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 May 31, 1998
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 June 15, 1998: 7,787,036
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)
Quarter Ended Nine Months Ended
May 31, May 31,
1998 1997 1998 1997
Net revenues $46,204 $ 39,859 $140,129 $120,977
Cost of goods sold 31,285 27,274 96,428 82,518
Gross profit 14,919 12,585 43,701 38,459
Selling, general
and
administrative
expenses 10,497 8,462 30,091 25,862
Unusual charges
(See Note 6) 975 - 1,475 -
Operating income 3,447 4,123 12,135 12,597
Interest expense,
net 1,164 864 3,259 2,550
Other expense,
net 33 53 104 151
Income before
income taxes 2,250 3,206 8,772 9,896
Provision for
income taxes 843 1,202 3,289 3,711
Net income $1,407 $ 2,004 $ 5,483 $ 6,185
Net income per common share:
Basic $0.18 $0.26 $0.71 $0.80
Diluted $0.18 $0.26 $0.70 $0.80
Shares used in computing per
share amounts:
Basic 7,792 7,715 7,770 7,708
Assumed exercise of stock
options 66 1 36 7
Diluted 7,858 7,716 7,806 7,715
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)
May 31, August 31,
1998 1997
Assets
Current Assets:
Cash and cash equivalents $ 1,910 $ 732
Accounts receivable,
net of allowance of
$2,011 and $1,627
respectively 45,966 32,968
Inventories 43,835 29,781
Prepaid expenses 960 935
Deferred income taxes 4,083 4,083
Total current assets 96,754 68,499
Property, plant and equipment, net 12,610 9,802
Other assets 801 760
Deferred income taxes 19,392 22,203
Goodwill, net 8,379 -
Total assets $137,936 $ 101,264
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 61 $ 59
Accounts payable 10,132 7,856
Accrued liabilities 12,317 9,901
Total current liabilities 22,510 17,816
Long-term debt, less current maturities 59,213 32,614
Other long-term liabilities 9,362 10,637
Total liabilities 91,085 61,067
Stockholders' equity:
Preferred stock, none issued - -
Common stock, 7,787,036 and 7,725,814
shares issued and outstanding,
respectively 78 77
Additional paid-in capital 29,388 26,083
Stock subscription receivable (1,421) -
Cumulative translation adjustment (714) -
Retained earnings 19,520 14,037
Stockholders' equity 46,851 40,197
Total liabilities and stockholders'
equity $ 137,936 $ 101,264
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
Rawlings Sporting Goods Company, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
(Amounts in thousands)
(Unaudited)
Nine Months Ended
May 31,
1998 1997
Cash flows from operating activities:
Net income $ 5,483 $ 6,185
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 1,216 912
Deferred income taxes 2,811 3,487
Changes in operating assets and
liabilities:
Accounts receivable, net (9,356) (5,437)
Inventories (10,870) 1,083
Prepaid expenses (8) 1,040
Other assets (113) (18)
Accounts payable 1,104 (2,608)
Accrued liabilities and other (954) 1,024
Net cash (used in) provided by operating
activities (10,687) 5,668
Cash flows from investing activities:
Capital expenditures (2,523) (1,741)
Acquisition of business (14,098) -
Net cash used in investing activities (16,621) (1,741)
Cash flows from financing activities:
Net borrowings (repayments) of
long-term debt 26,601 (3,700)
Issuance of warrants 1,271 -
Issuance of common stock 614 200
Net cash provided by (used in)
financing activities 28,486 (3,500)
Net increase in cash and cash
equivalents 1,178 427
Cash and cash equivalents,
beginning of period 732 789
Cash and cash equivalents,
end of period $ 1,910 $ 1,216
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,
1997. 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 nine months
ended May 31, 1998 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):
May 31, August 31,
1998 1997
Raw materials $ 9,259 $ 5,571
Work in process 1,796 2,027
Finished goods 32,780 22,183
$ 43,835 $29,781
<PAGE>
NOTE 3: WARRANTS
In November 1997, the Company issued warrants to purchase 925,804
shares of common stock at $12.00 to Bull Run Corporation for
$3.07 per warrant. The warrants expire in November 2001 and are
exercisable only if the Company's common stock closes above
$16.50 for twenty consecutive trading days. One half of the
purchase price of the warrants was paid in cash with the other
half payable with interest at 7% at the time of exercise or
expiration of the warrants. The receivable for the unpaid
portion of the warrants is classified as a stock subscription
receivable in the accompanying balance sheet. These warrants are
not considered common stock equivalents until the point in time
that the warrants become exercisable.
NOTE 4: ACQUISITION
On September 12, 1997 the Company acquired the net assets of the
Victoriaville hockey business. The acquisition was accounted for
under the purchase method and accordingly, the results of
operations were included in the Company's consolidated statement
of income from the date of acquisition. The purchase price, paid
in cash, has been allocated to the assets and liabilities on a
preliminary basis and the excess of cost over the fair value of
net assets acquired is being amortized over a forty year period
on a straight-line basis. The preliminary purchase price
allocation is as follows:
Net Assets $ 5,568
Goodwill 8,530
Total Purchase Price $14,098
NOTE 5: LONG-TERM DEBT
In September 1997, the Company amended and restated the unsecured
credit agreement with a bank group which, among other matters,
increased the facility to $90,000 and extended the maturity date
to September 2002. The amended and restated credit agreement,
among other matters, requires the Company to meet certain
financial covenants including a minimum fixed charge coverage, a
required ratio of maximum total debt to total capitalization, a
minimum net worth and restrictions on the Company's ability to
pay cash dividends to 50% of the Company's net income for the
<PAGE>
preceding year. The available borrowings under the amended
credit agreement decline $4,000, $5,000, $6,000 and $7,000 on
September 1, 1998, 1999, 2000 and 2001, respectively. In June
1998, the Company amended the credit agreement to , among other
matters, exclude the unusual charges from the minimum fixed
charge covenant.
In October 1997, 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 October 1999 on $30,000 and pays a fixed rate of 6.75% to
7.00%. The transaction effectively converts a portion of the
Company's debt from a floating rate to a fixed rate.
NOTE 6: UNUSUAL CHARGES
ENVIRONMENTAL
The Company has been conducting environmental investigation and
remediation activities at its Dolgeville, New York facility (the
"Site") with respect to the release of wood pitch into
surrounding soil and surface water. In November 1997, the
Company entered into a Voluntary Agreement with the New York
State Department of Environmental Conservation (the "NYSDEC") to
conduct certain environmental remediation activities related to
the presence of wood pitch in the soils at the Site. The wood
pitch was generated as a result of the operation, before
Rawlings' ownership of the Site, of a retort facility by a third
party unrelated to Rawlings. In December 1997, an environmental
consulting firm retained by Rawlings initiated remediation
activities under the oversight of the NYSDEC. In conducting the
remediation activities under the Voluntary Agreement, it was
discovered that the actual volume of wood pitch substantially
exceeded the amount originally estimated by the environmental
consulting firm. Some of the unanticipated, additional wood
pitch has been remediated in accordance with the requirements of
the Voluntary Agreement. The Company believes that a portion of
the unanticipated, additional volume of wood pitch remaining at
the Site may be outside the scope of the current Voluntary
Agreement. Nevertheless, the Company expects to be required to
address such additional wood pitch through an amendment to the
Voluntary Agreement. In May 1998, the Company's environmental
consultants completed an investigation of the amount of the
additional wood pitch at the Site. Based upon the report
received from the environmental consultants and the Company's
historical experience with environmental matters at this Site,
the Company has recorded a $975,000 charge to remediate the
additional <PAGE> unanticipated wood pitch, which is reflected as
unusual charges in the accompanying consolidated statement of
income for the quarter ended May 31, 1998. The Company's reserve
for remediation costs as of May 31, 1998 was approximately
$1,169,000. In management's view, this amount is adequate to
cover the expected remediation activities at the wood pitch Site.
In June 1998, the Company filed an action in the Northern
District of New York against Trident Rowan Group, Inc. (Trident
Rowan), which the Company believes is the successor to the entity
which owned the wood pitch Site during the period in which the
wood pitch contamination occurred. The Company believes that the
case against Trident Rowan is strong and all or a portion of the
clean up costs associated with the wood pitch at the Site may be
recoverable. However, due to the uncertainty associated with
this matter, no receivable associated with a potential recovery
has been recorded at this time.
CHANGE IN CHIEF EXECUTIVE OFFICER
In October 1997, the Company recorded a $500,000 charge for
severance and related benefits, legal costs and other costs
associated with changes in the Chief Executive Officer's
position. This charge has been included in unusual charges in
the accompanying consolidated statement of income.
NOTE 7: STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 128
FOOTNOTE DISCLOSURE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, Earnings Per
Share ("SFAS 128"), effective for financial statements for both
interim and annual periods ending after December 15, 1997. The
Company adopted the provisions of SFAS 128 during the quarter
ended February 28, 1998, and all prior period earnings per share
data has been presented on this basis.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
<PAGE>
RESULTS OF OPERATIONS
QUARTER ENDED MAY 31, 1998 COMPARED
WITH QUARTER ENDED MAY 31, 1997
Net revenues in the quarter ended May 31, 1998 were $46,204,000
or 15.9 percent higher than net revenues of $39,859,000 for the
same quarter last year. Increased net revenues in baseball-
related products, including the recently introduced radar speed-
sensing baseballs and power forged aluminum bats, along with
increased hockey and apparel net revenues were primarily
responsible for the increase. Net revenues increased 10.4
percent excluding the impact of the acquisition of the Vic hockey
business.
Gross margin in the quarter ended May 31, 1998 was 32.3 percent,
.7 margin points higher than the comparable quarter last year.
Gross margin increased from the comparable prior year quarter
primarily as a result of sales of higher margin radar speed-
sensing baseballs partially offset by lower licensing revenues.
Selling, general and administrative (SG&A) expenses in the
quarter ended May 31, 1998 were $10,497,000 (22.7 percent of net
revenues) compared to SG&A expenses of $8,462,000 (21.2 percent
of net revenues) in the comparable prior year quarter. Higher
royalties, commissions and advertising and promotional costs were
primarily responsible for the increase. Increased royalties were
primarily associated with the radar speed-sensing baseballs while
the increase in commissions was the result of a shift in product
mix and channels of distribution. The higher advertising and
promotional costs were primarily associated with point of
purchase and other promotions performed in conjunction with our
retail partners. The SG&A expenses in the quarter ended May 31,
1998 included expenses related to the Vic hockey business
acquired in September 1997.
Unusual charges in the quarter ended May 31, 1998 included a
$975,000 environmental charge associated with additional
remediation costs at the Company's Dolgeville, New York facility.
During the quarter ended May 31, 1998, the Company's
environmental engineers completed their analysis of the costs
associated with additional contamination identified in
conjunction with remediation work performed at the Site. The
environmental charge represents management's best estimate of the
remediation costs based upon the facts available at this time,
including cost estimates provided by the Company's environmental
consultants.
<PAGE>
Interest expense for the quarter ended May 31, 1998 was
$1,164,000 or 34.7 percent higher than interest expense of
$864,000 in the comparable prior year quarter. Higher average
borrowings as a result of the acquisition of the Vic hockey
business and higher working capital levels were primarily
responsible for the increase.
NINE MONTHS ENDED MAY 31, 1998 COMPARED
WITH THE NINE MONTHS ENDED MAY 31, 1997
Net revenues for the nine months ended May 31, 1998 were
$140,129,000 or 15.8 percent higher than net revenues of
$120,977,000 in the comparable nine month period last year.
Higher net revenues in all major product categories other than
licensing were responsible for the increase. The largest
increases in net revenues occurred in baseball-related equipment,
hockey-related equipment, basketball, football and volleyball
equipment and apparel. Net revenues of baseball-related
equipment increased as a result of increased sales of gloves and
net revenues from new products including the radar speed-sensing
baseballs and the power forged aluminum bats. Net revenues
increased 11.3 percent excluding the impact of the acquisition of
the Vic hockey business.
Gross margin for the nine months ended May 31, 1998 was 31.2
percent, .6 margin points lower than the comparable period last
year. Lower licensing revenues, lower net revenues from higher
margin memorabilia products, lower margins on baseball gloves and
lower than average margins on hockey net revenues partially
offset by above average margins on the radar speed-sensing
baseballs were primarily responsible for the decrease.
SG&A expenses for the nine months ended May 31, 1998 were
$30,091,000 or 16.4 percent higher than SG&A expenses of
$25,862,000 in the comparable prior year period. SG&A expenses
for the nine months ended May 31, 1998 also included expenses
related to the Vic hockey business since its acquisition in
September 1997. SG&A expenses were 21.5 percent of net revenues,
up .1 point from the comparable prior year period.
Unusual charges of $1,475,000 in the nine months ended May 31,
1998 included a $975,000 environmental charge associated with
additional remediation costs at the Company's Dolgeville, New
York facility and a $500,000 one time charge associated with
changes in <PAGE> the Chief Executive Officer's position. This charge
includes severance and related benefits, legal costs and other
costs associated with changes in the Chief Executive Officer's
position.
Interest expense for the nine months ended May 31, 1998 was
$3,259,000 or 27.8 percent higher than interest expense of
$2,550,000 in the comparable prior year period. Higher average
borrowings as a result of the acquisition of the Vic hockey
business and higher working capital levels were primarily
responsible for the increase.
The Vic hockey business has been impacted by transition and
integration issues in the United States and Europe related to the
September 1997 acquisition. As a result, the Company will
experience an operating loss related to hockey-related products
in fiscal 1998. A substantial portion of these issues have been
addressed and the Company believes that with the infrastructure
now in place, combined with new products to be introduced in
fiscal 1999, results in fiscal 1999 should improve.
Licensing revenues for fiscal 1998 are expected to be below prior
year levels primarily as a result of lower licensing revenues
from our athletic footwear licensee who is experiencing softness
in the overall footwear category and declines related to our
Japanese licensees which are the result of devaluation of the
yen.
SEASONALITY
Net revenues of baseball equipment and team uniforms are highly
seasonal. Customers generally place orders with the Company for
baseball-related products beginning in August for shipment
beginning in November (pre-season orders). These pre-season
orders from customers historically represented approximately 65
percent to 75 percent of the customers' anticipated needs for the
entire baseball season. The amount of these pre-season orders
generally determine the Company's net revenues and profitability
between November 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 generally represent
approximately 25 percent to 35 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
<PAGE>
extended terms increase the risk of collectibility of accounts
receivable. An increasing number of customers are on automatic
replenishment systems therefore 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 team uniforms are both shipped by
the Company and sold by retailers primarily in the period between
March 1 and September 30. Hockey equipment and uniforms are
shipped by the Company primarily in the period from May 1 to
October 31. Basketballs and 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.
YEAR 2000 ISSUE
Many existing computer programs, including those used by the
Company in its operations, use only two digits to identify a year
in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the
century. If not corrected, many computer applications could fail
or create erroneous results by or at the year 2000. This
potential problem is often referred to as the "Year 2000 issue".
The Company has undertaken a thorough analysis of the costs of
addressing the Year 2000 issue and of the consequences of an
incomplete or untimely resolution of the Year 2000 issue and
determined that such costs are not likely to have a material
effect on the Company's future financial results. In addition,
while the Company has not completed its analysis of the measures
taken by its key suppliers to address the Year 2000 issue, the
Company is not aware of any key supplier whose lack of
preparedness to address the Year 2000 issue could have a material
effect on the Company's future financial results.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $23,561,000 for the nine months ended
May 31, 1998 primarily the result of the seasonal increase in
accounts receivable and inventories and the working capital
acquired in connection with the Vic hockey acquisition. The
inventory increase was also impacted by the addition of new
products and anticipated future increased net revenues.
Cash flows used in operating activities for the nine months ended
May 31, 1998 were $10,687,000, compared to $5,668,000 provided by
operating activities in the comparable prior year period. The
change is primarily the result of increases in inventories and
accounts receivable partially offset by an increase in accounts
payable. The increase in inventories is primarily the result of
new or expanded product offerings, including radar speed-sensing
baseballs, aluminum bats and apparel, and additional inventory
purchased to support anticipated future revenue increases. The
Company's new year 2000 compliant enterprise-wide information
system, implemented at key locations in June 1998, is expected to
provide management the tools necessary to improve inventory turns
and cash flow in fiscal 1999 and beyond.
Capital expenditures were $2,523,000 for the nine months ended
May 31, 1998 compared to $1,741,000 in the comparable prior year
period. The Company expects capital expenditures for fiscal 1998
to be approximately $3,500,000 to $4,000,000.
Investing activities included $14,098,000 use of cash related to
the acquisition of the Vic hockey business.
The Company had net borrowings of $26,601,000 in the nine months
ended May 31, 1998. This resulted from $14,098,000 of borrowings
related to the acquisition of the Vic hockey business and
borrowings for seasonal working capital offset by proceeds from
the issuance of warrants and common stock of $1,885,000. Total
debt as of May 31, 1998 was $59,274,000, $24,274,000 or 69.4
percent higher than total debt as of May 31, 1997. The increase
is primarily the result of the Vic hockey acquisition and higher
working capital levels.
<PAGE>
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS OR THE
FINANCIAL CONDITION OF THE BUSINESS.
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 fluctuations in results, ongoing customer
changes in buying patterns, retail sell rates for the Company's
products, demand and performance of the Company's new 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, 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
Not Applicable.
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been conducting environmental investigation and
remediation activities at its Dolgeville, New York facility (the
"Site") with respect to the release of wood pitch into
surrounding soil and surface water. In November 1997, the
Company entered into a Voluntary Agreement with the New York
State Department of Environmental Conservation (the "NYSDEC") to
conduct certain environmental remediation activities related to
the presence of wood pitch in the soils at the Site. The wood
pitch was generated as a result of the operation, before
Rawlings' ownership of the Site, of a retort facility by a third
party unrelated to Rawlings. In December 1997, an environmental
consulting firm retained by Rawlings initiated remediation
activities under the oversight of the NYSDEC. In conducting the
remediation activities under the Voluntary Agreement, it was
discovered that the actual volume of wood pitch substantially
exceeded the amount originally estimated by the environmental
consulting firm. Some of the unanticipated, additional wood
pitch has been remediated in accordance with the requirements of
the Voluntary Agreement. The Company believes that a portion of
the unanticipated, additional volume of wood <PAGE> pitch remaining at
the Site may be outside the scope of the current Voluntary
Agreement. Nevertheless, the Company expects to be required to
address such additional wood pitch through an amendment to the
Voluntary Agreement. In May 1998, the Company's environmental
consultants completed an investigation of the amount of the
additional wood pitch at the Site. Based upon the report
received from the environmental consultants and the Company's
historical experience with environmental matters at this Site,
the Company has recorded a $975,000 charge to remediate the
additional unanticipated wood pitch, which is reflected as
unusual charges in the accompanying consolidated statement of
income for the quarter ended May 31, 1998. The Company's reserve
for remediation costs as of May 31, 1998 was approximately
$1,169,000. In management's view, this amount is adequate to
cover the expected remediation activities at the wood pitch Site.
In June 1998, the Company filed an action in the Northern
District of New York against Trident Rowan Group, Inc. (Trident
Rowan), which the Company believes is the successor to the entity
which owned the wood pitch Site during the period in which the
wood pitch contamination occurred. The Company believes that the
case against Trident Rowan is strong and all or a portion of the
clean up costs associated with the wood pitch at the Site may be
recoverable. However, due to the uncertainty associated with
this matter, no receivable associated with a potential recovery
has been recorded at this time.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
First Amendment to Amended and Restated Credit
Agreement dated May 31, 1998 by and among Rawlings
Sporting Goods Company, Inc., the First National
Bank of Chicago, as agents and certain lenders named
therein.
(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: July 8, 1998 /s/ HOWARD B. KEENE
Howard B. Keene
Chief Executive Officer and President
Date: July 8, 1998 /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
COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MAY 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> MAY-31-1998
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<ALLOWANCES> 2011
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<PP&E> 26322
<DEPRECIATION> 13712
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<CURRENT-LIABILITIES> 22510
<BONDS> 68575
0
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<CGS> 96428
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<OTHER-EXPENSES> 31566
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<INCOME-PRETAX> 8772
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</TABLE>
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (the "Amendment"), dated as of May 31, 1998, is among
Rawlings Sporting Goods Company, Inc. (the "Borrower"), the
Lenders (as defined below), and The First National Bank of
Chicago, as agent for the Lenders (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the lenders party thereto (the
"Lenders") and the Agent are parties to that certain Amended and
Restated Credit Agreement dated as of September 12, 1997 (the
"Agreement"); and
WHEREAS, the Borrower, the Lenders and the Agent desire to
amend certain of the covenants and other provisions set forth in
the Agreement;
NOW, THEREFORE, in consideration of the premises herein
contained, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not
otherwise defined shall have the meanings attributed to such
terms in the Agreement.
2. Amendments to the Agreement. Subject to the
satisfaction of the conditions precedent set forth in Section 4,
effective as of the date first set forth above (the "Effective
Date");
(a) A new defined term "Bull Run Warrants" is added to
Article I of the Agreement in its proper place in the
alphabetical sequence, such defined term to read in its entirety
as follows:
"Bull Run Warrants" means those certain warrants
to issue approximately 925,804 shares of common stock
of the Borrower held, at the time of the effective date
of the first amendment to this Agreement, by Bull Run
Corporation or one of its Subsidiaries or Affiliates."
(b) The defined term "Required Lenders" in Article I of the
Agreement is amended by deleting the two references to "66-2/3%"
contained therein and replacing each such reference with "51%".
(c) Section 2.7 of the Agreement is hereby amended by
deleting the word "and" at the end of clause (b)(ii) thereof and
replacing the existing clause (iii) with new clauses (iii) and
(iv) to read in their entirety as follows:
<PAGE>
"(iii) within two (2) Business Days after the
receipt thereof by the Borrower, in an amount equal to
100% of the aggregate Net Available Proceeds realized
upon all issuances of common stock of the Borrower or
any Subsidiary, except for issuances made pursuant to
clauses (i) or (ii) of Section 6.10 or issuances
described in the following clause (iv) of this Section;
and
(iv) within two (2) Business Days after the
Borrower's receipt of the proceeds tendered for stock
issued upon the exercise of any or all of the Bull Run
Warrants, in the amount of $3,000,000."
(d) Section 6.10 of the Agreement is hereby amended to read
in its entirety as follows:
"6.10 Capital Stock and Dividends. The Borrower
will not, nor will it permit any Subsidiary to, (a)
issue any preferred stock, other capital stock or any
debt or equity securities of any kind, or (b) declare
or pay any dividends or make any distributions on its
capital stock (other than dividends payable in its own
capital stock) or redeem, repurchase or otherwise
acquire or retire any of its capital stock at any time
outstanding, except that (i) any Subsidiary may declare
and pay dividends or make distributions tot he
Borrower, (ii) the Borrower may make distributions of
its equity securities in accordance with its
shareholder rights plan and employee benefits plans,
(iii) the Borrower may issue common shares and warrants
or options to purchase common shares from time to time,
(iv) the Borrower may repurchase shares of its common
stock with proceeds received from the exercise of the
Bull Run Warrants, provided that (x) the aggregate
consideration tendered by the Borrower for such
repurchase does not exceed the difference between the
Net Available Proceeds received upon exercise of the
Bull Run Warrants and $3,000,000, and (y) all
repurchases entered into under this clause (iv) must
take place within one year of such exercise, and (v) so
long as no Default or Unmatured Default or Change in
Control is pending before or after giving effect to the
payment of such dividends, the Borrower may declare and
pay dividends on its common stock in any Fiscal Year of
up to an amount not to exceed fifty percent (50%) of
the Borrower's Net Income for the preceding Fiscal
Year."
(e) Section 6.19 of the Agreement is hereby amended to read
in its entirety as follows:
"6.19. Capital Expenditures. The Borrower will
not, nor will it permit any subsidiary to, expend, or
be committed to expend, for Capital Expenditures
(including, without limitation, for the acquisition of
fixed assets) on a non-cumulative basis in the
aggregate for the borrower and its Subsidiaries more
than $3,000,000 during the 1997 Fiscal Year, more than
$4,000,000 during the 1998 Fiscal Year or more than
$3,000,000 during any Fiscal Year thereafter, provided
that additional Capital Expenditures by the Borrower or
any Subsidiary of up to <PAGE> $5,000,000 incurred in
connection with the construction of a new or expanded
distribution center shall be permitted and shall not be
counted against the foregoing amounts."
(f) The second sentence of Section 6.28.3 of the Agreement
is hereby amended to read in its entirety as follows:
"For the purposes of calculating the Fixed Charge
Coverage Ratio, there shall be added back to EBITDA (i)
up to $500,000 in charges incurred by the Borrower
relating to the change in the Borrower's Chief
Executive Officer, and (ii) up to $1,000,0000 in
charges incurred by the Borrower in connection with
environmental remediation at its Adirondack, New York
facility."
3. Representations and Warranties. The Borrower hereby
confirms, reaffirms and restates as of the Effective Date the
representations and warranties set forth in Article V of the
Agreement as amended hereby, provided that any such
representation or warranty which is stated to relate solely to an
earlier date is confirmed, reaffirmed and restated as of such
date. A Default under and as defined in the Agreement as amended
by this Amendment shall be deemed to have occurred if any
representation or warranty made pursuant to the foregoing
sentence of this Section 3 shall be materially false as of the
date on which made.
4. Conditions Precedent. The amendments to this Agreement
provided for in Section 2 hereof shall become effective as of the
Effective Date when all of the following conditions precedent
shall have been satisfied:
(a) This Agreement shall have been duly executed and
delivered by the Borrower, each of the Lenders and the Agent.
(b) No Default or Unmatured Default shall have occurred and
be continuing.
5. Effect on the Agreement. Except as expressly amended
hereby, all of the representations, warranties, terms, covenants
and conditions of the Agreement and the other Loan Documents (a)
shall remain unaltered, (b) shall continue to be, and shall
remain, in full force and effect in accordance with their
respective terms, and (c) are hereby ratified and confirmed in
all respects. Upon the effectiveness of this Amendment, all
references in the Agreement (including references in the
Agreement as amended by this Amendment) to "this Agreement" (and
all indirect references such as "hereby", "herein", "hereof" and
"hereunder") shall be deemed to be references to the Agreement as
amended by this Amendment.
6. Expenses. The Borrower shall reimburse the Agent for
any and all reasonable costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys
for the Agent, which attorneys may be employees of the Agent)
paid or incurred by the Agent in connection with the preparation,
review, execution and delivery of this Amendment.
<PAGE>
7. Entire Agreement. This Amendment, the Agreement as
amended by this Amendment and the other Loan Documents embody the
entire agreement and understanding among the parties hereto and
supersede any and all prior agreements and understandings among
the parties hereto relating to the subject matter hereof.
8. Governing Law. This Amendment 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 a national banking association located in the State
of Illinois.
9. Counterparts. This Amendment may be executed in any
number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may
execute this Amendment by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to Amended and Restated Credit Agreement to be
duly executed as of the date first above written.
RAWLINGS SPORTING GOODS COMPANY, INC.
By: /s/ Paul E. Martin
Print Name: Paul E. Martin
Title: CEO
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent
By: /s/ Nathan L. Bloch
Print Name: Nathan L. Bloch
Title: First Vice President
THE BANK OF NEW YORK
By: /s/ Steven Wilson
Print Name: Steven Wilson
Title: Assistant Vice President
<PAGE>
COMERICA BANK
By: /s/ Burt R. Shusly III
Print Name: Burt R. Shusly III
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Jeffrey S. Potts
Print Name: Jeffrey S. Potts
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Steven T. Standbridge
Print Name: Steven T. Standbridge
Title: Vice President
