPT PER FORMA 31,
SHARE DATA 1996 1995 1994/2/ 1994 1993 1992 1991
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA: /1/
Net revenues $149,735 $144,141 $135,999 $81,174 $139,615 $135,810 $144,950
Operating
income 11,666 11,598 13,500 2,935 7,138 12,400 10,325
Net income 5,272 4,584 6,223 1,335 3,922 7,112 5,895
Net income
per share 0.69 0.60 0.81 N/A N/A N/A N/A
BALANCE SHEET
DATA:
Total assets $102,252 $97,783 $93,752 $93,752 $67,616 $71,097 $69,958
Long-term debt,
including
current
maturities 38,700 43,900 39,480 39,480 1,262 1,762 2,214
/1/ Net income per share has not been presented for each period because,
prior to July 8, 1994, the Company's predecessor was a division of Figgie
International, Inc. (the former parent) and had no separately issued equity
securities.
/2/ Prepared on a pro forma basis; see page 12 for detailed discussion of pro
forma adjustments.
</TABLE>
<TABLE>
NET REVENUES BY PRINCIPAL PRODUCT LINE (unaudited)
<CAPTION>
Eight
Months
Ended
August
(Amounts in Years Ended August 31, 31, Years Ended December 31,
millions) 1996 1995 1994 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Equipment:
Baseball $88.3 $86.9 $82.8 $44.3 $83.7 $83.5 $78.4
Basketball
and football 24.2 23.3 20.5 13.9 21.7 19.7 14.6
Apparel 14.3 10.2 8.3 5.1 9.9 9.3 22.0
International 7.7 9.5 9.5 7.6 9.5 9.2 15.6
Licensing 6.9 6.2 6.6 5.6 4.5 4.3 3.5
Miscellaneous 8.3 8.0 8.3 4.7 10.3 9.8 10.9
Net revenues $149.7 $144.1 $136.0 $81.2 $139.6 $135.8 $145.0
</TABLE>
FINANCIAL CONTENTS
Selected Financial Data 11
Management's Discussion and Analysis of
Results of Operations and Financial Condition 12
Consolidated Statements of Income 16
Consolidated Balance Sheets 17
Consolidated Statements of Stockholders' Equity 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements 20
Report of Independent Public Accountants 24
Stockholder Information 25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
BASIS OF PRESENTATION
In August 1994, Rawlings changed its fiscal year end from
December 31 to August 31. Therefore, included herein is a
discussion of:
i) the actual results for the fiscal year ended August 31,
1996 compared to the actual results for the fiscal year
ended August 31, 1995,
ii) the actual results for the fiscal year ended August 31,
1995 compared to the pro forma results that estimate
the Company's results as a stand-alone company for the
twelve months ended August 31, 1994 and
iii) the actual eight months ended August 31, 1994 compared
to the actual eight months ended August 31, 1993.
CAUTIONARY STATEMENTS
Cautionary statements identifying important factors that could
cause the Company's future results to differ materially from past
results, or those contemplated by statements herein regarding
matters other than historical fact (i.e., forward-looking
statements), are described in, and incorporated by reference
from, the Company's 1996 Annual Report on Form 10-K.
YEAR ENDED AUGUST 31, 1996 COMPARED
TO THE YEAR ENDED AUGUST 31, 1995
RESULTS OF OPERATIONS
Net revenues for the year ended August 31, 1996 (1996) were
$149,735,000, or 3.9 percent higher than net revenues of
$144,141,000 for the year ended August 31, 1995 (1995). Higher
apparel, baseball, basketball and football and licensing net
revenues partially offset by lower international net revenues
were primarily responsible for the increase. The 1.6 percent
increase in baseball net revenues was the result of an increase
in sales of baseballs and protective equipment offset by a
decline in sales of baseball gloves. The increase in sales of
baseballs was primarily the result of increased memorabilia sales
including the Cal Ripken, Jr. and Mickey Mantle commemorative
baseballs. The ability to expand or sustain this level of sales
from the memorabilia market will depend on collector demand for
new commemorative baseballs which, in turn, depends primarily on
the level of interest by fans in professional baseball. The
decline in net revenues from baseball gloves was primarily the
result of poor retail sell-through in 1995 that resulted in lower
orders and shipments of baseball gloves in 1996. Basketball and
football net revenues increased 3.9 percent primarily as a result
of expanded distribution and increased market share for
basketballs. Licensing net revenues increased 11.3 percent as a
result of increased sales by virtually every domestic and
international licensee. International net revenues declined as a
result of a 32.3 percent decline in net revenues in Canada,
partially offset by a 26.5 percent increase in international net
revenues in countries other than Canada. The decrease in Canada
was primarily the result of lower baseball net revenues and an
overall slow retail sales environment. The other international
growth was primarily concentrated in Latin America.
The retail sell-through of baseball-related products
improved in 1996 compared to 1995. This has resulted in retailers
generally carrying lower than prior year levels of inventory of
key baseball-related products. While management believes the
fans' disaffection with baseball has begun to subside, the
retailers are approaching the 1997 selling season with caution.
As a result, the Company expects the trend toward later receipt
of retailer orders, the receipt of orders in smaller quantities
with follow-up orders to meet demand and shipments closer to and
during the selling season to continue. This may have the effect
of shifting the seasonality and quarterly results of the Company.
In addition, the portion of the Company's revenues represented by
sales to major retailers continues to increase and their sell
through and product mix is having a more pronounced impact on the
predictability of the amount and timing of total revenues.
Gross margin in 1996 was 31.0 percent, down 0.2 points from
the 1995 gross margin of 31.2 percent. Increased net revenues of
lower margin products including apparel and basketball and
football, along with lower sales of baseball gloves, one of the
Company's higher margin products, were primarily responsible for
the decrease. The Company achieved improvement in the gross
margins on apparel products in 1996 and expects further
improvement in 1997.
Selling, general and administrative (SG&A) expenses for 1996
were $34,750,000 or $1,306,000, or 3.9 percent, higher than 1995
SG&A expenses of $33,444,000. As a percent of net revenues, the
SG&A expenses in 1996 and 1995 were 23.2 percent. Higher
royalties and advertising and promotional costs, partially offset
by lower total salaries and wages and professional fees, were
primarily responsible for the increase in SG&A expenses.
Interest expense of $3,656,000 decreased 3.1 percent as a
result of lower average interest rates and lower average
borrowings.
The effective tax rate of 32.1 percent in 1996 was 7.1
points lower than the effective tax rate of 39.2 percent in 1995.
The decrease in the effective tax rate is the result of lower
foreign effective tax rates on a portion of the Company's income,
generated and indefinitely reinvested in Costa Rica, which
reduced the income tax provision by $554,000. The Company expects
its fiscal 1997 effective tax rate, based on its current mix of
domestic and foreign earnings, to be approximately 38 percent.
YEAR ENDED AUGUST 31, 1995 COMPARED TO PRO
FORMA TWELVE MONTHS ENDED AUGUST 31, 1994
PRO FORMA FINANCIAL INFORMATION For the period September 1,
1993 to July 8, 1994, Rawlings was a division of the former
parent, and its results were included in the consolidated totals
of the former parent. The separate financial statements of the
division included a charge from the former parent that reflected
an allocation of various corporate level expenses. Assuming that
the transactions effected on July 8, 1994, as more fully
described in Note 13 to the consolidated <PAGE> financial
statements, had been consummated as of September 1, 1993, the
Company estimated net income of $ 6.2 million for the twelve
months ended August 31, 1994 based upon the following pro forma
adjustments:
TWELVE MONTHS ENDED
(AMOUNTS IN THOUSANDS) AUGUST 31, 1994
(Unaudited)
Net income per historical financial statements $4,142
Add elimination of charge from former parent 6,603
Less:
Additional cost of sales (105)
Additional general and administrative expenses (813)
Additional interest expense (2,217)
Tax impact of adjustments (1,387)
Pro forma net income $6,223
This unaudited pro forma financial information is for
informational purposes only and may not necessarily reflect
future results of operations or what the results of operations
would actually have been had Rawlings operated as a stand-alone
Company for the twelve months ended August 31, 1994.
Financial data for the year ended August 31, 1995 and the
twelve months ended August 31, 1994 on a pro forma basis is as
follows:
Pro Forma
(Amounts in thousands, except per share data) 1995 1994
(Unaudited)
Net revenues $144,141 $135,999
Gross profit 45,042 44,807
Selling, general and administrative expenses 33,444 30,832
Environmental expense - 475
Operating income 11,598 13,500
Interest expense 3,773 2,924
Other expense, net 285 205
Income before income taxes 7,540 10,371
Provision for income taxes 2,956 4,148
Net income 4,584 6,223
Net Income per share 0.60 0.81
RESULTS OF OPERATIONS
Net revenues for 1995 were $144,141,000, 6.0 percent higher than
pro forma net revenues for the twelve months ended August 31,
1994 (1994). Higher baseball-related, basketball and football
equipment and apparel net revenues partially offset by lower
licensing net revenues were primarily responsible for the
increase.
The poor sell-through of baseball-related products adversely
affected the second half of 1995 and resulted in a number of
retailers carrying unprecedented levels of inventory of key
baseball products into the 1996 spring season.
Gross margin for 1995 was 31.2 percent, down 1.7 margin
points from 1994 pro forma results. The decrease in gross margin
was primarily the result of a higher percentage of the net
revenues being generated by lower margin product lines, freight
on a new line of baseball gloves and lower licensing net
revenues.
SG&A expenses for 1995 were $33,444,000, $2,612,000, or 8.5
percent, higher than 1994 pro forma results. As a percent of net
revenues, the SG&A expenses in 1995 were 23.2 percent, up 0.5
points from 1994 pro forma results. Higher advertising,
promotional and royalty expenses were primarily responsible for
the increase.
In 1994, the Company recorded a $475,000 provision for
environmental costs related to the Dolgeville, New York facility.
No provision was required in 1995.
In 1995, interest expense was $3,773,000, $849,000, or 29.0
percent, above pro forma 1994 results. The increase primarily
reflects higher borrowings resulting from higher inventory
levels.
The effective tax rate of 39.2 percent in 1995 was 0.8
points lower than the pro forma effective tax rate for 1994,
reflecting a lower state income tax provision based upon an
estimated mix of state effective tax rates.
EIGHT MONTHS ENDED AUGUST 31, 1994 COMPARED
TO EIGHT MONTHS ENDED AUGUST 31, 1993
Financial data for the eight months ended August 31, 1994 and
1993 is as follows:
(Amounts in thousands) 1994 1993
(Unaudited)
Net revenues $81,174 $84,917
Gross profit 27,603 27,198
Selling, general and administrative expenses 20,340 19,105
Environmental expense - 1,084
Intercompany charge 4,328 4,624
Operating income 2,935 2,385
Interest expense 623 254
Other expense, net 87 215
Income before income taxes 2,225 1,916
Provision for income taxes 890 720
Net income 1,335 1,196
RESULTS OF OPERATIONS
Net revenues decreased 4.4 percent, or $3,743,000, to $81,174,000
in the eight months ended August 31, 1994 from $84,917,000 in the
eight months ended August 31, 1993. The decrease in net revenues
was primarily due to lower sales of baseball equipment and
apparel. The Company's operations were adversely affected by the
significant liquidity constraints imposed on Rawlings by the
former parent. As a result of the liquidity shortage, Rawlings
was forced to delay payments to certain domestic suppliers and
vendors. In response to these delays, some of the Company's
domestic suppliers withheld deliveries of raw materials, forcing
the Company to limit production of certain products and cancel
certain customer orders. The Company believes that it received a
lower level of orders in certain of its product lines as a result
of the cash constraints under which it was operating. In
addition, sales of baseball equipment declined due to lower
pre-season orders from customers during the fall of 1993 for the
1994 baseball season. The Company's customers placed lower
pre-season orders in anticipation of the 1994 baseball season
because they generally held higher inventories of
baseball-related products at the end of the 1993 baseball season
due to abnormally wet weather conditions during the 1993 baseball
season. These weather conditions reduced the amount of baseball
played and, accordingly, retailers' sales of baseball-related
equipment during the 1993 baseball season.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Although the Company's ability to produce certain products
was adversely affected by the liquidity shortage of the former
parent, this situation had little, if any, impact on the
Company's ability to procure products from its foreign
manufacturers. These products (which represented approximately 60
percent of its net revenues during the eight months ended August
31, 1994) were largely purchased pursuant to letters of credit
that remained available to the Company even during the former
parent's liquidity crisis. The Company believes that the
liquidity constraints did not have an adverse effect on its
long-term relationships with its customers, suppliers and vendors
or on its business.
Gross margin increased 1.5 percent, or $405,000, to
$27,603,000 in the eight months ended August 31, 1994 from
$27,198,000 in the comparable period of 1993. Gross margin
increased to 34.0 percent from 32.0 percent during the same
period. The improvement in gross margin was due to improved
manufacturing efficiencies, a better product mix and increased
licensing net revenues.
SG&A in the eight months ended August 31, 1994 was
$20,340,000, $1,235,000, or 6.5 percent, higher than in the eight
months ended August 31, 1993. As a percent of net revenues in the
eight months ended August 31, 1994 SG&A was 25.1 percent, up 2.6
points from the eight months ended August 31, 1993. The increase
was primarily the result of higher advertising and royalty
expenses.
The Company recorded no environmental expenses in the eight
months ended August 31, 1994 as compared to $1,084,000 in the
eight months ended August 31, 1993.
Intercompany charge in the eight months ended August 31,
1994 decreased by 6.4 percent, or $296,000, to $4,328,000 from
$4,624,000 in the comparable period in 1993.
As a result of the foregoing factors, operating income
increased 23.1 percent, or $550,000, to $2,935,000 in the first
eight months of 1994 from $2,385,000 in the first eight months of
1993.
Interest and other expense increased $241,000 to $710,000 in
the first eight months of 1994 from $469,000 in the first eight
months of 1993.
The Company's effective tax rate was 40.0 percent the first
eight months of 1994 as compared to 37.6 percent for the
comparable period in 1993.
As a result of the foregoing factors, net income increased
11.6 percent, or $139,000, to $1,335,000 in the first eight
months of 1994 from $1,196,000 in the comparable period in 1993.
SEASONALITY
Net revenues of baseball equipment and related team uniforms are
highly seasonal. Customers historically have placed orders with
the Company for baseball-related products beginning in July for
shipment beginning in October (pre-season orders). These
pre-season orders from customers historically represented
approximately 75 percent to 80 percent of the customers'
anticipated needs for the entire baseball season. The amount of
these pre-season orders historically determined the Company's net
revenues and profitability between October 1 and March 31. The
Company then receives additional orders (fill-in orders) which
depend upon customers' actual sales of products during the
baseball season (sell-through). Fill-in orders are typically
received by the Company between February and May. These orders
historically represented approximately 20 percent to 25 percent
of the Company's sales of baseball-related products during a
particular season. Pre-season orders for certain baseball-related
products from certain customers are not required to be paid until
early spring. These extended terms increase the risk of
collectability related to accounts receivable. In fiscal 1996 and
1997, customers have begun placing their pre-season orders later
and a larger percentage of orders are fill-in orders. In
addition, with an increasing number of customers on automatic
replenishment systems more and more orders are received on a
ship-at-once basis. This change has resulted in shipments to the
customer closer to the time the products are actually sold. This
trend has and may continue to have the effect of shifting the
seasonality and quarterly results of the Company with higher
inventory and debt levels required to meet orders for immediate
delivery. The sell-through of baseball-related products also
affects the amount of inventory held by customers at the end of
the season which is carried over by the customer for sale in the
next baseball season. Customers typically adjust their pre-season
orders for the next baseball season to account for the level of
inventory carried over from the preceding baseball season.
Football equipment and related team uniforms are both shipped by
the Company and sold by retailers primarily in the period between
March 1 and September 30. Basketballs and related team uniforms
generally are shipped and sold throughout the year. Because the
Company's sales of baseball-related products exceed those of its
other products, Rawlings' business is seasonal, with its highest
net revenues and profitability recognized between November 1 and
April 30.
INTEREST RATE MANAGEMENT ACTIVITIES
The Company has engaged in interest rate management activities
with the objective of limiting exposure to interest rate
increases related to the Company's long-term debt and converting
a portion of the Company's variable rate debt to a fixed rate.
The interest rate management activity objectives are achieved
through the use of interest rate caps and interest rate swaps as
described in Note 8.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local
environmental laws relating to air emissions, water discharges,
and the storage, handling, disposal and remediation of petroleum
and hazardous substances. Pursuant to these laws, the Company is
conducting environmental investigation and remediation activities
at its Adirondack facility in Dolgeville, New York with respect
to past petroleum and waste storage practices and a release of
wood pitch into surrounding <PAGE> soil and surface water. The cost of
investigating and remediating the contamination at the Adirondack
facility described above cannot be finally determined until the
appropriate studies are complete. Accordingly, the Company is
unable to estimate any additional amount beyond the $996,000
accrued at August 31, 1996. However, the Company believes that
any additional expenses will not have a material adverse effect
on the Company's financial condition, results of operation or
cash flows. At this time, the Company does not anticipate
incurring additional costs related to other environmental matters
that will be material to its financial condition, results of
operations or cash flows.
LITIGATION
On November 22, 1995, a class action complaint was filed in the
United States District Court for the Eastern Division of the
Eastern District of Missouri by Henry G. Jakobe, Jr. against the
Company. The complaint also names as defendants Mr. Carl J.
Shields, Chairman, CEO and President of the Company, and Mr.
Howard B. Keene, Chief Operating Officer of the Company. The
complaint alleges, among other things, that the defendants
violated the federal securities laws by making false and
misleading statements regarding the impact of the Major League
Baseball strike on the Company's business. The plaintiff seeks an
unspecified amount of damages, reimbursement of costs and
expenses of the litigation, including attorney fees, and other
unspecified relief.
The Company intends to vigorously defend this action. The
Company further believes that this matter will not have a
material adverse effect on the Company's financial condition,
results of operations or cash flow.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by
operating activities and the $76,000,000 credit agreement with a
bank group. The Company's primary use of cash is to fund its
working capital needs, capital expenditures and debt service
requirements. The Company's working capital requirements are
seasonal with higher investments in working capital generally
required in the period that begins in August and ends in April of
the succeeding year. The change in the timing of orders and
shipments to retailers closer to when the products are actually
sold to the retailers' customers may increase the amount of
working capital required by the Company and may increase required
levels of long-term debt. Detailed information on the Company's
cash flows is presented in the consolidated statements of cash
flows.
YEAR ENDED AUGUST 31, 1996 Operating cash flows of $5,230,000
were primarily the result of net income adjusted for non cash
charges partially offset by increased accounts receivable and
inventories. Operating cash flows were $1,369,000 higher than
1995 primarily as a result of higher net income and changes in
various components of working capital. Investment activities used
cash of $1,193,000 for capital expenditures for normal property
and plant improvements and the upgrading of certain plants to
improve production capacity and efficiency. With the planned
expansion of the Company's Costa Rica facility the Company
expects capital expenditures of $2,000,000 to $2,500,000 in 1997.
Financing activities used cash of $4,585,000 which included a net
debt repayment of $5,200,000 partially offset by issuance of
common stock of $340,000 and a final purchase price settlement
with the former parent of $275,000.
The Company believes that cash flow from operations and
unused borrowing capacity under the credit agreement should be
sufficient to fund its anticipated working capital needs, capital
expenditures and debt service requirements for the foreseeable
future. However, because future cash flows and the availability
of financing depend on a number of factors, including prevailing
economic conditions and financial, business and other factors
beyond the Company's control, no assurances can be given in this
regard.
YEAR ENDED AUGUST 31, 1995 Operating cash flows of $3,861,000
were primarily the result of net income adjusted for non cash
charges partially offset by increased inventories and changes in
other components of working capital. Operating cash flows were
$6,588,000 higher than pro forma 1994 operating cash flows
primarily as a result of changes in various components of working
capital. Investing activities used cash of $2,119,000 for capital
expenditures for normal property and plant improvements and the
upgrading of certain company plants to improve production
capacity and efficiency. Financing activities used cash of
$1,954,000 which included a payment to the former parent of
$6,456,000 partially offset by $4,420,000 of net additional
borrowings under the credit agreement.
EIGHT MONTHS ENDED AUGUST 31, 1994 AND THE YEAR ENDED DECEMBER
31, 1993 Immediately prior to the public offering of the
Company's shares by the former parent, the Rawlings Business was
owned by the former parent. The Company's primary sources of
funds were cash flows from operations and borrowings from the
former parent.
Cash flows provided by operating activities decreased by
$14,046,000 and cash flows used in financing activities decreased
by $12,573,000 in the eight months ended August 31, 1994 as
compared to the eight months ended August 31, 1993. Cash flows
provided by operating activities increased by $3,996,000 in 1993
as compared to 1992, primarily from a decrease in accounts
receivable and inventories.
Capital expenditures were $112,000 for the eight months
ended August 31, 1994 and $1,498,000 in 1993. Capital
expenditures during these periods were used for equipment
purchases, normal property and plant improvements and the
upgrading of certain Company plants to improve production
capacity and efficiencies. In addition, in 1994, capital
expenditures were made related to the Company's conversion of
certain of its facilities from line manufacturing to modular
manufacturing.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Eight
Months Ended Year Ended
Years Ended August 31, August 31, December 31,
1996 1995 1994 1993
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $149,735 $144,141 $81,174 $139,615
Cost of goods sold 103,319 99,099 53,571 95,235
Gross profit 46,416 45,042 27,603 44,380
Selling, general and
administrative expenses 34,750 33,444 20,340 28,784
Environmental expense 1,559
Intercompany charge 4,328 6,899
Operating income 11,666 11,598 2,935 7,138
Interest expense 3,656 3,773 524 128
Interest to former parent 99 210
Other expense, net 250 285 87 206
Income before income taxes 7,760 7,540 2,225 6,594
Provision for income taxes 2,488 2,956 890 2,672
Net income $ 5,272 $ 4,584 $ 1,335 $ 3,922
Net income per share $ 0.69 $ 0.60 N/A N/A
Average number of common
shares outstanding 7,680 7,652 N/A N/A
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
August 31,
1996 1995
(Amounts in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 789 $ 1,337
Accounts receivable, net of allowance
of $1,498 and $1,459 respectively 30,090 24,163
Inventories 32,415 31,346
Prepaid expenses 1,472 1,607
Deferred income taxes 3,162 3,369
Total current assets 67,928 61,822
Property, plant and equipment, net 7,860 7,601
Other assets 698 944
Deferred income taxes 25,766 27,416
Total assets $102,252 $97,783
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,119 $ 6,388
Accrued liabilities 8,461 7,399
Total current liabilities 17,580 13,787
Long-term debt 38,700 43,900
Other long-term liabilities 11,508 11,519
Total liabilities 67,788 69,206
Stockholders' equity:
Preferred stock, $.01 par value
per share, 10,000,000 shares
authorized, no shares issued
and outstanding
Common stock, $.01 par value per
share, 50,000,000 shares
authorized, 7,697,527 and
7,656,908 shares issued
and outstanding, respectively 77 77
Additional paid-in capital 25,820 25,205
Retained earnings 8,567 3,295
Stockholders' equity 34,464 28,577
Total liabilities and
stockholders' equity $102,252 $97,783
The accompanying notes are an integral part of these consolidated
balance sheets.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Additional Retained Investment
Common Stock Paid-in Earnings by Former
Shares Amount Capital (Deficit) Parent Total
(Amounts in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 - $ - $ - $ -- $ 60,580 $ 60,580
Net income - - - - 3,922 3,922
Net return to former parent - - - - (8,903) (8,903)
Balance, December 31, 1993 - - - - 55,599 55,599
Net income - - - (1,289) 2,624 1,335
Net return to former parent - - (35,000) - (16,251) (51,251)
Issuance of common stock 7,650,081 77 41,895 - (41,972) -
Establishment of net
deferred taxes related
to the assets transfer - - 18,228 - - 18,228
Balance, August 31, 1994 7,650,081 77 25,123 (1,289) - 23,911
Net income - - - 4,584 - 4,584
Issuance of common stock 6,827 - 82 - - 82
Balance, August 31, 1995 7,656,908 77 25,205 3,295 - 28,577
Net income - - - 5,272 - 5,272
Issuance of common stock 40,619 - 340 - - 340
Final settlement with
former parent - - 275 - - 275
Balance, August 31, 1996 7,697,527 $77 $25,820 $8,567 $ - $34,464
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Eight Year
Months Ended Ended
Years Ended August 31, August 31, December 31,
(Amounts in thousands) 1996 1995 1994 1993 <C>
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,272 $ 4,584 $ 1,335 $ 3,922
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,123 1,008 551 727
Deferred taxes 1,857 2,418 (847) -
Changes in operating assets and
liabilities:
Accounts receivable, net (5,927) (871) 16,474 4,159
Inventories (1,069) (3,934) (10,293) 1,378
Prepaid expenses 135 (397) (246) (365)
Other assets 60 (348) 20 (502)
Accounts payable 2,731 1,097 (122) 725
Accrued liabilities and other 1,048 304 (856) 1,275
Net cash provided by operating
activities 5,230 3,861 6,016 11,319
Cash flows from investing
activities:
Capital expenditures, net (1,193) (2,119) (112) (1,498)
Cash flows from financing
activities:
Net (repayments) borrowings
of long-term debt (5,200) 4,420 38,218 (500)
Issuance of common stock 340 82 - -
Payment from (to) former
parent related to purchase
price settlement 275 (6,456) 6,456 -
Net return to former parent - - (16,251) (8,903)
Transferred to former parent - - (35,000) -
Net cash used in financing
activities (4,585) (1,954) (6,577) (9,403)
Net (decrease) increase in cash
and cash equivalents (548) (212) (673) 418
Cash and cash equivalents,
beginning of period 1,337 1,549 2,222 1,804
Cash and cash equivalents,
end of period $ 789 $ 1,337 $ 1,549 $ 2,222
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest $ 3,548 $ 3,899 $ 187 $ 173
Income taxes 247 459 2,200 2,776
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
Notes to Consolidated Financial Statements
(Amounts in thousands, except share and per share data)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION The consolidated financial statements
include the assets, liabilities, revenues and expenses of the
Rawlings Sporting Goods Company, Inc. and all of its subsidiaries
(Rawlings or the Company). For periods prior to July 8, 1994 the
consolidated financial statements include the assets,
liabilities, revenues and expenses of the division and
subsidiaries of Figgie International, Inc. (the former parent)
that constitute the unincorporated Rawlings Business. As a result
of the Rawlings Business being conducted through a division of
the former parent, the Rawlings Business had no separately
identifiable equity other than an amount equal to net assets
entitled "Investment by Former Parent . All significant
intercompany transactions have been eliminated.
CHANGE IN FISCAL YEAR The Company changed its fiscal year end
from December 31 to August 31 after the July 8, 1994 transfer of
the Rawlings Business to the Company from the former parent was
completed. The change resulted in a short period of eight months
beginning January 1, 1994 and ending August 31, 1994. Information
included in the footnotes to the financial statements for 1996
refers to the twelve months ended August 31, 1996, the
information for 1995 refers to the twelve months ended August 31,
1995, the information for 1994 refers to the eight months ended
August 31, 1994 and the information for 1993 refers to the twelve
months ended December 31, 1993.
CASH AND CASH EQUIVALENTS Cash equivalents consist of
short-term, highly liquid investments with an average maturity
when purchased of three months or less.
INVENTORIES Inventories are valued at the lower of cost or net
realizable value with cost principally determined on a first-in,
first-out method. Cost includes materials, labor and overhead.
PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment
is stated at cost and depreciation is generally computed on a
straight-line basis. The principal rates of depreciation are as
follows:
Buildings and improvements 20-30 years
Machinery and equipment 7-12 years
Other 4-10 years
INCOME TAXES Deferred income taxes are recorded for temporary
differences in reporting income and expenses for tax and
financial statement purposes. The Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Incomes
Taxes (SFAS No. 109), on July 8, 1994. The provision for income
taxes reflected in the consolidated financial statements prior to
July 8, 1994 included the Rawlings Business share of the
consolidated income tax expense of the former parent.
FINANCIAL INSTRUMENTS The fair value of the Company's financial
instruments approximate their carrying amounts.
NET INCOME PER SHARE Net income per share for 1996 and 1995 is
based on the weighted average number of common shares outstanding
during the period. Net income per share data on a historical
basis has been omitted for 1994 and 1993, as the Rawlings
Business was a division of the former parent.
SEGMENT REPORTING The Company is engaged principally in one line
of business, the manufacturing, procurement and sale of sporting
goods and related products.
RECLASSIFICATION Certain reclassifications have been made to the
prior year financial statements to conform with the current year
presentation.
USE OF ESTIMATES These financial statements have been prepared
on the accrual basis of accounting, which required the use of
certain estimates by management, in determining the Company's
assets, liabilities, revenues and expenses.
2 INVENTORIES
Inventories consist of the following:
August 31,
1996 1995
Raw materials $ 5,624 $ 5,498
Work in process 1,899 1,940
Finished goods 24,892 23,908
Inventories $32,415 $31,346
3 PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
August 31,
1996 1995
Buildings and improvements $ 5,412 $ 5,249
Machinery and equipment 12,709 11,943
Other 2,348 1,998
Total property, plant and equipment 20,469 19,190
Less - Accumulated depreciation (12,609) (11,589)
Property, plant and equipment, net $ 7,860 $ 7,601
4 FOREIGN CURRENCY TRANSACTIONS
For 1996, 1995, 1994 and 1993, the foreign currency transaction
gains (losses) included in determining net income were ($12),
$91, ($274) and ($156), respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5 SUPPLEMENTAL INCOME STATEMENT INFORMATION
Set forth below is a comparative summary of certain net revenue
and expense items:
<TABLE>
<CAPTION>
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Licensing revenues $6,880 $6,169 $5,593 $4,501
Operating lease expenses 2,426 2,172 1,404 1,531
Royalty and licensing expenses 5,536 4,986 2,634 3,784
Research and development
expenses 238 540 143 519
</TABLE>
6 INCOME TAXES
Rawlings was included in the consolidated tax returns of the
former parent prior to July 8, 1994. The provision for income
taxes reflected in the consolidated financial statements prior to
July 8, 1994 included the Rawlings Business's share of the
consolidated income tax expense of the former parent. The
provision approximates Rawlings' income tax expense under SFAS
No. 109 which would have been incurred on a stand-alone basis.
Prior to July 8, 1994, cash paid for income taxes included
in the accompanying statements of cash flows represents the
current portion of the Rawlings Business's provision for income
taxes. The Company made no payments from July 9, 1994 to August
31, 1994.
The income tax provision (benefit) is as follows:
<TABLE>
<CAPTION>
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Current:
Federal $ 564 $ 557 $1,206 $2,428
State and other 67 (19) 237 348
Total current 631 538 1,443 2,776
Deferred:
Federal 1,658 2,082 (482) (91)
State and other 199 336 (71) (13)
Total deferred 1,857 2,418 (553) (104)
Total income tax provision $2,488 $2,956 $ 890 $2,672
</TABLE>
A reconciliation between the provision for income taxes
computed at the Federal statutory rate and the rate used for
financial reporting purposes is as follows:
<TABLE>
1996 1995 1994 1993
Amount % Amount % Amount % Amount %
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expected
provision
at the
statutory
rate $2,716 35.0 $2,639 35.0 $779 35.0 $2,308 35.0
State and
other taxes,
net of federal
tax benefit 326 4.2 317 4.2 111 5.0 335 5.1
Lower effective
tax rates
on foreign
income (554) (7.1) - - - - - -
Other - - - - - - 29 .4
Total income
tax provision $2,488 32.1 $2,956 39.2 $890 40.0 $2,672 40.5
</TABLE>
The significant components of deferred taxes which are
included in the accompanying balance sheets are as follows:
<TABLE>
1996 1995
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
<CAPTION>
<S> <C> <C> <C> <C>
Intangible assets $25,348 $- $26,451 $ -
Operating loss
carryforwards 2,141 - 2,191 -
Foreign tax credits 748 - 272 -
Allowance for
doubtful accounts 596 - 579 -
Environmental reserve 391 - 439 -
Inventory 388 - 106 -
Property, plant
and equipment 220 - 939 -
Other - 904 593 785
Total $29,832 $904 $31,570 $785
</TABLE>
The Company believes a valuation allowance against deferred
income tax assets as of August 31, 1996 is not necessary. The
Company's net operating loss carryforwards expire in 2009 through
2010. Deferred taxes for 1994 resulted primarily from intangible
assets, net operating loss carryforwards and accelerated
depreciation. Deferred taxes for 1993 resulted principally from
depreciation and provisions for estimated expenses.
Income taxes have not been provided on the undistributed
income (approximately $1,400) of Rawlings' foreign subsidiary
which the Company does not intend to be remitted to the US.
7 ACCRUED LIABILITIES
Accrued liabilities consist of the following:
August 31,
1996 1995
Salary, benefits and other taxes $3,487 $2,536
Payable to former parent 1,342 2,003
Environmental and other 3,191 2,695
Royalties 441 165
Accrued liabilities $8,461 $7,399
8 LONG-TERM DEBT
Long-term debt consists of the following:
August 31,
1996 1995
Credit agreement with banks due 1999,
average interest rate of 6.86%
and 7.30%, respectively $38,700 $43,000
Industrial Revenue Bond, 8.75%, due 2000,
repaid in 1996 - 900
Total long-term debt $38,700 $43,900
In July 1994 the Company entered into an $80,000 variable
rate unsecured credit agreement with a bank group. The credit
agreement was amended in March and August 1995 and September
1996. The September 1996 amendment modified, among other matters,
certain financial covenants including the minimum fixed charge
coverage and the required ratio of maximum total debt to total
capitalization. The available borrowings under the amended credit
agreement decline $4,000 and $5,000 as of July 8, 1997 and 1998,
respectively. The committed line of credit is $76,000 as of
August 31, 1996 after a scheduled $4,000 reduction on July 8,
1996.
The Company is required under the amended credit agreement
to meet certain financial covenants pertaining to minimum <PAGE> fixed
charge coverage, incurrence of additional debt, maximum total
debt as a percentage of total capitalization, minimum net worth
and restrictions on the Company's ability to pay cash dividends
to 50% of the Company's net income for the preceding year. The
Company is in compliance with these covenants.
As of August 31, 1996 the Company had outstanding letters of
credit of $5,743 and available borrowing capacity of $31,557
under the credit agreement with banks.
In July 1994 the Company entered into an interest rate cap
at 9.25% for up to $15,000 in borrowings through July 1997.
In October 1995 the Company entered into a two-year interest
rate swap agreement with a commercial bank under which the
Company receives a floating rate based on three month LIBOR
through September 1997 on $25,000 and pays a fixed rate of 6.50%.
This transaction effectively changes a portion of the Company's
debt from a floating rate to a fixed rate.
9 EMPLOYEE BENEFITS
COMPANY-SPONSORED DEFINED CONTRIBUTION PLANS Beginning December
1, 1994, substantially all US salaried employees and certain US
hourly employees are covered by a defined contribution (Section
401(k)) plan that provides funding based on a percentage of
compensation. The Company's contributions to the plan were $299
and $183 in 1996 and 1995, respectively.
MULTI-EMPLOYER PENSION PLANS Certain union employees participate
in multi-employer defined benefit pension plans. Contributions to
the plans were $956, $839, $483 and $903 in 1996, 1995, 1994 and
1993, respectively.
BENEFITS FROM FORMER PARENT The former parent has retained the
obligation for accrued benefits attributable to employees and
former employees of the Rawlings Business earned prior to July 8,
1994. The Rawlings Business participated in various employee
benefit plans of the former parent prior to July 8, 1994. The
cost allocated to the Rawlings Business, as determined by the
plan administrator, for these plans was $387 and $856 in 1994 and
1993, respectively.
10 STOCK OPTIONS
The 1994 Rawlings Long-Term Incentive Plan (the 1994 Incentive
Plan) provides for the issuance of up to 625,000 shares of
Rawlings common stock upon the exercise of stock options and
stock appreciation rights, and as restricted stock, deferred
stock, stock granted as a bonus or in lieu of other awards and
other equity-based awards. The 1994 Non-Employee Directors Stock
Plan (1994 Directors Stock Plan) provides for the issuance of up
to 50,000 shares of Rawlings common stock to non-employee
directors upon the exercise of stock options or in lieu of
director's fees.
Stock options granted under the 1994 Incentive Plan and the
1994 Directors Stock Plan have exercise prices equal to the
market price on the date of grant, vest over three to four years
from the date of grant and, once vested, are generally
exercisable over ten years following the date of grant.
Option activity is as follows:
1996 1995 1994
Outstanding at beginning
of period 346,610 313,266 -
Granted 192,125 84,886 313,266
Exercised - - -
Cancelled (55,550) (51,542) -
Outstanding at end
of period 483,185 346,610 313,266
Shares exercisable 175,077 87,237 -
Price of stock options:
Granted $7.88-$9.94 $9.63-$13.88 $11.25-$12.00
Exercised - - -
Cancelled $9.00-$13.88 $12.00 -
Outstanding $7.88-$13.88 $9.63-$13.88 $11.25-$12.00
At August 31, 1996, 191,815 shares of Rawlings common stock
were available for future awards under the plans.
The Financial Accounting Standards Board has issued SFAS No.
123 "Accounting for Stock-Based Compensation, which is effective
for fiscal years beginning after December 15, 1995. This
statement recommends that companies account for stock option
plans by recognizing the fair value of stock options granted over
the vesting period of the option, but also permits companies to
continue to account for employee stock options under Accounting
Principles Board Opinion No. 25 (APB No. 25) "Accounting for
Stock Issued to Employees. The Company will adopt SFAS No. 123
in its fiscal year ending August 31, 1997 but will continue to
account for options under APB No. 25 and will disclose the pro
forma net income and net income per share effect as if the
Company had used the fair value-based method recommended under
SFAS No. 123.
11 RELATED PARTY TRANSACTIONS
The Company leased office space, through December 1995, from a
partnership in which one of the Company's board of directors had
a 40% ownership interest. In December 1995, the director sold his
40% ownership interest in the office space. Lease payments made
during the period the outside director maintained an ownership
interest in the building were $233, $390 and $257 in 1996, 1995
and 1994, respectively.
12 COMMITMENTS AND CONTINGENCIES
Future minimum payments under noncancelable leases, royalty and
licensing agreements as of August 31, 1996 are as follows:
Royalty and
Operating Licensing
Leases Agreements
Fiscal 1997 $1,860 $3,549
Fiscal 1998 1,400 1,239
Fiscal 1999 947 1,078
Fiscal 2000 663 73
Fiscal 2001 233 -
Thereafter 57 225
Total minimum lease payments $5,160 $6,164
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
One customer's purchases are 11% 10%, 9% and 11% of net
revenues of Rawlings for 1996, 1995, 1994 and 1993, respectively.
No other customers' purchases were greater than 10% of net
revenues.
In the normal course of doing business, Rawlings is subject
to various federal, state and local environmental laws. Rawlings
currently is working with the New York State Department of
Environmental Conservation in addressing contamination relating
to past petroleum and waste storage practices at its facility in
Dolgeville, New York. In 1993, Rawlings accrued $1,559 relating
to estimated environmental investigation and remediation costs.
Rawlings believes that the accrued environmental costs will be
incurred over the next several years. Due to the uncertainty of
recovery of costs from insurance carriers and other potentially
liable third parties, Rawlings has not adjusted its accrual for
environmental costs to reflect potential recoveries from third
parties.
On November 22, 1995, a class action complaint was filed in
the United States District Court for the Eastern Division of the
Eastern District of Missouri by Henry G. Jakobe, Jr. against the
Company. The complaint also names Mr. Carl J. Shields, Chairman,
CEO and President of the Company, and Mr. Howard B. Keene, Chief
Operating Officer of the Company. The complaint alleges, among
other things, that the defendant's violated the federal
securities laws by making false and misleading statements
regarding the impact of the Major League Baseball strike on the
Company's business. The plaintiff seeks unspecified amount of
damages, reimbursement of costs and expenses of the litigation,
including attorney fees, and other unspecified relief. The
Company intends to vigorously defend this action.
Rawlings is periodically subjected to product liability
claims and proceedings involving its patents; such proceedings
have not had a material adverse effect on Rawlings.
In the opinion of management, ultimate liabilities resulting
from pending environmental matters, the shareholder suit and
other legal proceedings will not have a material adverse effect
on the financial condition or results of operations of Rawlings.
13 TRANSACTIONS WITH FORMER PARENT
NET ASSET TRANSFER In July 1994, the former parent transferred
the net assets of the Rawlings Business to the Company in
exchange for $35,000 in cash and the net cash proceeds generated
from the initial public offering of the Company's stock. The
purchase price was subject to a post-closing adjustment based on
the investment by the former parent in the Rawlings Business as
of June 30, 1994 as defined in the asset transfer agreement. In
1995, the Company paid the former parent $6,456 as a preliminary
settlement of the post-closing adjustment. A final purchase
settlement was reached in 1996 with the former parent paying the
Company a final settlement of $275.
The assets and liabilities transferred to Rawlings are
recorded at the predecessor's cost for financial reporting
purposes. For tax purposes, the transaction results in a step-up
of the basis of the assets transferred determined by the fair
value paid by the Company for the Rawlings Business. The
recording of the deferred income tax asset related to the step-up
in the tax basis of the assets results in a corresponding
increase in additional paid-in capital. Under the terms of a tax
sharing and separation agreement between the Company and the
former parent, the Company is required to pay the former parent
43% of the tax benefits resulting from the step-up in the tax
basis of the assets as the benefit of the step-up is realized.
The obligation to pay the former parent was recorded as a
liability and a corresponding reduction in additional paid-in
capital.
CHARGES FROM FORMER PARENT Prior to July 8, 1994, the former
parent allocated corporate overhead and interest expense to the
Company. The charge from the former parent to the Rawlings
Business did not include expenses related to the Rawlings
Business, such as insurance, pension, medical and health benefits
and outside legal expenses. These expenses were charged directly
to the Rawlings Business by the former parent and are reflected
in the appropriate expense categories in the accompanying
consolidated statements of income. These transactions did not
occur subsequent to the July 8, 1994 transaction.
Interest expense relating to the former parent's factoring
of Rawlings' accounts receivable was $99 and $255 for 1994 and
1993, respectively.
INVESTMENT BY FORMER PARENT The following is an analysis of the
investment by the former parent:
1994 1993
Cash collected by former parent from
the Rawlings Business operations $(82,291) $(144,585)
Cash provided by former parent to fund
the Rawlings Business operations 61,712 128,783
Corporate overhead and interest expense
allocated by former parent to the
Rawlings Business 4,328 6,899
Net investment return to former parent (16,251) (8,903)
Net income 2,624 3,922
Net assets of Rawlings acquired (41,972) -
Net change in investment by former parent (55,599) (4,981)
Investment by former parent,
beginning of period 55,599 60,580
Investment by former parent, end of period $ - $ 55,599
14 SUPPLEMENTAL TRANSITION PERIOD
INFORMATION (unaudited)
Eight
Months Ended
August 31,
1993
Net revenues $84,917
Gross profit 27,198
Operating income 2,385
Income before income taxes 1,916
Provision for income taxes 720
Net income 1,196
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS OF RAWLINGS SPORTING GOODS COMPANY, INC.:
We have audited the accompanying consolidated balance sheets
of Rawlings Sporting Goods Company, Inc. (a Delaware corporation)
and subsidiaries (the Company or Rawlings) (successor to the
Rawlings Sporting Goods Company, a division of Figgie
International Inc. - see Note 1) as of August 31, 1996 and 1995
and the related consolidated statements of income, stockholders'
equity and cash flows for each of the two years in the period
ended August 31, 1996, the eight months ended August 31, 1994,
and for the year ended December 31, 1993. These financial
statements are the responsibility of Rawlings' management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Rawlings Sporting Goods Company, Inc. and subsidiaries as of
August 31, 1996 and 1995, and the results of their operations and
their cash flows for each of the two years in the period ended
August 31, 1996, the eight months ended August 31, 1994, and for
the year ended December 31, 1993, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
October 11, 1996
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountant's, we hereby consent to the
incorporation by reference of our report included in this Form
10-K, into the Company's previously filed Registration Statement
File No. 33-83958, dated September 14, 1994, and the Company's
previously filed Registration Statement No. 33-86354, dated
November 14, 1994.
\s\ Arthur Andersen LLP
St. Louis, Missouri,
November 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RAWLINGS SPORTING GOODS CO., INC. CONTAINED IN ITS
ANNUAL REPORT ON FORM 10-K FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 789
<SECURITIES> 0
<RECEIVABLES> 31,588
<ALLOWANCES> 1,498
<INVENTORY> 32,415
<CURRENT-ASSETS> 67,928
<PP&E> 20,469
<DEPRECIATION> 12,609
<TOTAL-ASSETS> 102,252
<CURRENT-LIABILITIES> 17,580
<BONDS> 50,208
0
0
<COMMON> 77
<OTHER-SE> 34,387
<TOTAL-LIABILITY-AND-EQUITY> 102,252
<SALES> 149,735
<TOTAL-REVENUES> 149,735
<CGS> 103,319
<TOTAL-COSTS> 103,319
<OTHER-EXPENSES> 34,750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,656
<INCOME-PRETAX> 7,760
<INCOME-TAX> 2,488
<INCOME-CONTINUING> 5,272
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,272
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
</TABLE>
