UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended November 30, 1996
Commission file number 0-24450
RAWLINGS SPORTING GOODS COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 43-1674348
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1859 Intertech Drive, Fenton, Missouri 63026
(Address of Principal Executive Offices) (Zip Code)
(314) 349-3500
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares outstanding of the issuer's Common Stock,
par value $0.01 per share, as of December 16, 1996: 7,705,721
shares.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Statements of Income
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
November 30,
1996 1995
Net revenues.............................. $ 28,259 $ 35,451
Cost of goods sold........................ 19,441 24,528
Gross profit............................ 8,818 10,923
Selling, general and administrative
expenses.................................. 8,142 8,456
Operating income........................ 676 2,467
Interest expense, net..................... 738 902
Other expense, net........................ 30 102
Income (loss) before income taxes....... (92) 1,463
Provision (benefit) for income
taxes..................................... (34) 573
Net income (loss)....................... $ (58) $ 890
Average number of common shares
outstanding............................... 7,701 7,664
Net income (loss) per common share........ $ (0.01) $ 0.12
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except share data)
(Unaudited)
November 30, August 31,
1996 1996
Assets
Current Assets:
Cash and cash equivalents....... $ 926 $ 789
Accounts receivable, net of
allowance of $1,484 and $1,498
respectively.................... 34,001 30,090
Inventories..................... 37,118 32,415
Prepaid expenses................ 798 1,472
Deferred income taxes........... 3,161 3,162
Total current assets.......... 76,004 67,928
Property, plant and equipment, net 7,747 7,860
Other assets...................... 661 698
Deferred income taxes............. 25,938 25,766
Total assets.................. $ 110,350 $ 102,252
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................ $ 6,989 $ 9,119
Accrued liabilities............. 9,590 8,461
Total current liabilities..... 16,579 17,580
Long-term debt.................... 47,800 38,700
Other long-term liabilities....... 11,508 11,508
Total liabilities............. 75,887 67,788
Stockholders' equity:
Preferred stock, none issued.... - -
Common stock, 7,703,435 and 7,697,527
shares issued and outstanding,
respectively.................. 77 77
Additional paid-in capital...... 25,877 25,820
Retained earnings............... 8,509 8,567
Stockholders' equity............ 34,463 34,464
Total liabilities and stockholders'
equity........................ $ 110,350 $ 102,252
The accompanying notes are an integral part of these consolidated
balance sheets.
<PAGE>
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
(Amounts in thousands)
(Unaudited)
Three Months Ended
November 30,
1996 1995
Cash flows from operating activities:
Net income (loss)........................ $ (58) $ 890
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization.......... 303 262
Deferred income taxes.................. (171) 569
Changes in operating assets and liabilities:
Accounts receivable, net............... (3,911) (10,962)
Inventories............................ (4,703) (1,953)
Prepaid expenses....................... 674 416
Other assets........................... (9) (48)
Accounts payable....................... (2,130) 1,178
Accrued liabilities and other.......... 1,129 340
Net cash used in operating activities...... (8,876) (9,308)
Cash flows from investing activities:
Capital expenditures..................... (144) (247)
Cash flows from financing activities:
Net borrowings of long-term debt......... 9,100 8,300
Payment from former parent related to
purchase price settlement................ - 275
Issuance of common stock................. 57 141
Net cash provided by financing
activities................................. 9,157 8,716
Net increase (decrease) in cash and cash
equivalents................................ 137 (839)
Cash and cash equivalents, beginning of
period.............................. 789 1,337
Cash and cash equivalents, end of
period..................................... $ 926 $ 498
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
Rawlings Sporting Goods Company, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies.
The accompanying unaudited interim consolidated financial
statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission pertaining
to interim financial information and do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. These
financial statements should be read in conjunction with the
consolidated financial statements and accompanying notes included
in the Company's Annual Report for the year ended August 31,
1996. In the opinion of management, all adjustments consisting
only of normal recurring adjustments considered necessary for a
fair presentation of financial position and results of operations
have been included therein. The results for the three months
ended November 30, 1996 are not necessarily indicative of the
results that may be expected for a full fiscal year.
Note 2: Inventories
Inventories consisted of the following (in thousands):
November 30, August 31,
1996 1996
Raw materials $ 5,164 $ 5,624
Work in process 1,995 1,899
Finished goods 29,959 24,892
$37,118 $32,415
<PAGE>
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
Quarter Ended November 30, 1996 Compared
with Quarter Ended November 30, 1995
Net revenues in the quarter ended November 30, 1996 were
$28,259,000 or 20.3 percent below the same quarter last year.
Decreased net revenues of baseball-related products, primarily
baseballs and baseball gloves, and basketballs were primarily
responsible for the decrease. The decrease in net revenues from
baseballs is primarily the result of the Cal Ripken, Jr.
commemorative baseball contributing significantly to net revenues
in the quarter ended November 30, 1995 with no comparable product
in the quarter ended November 30, 1996. Lower net revenues of
baseball gloves resulted from a continued trend toward later
shipments to retailers and a major warehouse club exiting the
baseball category. Net revenues from basketballs declined
primarily as a result of overall weakness in the basketball
category at retail. The settlement of the Major League Baseball
labor situation and other factors have resulted in retailers
being optimistic regarding the spring selling season for
baseball-related products. The Company believes it is well
positioned to take advantage of an improved spring selling season
in baseball-related products.
The Company's gross profit was $8,818,000, or 19.3 percent
below gross profit of $10,923,000 in the comparable prior year
period. The gross profit margin was 31.2 percent, 0.4 margin
points higher than the comparable prior year period. Higher
gross margins in apparel were primarily responsible for the
increase.
Selling, general and administrative (SG&A) expenses were
$8,142,000 or 3.7 percent lower than SG&A expenses of $8,456,000
in the comparable prior year period. Lower royalties and
commissions were primarily responsible for the decrease. SG&A
expenses were 28.8 percent of net revenues, up 4.9 points from
the comparable prior year quarter. The high level of fixed SG&A
expenses combined with the lower net revenues were primarily
responsible for the increase in SG&A expenses as a percent of net
revenues.
Interest expense for the quarter was $738,000, 18.2 percent
lower than interest expense of $902,000 in the comparable quarter
last year. Lower average borrowings and lower average interest
rates were responsible for the decrease.
<PAGE>
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.
<PAGE>
Except for the historical information contained herein, the
matters outlined in the management's discussion and analysis are
forward looking statements that involve risks and uncertainties,
including quarterly fluctuation in results, retail sell rates for
the Company's products which may result in more or less orders
than those anticipated and the impact of competitive products and
pricing. In addition, other risks and uncertainties are detailed
from time to time in the Company's SEC reports, including the
report on Form 10-K for the year ended August 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $9,077,000 for the three months
ended November 30, 1996, primarily the result of the seasonal
increase in accounts receivable and inventories.
Cash flows used in operating activities for the quarter
ended November 30, 1996 were $8,876,000, or 4.6 percent lower
than the $9,308,000 used in the comparable prior year period.
The decrease is primarily the result of a smaller build in
accounts receivable partially offset by a larger build in
inventories.
Capital expenditures were $144,000 for the quarter ended
November 30, 1996 compared to $247,000 in the comparable prior
year period. With the planned expansion of the Costa Rica
facility and other equipment purchases the Company expects
capital expenditures of approximately $2,500,000 in fiscal 1997.
The Company had net borrowings for seasonal working capital
needs of $9,100,000 in the quarter ended November 30, 1996. This
resulted in total debt at November 30, 1996 of $47,800,000,
$4,400,000, or 8.4 percent, below total debt as of November 30,
1995 and $9,600,000, or 16.7 percent, below the total debt as of
November 30, 1994.
<PAGE>
Part II.
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
RAWLINGS SPORTING GOODS COMPANY, INC.
Date: January 9, 1997 /s/ CARL J. SHIELDS
Carl J. Shields
Chairman, CEO and President
Date: January 9, 1997 /s/ PAUL E. MARTIN
Paul E. Martin
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RAWLINGS SPORTING GOODS COMPANY, INC. CONTAINED IN ITS
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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