FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended August 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)
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 14, 1998 was
$79,893,451.
The number of shares of the registrant's Common Stock, $.01
par value, outstanding as of September 17, 1998, was 7,794,483.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1998 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Item 1. Business. . . . . . . . . . . . . . . . . . . . .1
Item 2. Properties . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . 17
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . 17
Item 6. Selected Financial Data . . . . . . . . . . . . 18
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations . 18
Item 8. Financial Statements and Supplementary Data . . 18
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . .118
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 10. Directors and Executive officers of the
Registrant. . . . . . . . . . . . . . . . . . . 19
Item 11. Executive Compensation . . . . . . . . . . . . 19
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . 19
Item 13. Certain Relationships and Related Transactions. 19
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . 20
<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. Under the Vic, McMartin, Rawlings and Victoriaville
brand names, the Company provides an extensive line of equipment
for hockey. 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 the National and
American Leagues, All-Star Game and World Series games for
baseballs and the National Collegiate Athletic Association (the
"NCAA") for the sports of basketball and football. In addition,
Rawlings' products are endorsed by more than 43 college coaches,
25 sports organizations and numerous athletes, including
approximately 165 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 initiated sales of a new power forged
aluminum bat and a speed-sensing baseball in fiscal 1998. 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, volleyballs,
soccer balls, football shoulder pads and other protective gear,
hockey sticks, hockey gloves, hockey protective and goalie 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.
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 extended its exclusive rights to the All-Star Game
and World Series games through 2000. As part of this extension,
Rawlings has exclusive rights to the Divisional Playoffs and
League Championship Series and nonexclusive rights to vinyl
baseballs with Club logos and for the above outlined events.
Since 1994, the Company has been the exclusive supplier of
baseballs to each of the 18 Minor Leagues with the agreement
expiring in 2000. The Company is the leading supplier of baseball
gloves to Major and Minor League players.
<PAGE>
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 with an
agreement expiring in 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 1999. In
football, we are not continuing the NCAA endorsement but
reinvesting funds previously spent on the NCAA to support other
marketing programs and to enhance our on-field exposure including
ongoing endorsements with pro quarterbacks Steve Young and Brett
Favre.
In September 1997, the Company acquired the net assets of
the Victoriaville (Vic) hockey business which includes the Vic,
Victoriaville and McMartin brands. The Vic hockey business has
on ice exposure including sticks and protective gear with over
150 professional hockey players.
Products and Markets
The following is a summary of net revenues by principal
product line for the three fiscal years ended August 31, 1998:
Net Revenues by Principal Product Line
(Amounts in millions)
(Unaudited)
Years Ended August 31,
1998 1997 1996
Equipment:
Baseball $94.0 $86.3 $93.8
Basketball, football 34.4 29.7 25.3
and volleyball
Hockey 8.6 0.7 0.9
Apparel 20.7 16.9 14.7
Licensing 5.9 6.5 6.9
Miscellaneous 7.0 7.5 8.1
Net revenues $170.6 $147.6 $149.7
<PAGE>
The following is a summary of net revenues by geographic
area for the three fiscal years ended August 31, 1998:
Net Revenues by Geographic Area
(Amounts in millions)
(Unaudited)
Years Ended August 31,
1998 1997 1996
Domestic $155.1 $137.5 $139.2
Foreign 15.5 10.1 10.5
Net revenues $170.6 $147.6 $149.7
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, softballs, 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 150 styles, which are often customized
to meet customer preferences. Its gloves range in retail price
from $5.99 for beginners to more than $169.99 for the Heart of
the Hide [Registered Trademark] series, which are used by more
than half of the Major League Baseball players. 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 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
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 <PAGE> 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 purchased by 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. Rawlings also has nonexclusive rights
to vinyl baseballs with Club logos. 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.
In 1998, the Company introduced a speed-sensing baseball
(the radar ball) with baseballs that measure speed from the Major
League and Little League distances of 60 feet 6 inches and
46 feet, respectively. The radar ball was named New Product of
the Year by the Sporting Goods Manufacturers Association.
Rawlings believes that it is the leading supplier of
baseball protective equipment in North America. In 1998, the
Company introduced the Lobster leg guards, which provide greater
flexibility in movement for catchers using this product. In
1996, the Company introduced the pony tail batter's helmet for
women. 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 bats
to a number of Major League and Minor League teams including
substantially all of the wood baseball bats used by Mark McGwire.
The Rawlings' line of wood bats is manufactured at its
Dolgeville, New York facility under the Rawlings [Registered
Trademark] and Adirondack [Registered Trademark] names. The
Company also maintains a line of aluminum baseball and softball
bats that use an innovative technology which was introduced in
fiscal 1998. In fiscal 1998, we recorded a charge to account for
a discontinued line: 2 3/4 inch adult aluminum baseball bats,
which we stopped selling in order to support the NCAA's new
rules, restricting the diameter of the bat barrel.
<PAGE>
Basketball and Football
Rawlings sells 20 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). The basketball
contract with the NCAA expires in 2002. The Company is also the
official supplier of basketballs to the National Association of
Intercollegiate Athletics.
Rawlings sells 22 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 championship games. The football contract with
the NCAA expires in 1999. Rawlings also supplies the official
football to the National Association of Intercollegiate
Athletics. See page two for discussion of the nonrenewal of the
NCAA football contract.
Hockey
In September 1997, the Company acquired the net assets of
the Vic hockey business which includes the Vic, Victoriaville and
McMartin brands. Vic's major products include hockey sticks,
hockey protective equipment and goalie protective equipment. The
Company is planning the introduction of a hockey helmet during
fiscal 1999. The acquisition of the Vic hockey business has
significantly increased the size of the Company's hockey
business.
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
12.2% of the net revenues of the Company in the year ended August
31, 1998. The Company believes it has growth opportunities
related to apparel. The Company plans to increase sales to
institutional customers, particularly high school, collegiate and
amateur sports organizations. Through 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, the Company hopes to improve its
service and delivery, while reducing costs. In 1997, the Company
completed a 21,000 square foot expansion of its Costa Rica
facility in order to expand its stock clothing capacity. This
expansion is expected to result in further cost reduction and
margin improvement in stock apparel.
<PAGE>
Licensing
In the year ended August 31, 1998, the Company generated
$5.9 million of licensing revenues on approximately $140 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 13 companies which are using the Rawlings
[Registered Trademark] brand name on various products including
sportswear, shoes, golf clubs and 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 continue to 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 other net revenues from its three outlet
stores and from its leather tanning facility. The outlet stores
sell seconds, irregular quality and discontinued items.
Approximately 60% 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 40% of the
leather tanned at Rawlings' tanning facility is sold to third
parties for use in a variety of products.
Foreign
The Company's foreign net revenues constituted approximately
9.1% of its total net revenues in the year ended August 31, 1998.
Rawlings currently distributes its products in more than 39
countries primarily through independent distributors. Of the
Company's foreign net revenues in the year ended August 31, 1998,
approximately $9.7 million 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 U.S. The Company supplies baseball, basketball and football
equipment and team uniforms to international sports
organizations, and to leagues in a number of foreign countries
including those where Rawlings supplies baseballs (Argentina,
Australia, Spain and Puerto Rico), basketballs (Czech Republic,
Germany, Italy and Puerto <PAGE> Rico). Rawlings also assists sports
federations outside the U.S. 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 foreign net revenues.
Sales, Marketing and Distribution
Rawlings' products are sold worldwide. In the United
States, Rawlings sells directly to approximately 4,400 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 Champs), sporting goods megastores (such as
Sports Authority and Jumbo Sports) and mass merchandisers (such
as Wal-Mart and K-Mart). In recent years, sales to sporting
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 32%
of the total net revenues of Rawlings in the year ended August
31, 1998 including one customer (Wal-Mart) which accounted for
approximately 12% of 1998 net revenues.
The Company has 43 direct sales employees and 8
manufacturers' representatives who sell its products in the
United States. The Company has two separate sales forces, one to
serve national accounts and one to service institutional dealers
and local sporting goods stores. Sales in Canada are handled by
24 manufacturers' representatives. 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
warehouses in Springfield, Licking and Ava, Missouri; Dolgeville,
New York; Daveluyville, Quebec, Canada; 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 and
Rawlings Dugout. 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 Rawlings
Dugout, added in 1998, is a trailer replica of a dugout that is
pulled by a Hummer. The replica dugout is an interactive display
which travels across the country to make special appearances at
softball <PAGE> tournaments, youth league ballparks and similar venues.
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.
In November 1997 the Company entered into a five-year
strategic marketing alliance with Host Communication, Inc. (HCI),
a sports marketing company. Under this agreement, Rawlings and
HCI will jointly market and sell Rawlings' products primarily
through corporate promotions and grassroots events.
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 and
League Championship Series games); the NCAA (basketball and
football championships and Final Four games); the 18 Minor
Leagues (Minor League games); the National Association of
Intercollegiate Athletics; the National Junior College Athletic
Association and the Men's Senior Baseball League.
In addition, the Company's baseball products are endorsed by
numerous athletes, including approximately 165 Major League
Baseball players such as Ken Griffey Jr., Randy Johnson, Mark
McGwire, Cal Ripken Jr. and Sammy Sosa. The Company's basketball
products carry endorsements from approximately 43 college coaches
including basketball's Denny Crum, Lute Olson, Nolan Richardson
and Marian Washington. The Company's football products are
endorsed by Brett Favre of the Green Bay Packers and Steve Young
of the San Francisco 49ers. The products related to the Vic
hockey business are endorsed by over 150 professional hockey
players such as Zigmund Palffy, Jeff Hackett and Rod Brind'amour.
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 and League
Championship Series games, the official baseballs for the Minor
League games and the NCAA basketball and football contracts,
provide that the agreements will be subject to termination upon a
change of control of Rawlings, as <PAGE> 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
Products manufactured in Rawlings' eight plants constituted
approximately 32% of its net revenues in the year ended August
31, 1998 and the balance was derived from the sale of products
manufactured by third parties in Asia and Latin America 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,
Indonesia, Mexico and Guatemala. Each of five suppliers, Trion
Corporation, Cortina International, Inc., Samyang Tongsang
Company Limited, Topball Trading Co., Ltd. and Tayang Sporting
Goods Co., Ltd., account for more than 10% of the Company's raw
material and finished goods purchases. The Company does not
maintain formal supply contracts with these suppliers. 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 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 eight manufacturing facilities in the
United States, Canada and Costa Rica where it makes baseballs,
apparel, baseball gloves, footballs, injection molded
accessories, tanned leather, wood baseball bats, hockey sticks,
gloves and pants. In 1994 the Company began relocating
production of stock apparel to its Costa Rica factory to reduce
operating costs. In 1997, the Company completed an 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 <PAGE> of a Pro [Registered Trademark], are protected
trademarks in various countries. As of August 31, 1998, Rawlings
held 34 U.S. and 6 non U.S. patents, and had 5 U.S. patent
applications and 3 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.
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 and Wilson Sporting
Goods Company 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 pages 18 and 19
of the Company's 1998 Annual Report to Stockholders.
Employees
As of August 31, 1998, Rawlings employed approximately 1,537
people on a full-time basis, of whom 721 were based in the United
States; 123 in Canada and 693 were based in Costa Rica. Of the
total number of employees, approximately 1,350 were engaged in
manufacturing, 136 were engaged in marketing and sales and 51
were engaged in administration. Approximately 364 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 November 1999 and February 2000, 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>
YEAR 2000 ISSUES
The Company has initiated a comprehensive program to replace
its computer systems and applications with a Year 2000 compliant
enterprise-wide system. The assessment phase of the Company's
system migrations is complete and the systems testing and
implementation stages are in progress. To date, a majority of the
Company's locations and processes have been successfully migrated
to the new system with completion expected by June 1999. The
Company has incurred capital expenditures, including hardware,
software, outside consultants and other expenses, of
approximately $2.5 million on its new enterprise-wide system and
expects that full implementation of the system will require an
additional $500,000 over the next year. In addition, the Company
incurred approximately $300,000 in software selection and
training costs that were expensed during fiscal 1998 and fiscal
1997.
The Company has formally communicated with its major vendors
and suppliers to determine the extent to which the Company may be
vulnerable to those third parties' failure to remediate their own
Year 2000 issues. The first phase, which included sending Year
2000 surveys and questionnaires to customers and vendors is
complete and the response evaluation phase is currently in
progress. The Company has not had sufficient response from
vendors to provide an estimate of the potential impact of
non-compliance on the part of such vendors. Management is
currently developing contingency plans which include, but are not
limited to, evaluating alternative vendors who are Year 2000
compliant and evaluating inventory management plans. It is too
early to determine to what extent, if any, these contingency
plans will have to be implemented. Although the Company expects
to be Year 2000 compliant by mid-1999 and does not expect to be
materially impacted by the external environment, such future
events cannot be known with certainty. Furthermore, the
Company's estimates of future migration costs and completion
dates are based on presently available information and will be
updated, as additional information becomes available.
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.
<PAGE>
Dependence on Baseball. Sales of baseball-related products
constituted approximately 55% of the total net revenues of
Rawlings in the year ended August 31, 1998. 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 the
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 generally place orders with the
Company for baseball-related products beginning in August for
shipment beginning in November (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 recognized between November 1 and
March 31, 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."
Reliance on Certain Customers. Sales to the ten largest
customers of Rawlings constituted approximately 32% of the total
net revenues of Rawlings in the year ended August 31, 1998,
including one customer, Wal-Mart, which accounted for
approximately 12% of 1998 net revenues. Although the Company has
long-established relationships with 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
periodically subjected to product liability claims and
proceedings involving its patents and other legal proceedings
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."
<PAGE>
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.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION
Stephen M. O'Hara 43 Chairman of the Board and
Chief Executive Officer
Howard B. Keene 56 President and Chief Operating
Officer
Paul E. Martin 38 Chief Financial Officer
Stan W. Morrison 47 Vice President, Sales and
Marketing
Ted C. Sizemore 53 Vice President, Baseball
Development and International
Sales
J. Michael Thompson 41 Vice President, Sales
Jonathan C. Hodgins 34 President, Hockey Division
Stephen M. O'Hara has served as Chairman of the Board and
Chief Executive Officer since November 1998. From November 1994
until August 1998, Mr. O'Hara served as President of Specialty
Catalog Corporation (SC), a public company, which is a direct
marketer of wigs and hairpieces with $42 million in net revenues.
From November 1991 through November 1994, Mr. O'Hara was
President of SC's largest subsidiary, Wigs by Paula, Inc.,
including the period of time when SC and its subsidiaries were in
Chapter 11. Prior to 1991, Mr. O'Hara held various marketing
positions at consumer product companies including Procter &
Gamble, Kraft General Foods and CML Group. Mr. O'Hara has a MBA
degree from the Harvard Graduate School of Business and an AB
degree from Harvard College.
Howard B. Keene has served as President since October 1997.
From October 1997 to October 1998, Mr. Keene served as interim
Chief Executive Officer and President. From April 1995 to
October 1997 Mr. Keene served as Chief Operating Officer. From
November 1992 to March 1995, Mr. Keene served as Vice President,
Foreign Activity and Procurement of <PAGE> 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 public company that manufactured packaging
materials with $50 million in revenues. From 1982 to 1991, Mr.
Martin was employed in progressively responsible positions,
including Senior Audit Manager, by Arthur Andersen LLP.
Stan W. Morrison has served as Vice President, Sales and
Marketing of Rawlings since September 1998. From April 1998 to
September 1998, Mr. Morrison served as a consultant to a number
of companies in the sporting goods industry. From 1993 to 1998,
Mr. Morrison served as President of Legends Athletic, a $22
million sports apparel company. From 1985 to 1993, Mr. Morrison
served as Senior Vice President of Sales and Marketing for
Swingster, a $180 million sports apparel company.
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.
Jonathan C. Hodgins has served as President, Hockey Division
since September 1997. From September 1996 until joining the
Company, Mr. Hodgins served as President and Chief Executive
Officer of USA Skate, Inc., the previous owner of the hockey
business. From 1990 to 1996 Mr. Hodgins was employed by
CCM/Sports Maska, Inc. in various management and executive
capacities. From 1986 to 1990 Mr. Hodgins was employed by
Canstar Sports Group in product management.
ITEM 2. PROPERTIES 2. Properties.
The following table sets forth certain information as of
August 31, 1998 relating to Rawlings' principal properties:
<PAGE>
Approximate Owned or
Location Purpose/Products Size (sq. ft.) Leased
Ava, Missouri Manufacturing of 90,000 Leased
(two adjoining baseball gloves, 60,000 Leased
facilities) batter's helmets,
footballs and
injection molded
accessories
Daveluyville, Manufacturing of 74,000 Owned
Quebec hockey sticks
Canada
Dolgeville, Manufacturing of wood 80,500 Owned
New York baseball bats
(three
properties)
Fenton, Corporate headquarters 25,000 Leased
Missouri
Licking,
Missouri Manufacturing of 55,400 Owned
(two apparel 55,000 Leased
facilities)
London, Manufacturing of 5,000 Leased
Ontario goaltending equipment
Canada
Montreal, Manufacturing of 9,600 Leased
Quebec hockey protective
Canada
Springfield, Warehouse/ 83,500 Owned
Missouri distribution center
Tullahoma, Leather tanning 69,000 Owned
Tennessee
Turrialba, Manufacturing of 54,000 Owned
Costa Rica baseballs and apparel
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
three outlet stores. Rawlings also leases space for six 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
Like similar manufacturing companies, 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 is not currently identified as
a potentially responsible party under the federal Superfund law
or 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.
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 recorded a $975,000 charge in 1998 to remediate the
additional unanticipated wood pitch, which is reflected in
unusual charges in the accompanying consolidated statement of
income for fiscal 1998. In the year ended December 31, 1993, the
Company recorded a charge of $1,559,000, which included the
estimated clean up costs at this site. The Company's reserve for
remediation costs as of August 31, 1998 was $1,082,000. 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 <PAGE> potential recovery
has been recorded at this time and there can be no assurance that
any amount will be recovered.
Litigation and Other Liabilities
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 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, 1998.
PART IIII
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information regarding the market for the Company's
common stock, quarterly market price ranges, dividends declared
and shareholders of record is incorporated by reference from page
33 of the Company's 1998 Annual Report to Stockholders.
In November 1997 the Company issued warrants to purchase
925,804 shares of common stock at $12.00 per share 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.
<PAGE>
The information regarding dividend restrictions is
incorporated by reference from page 30 of the Company's 1998
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 16 of
the Company's 1998 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 17 to 21 of the Company's 1998 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 22 to 32 of the
Company's 1998 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, the 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, and page 32 of the
Company's 1998 Annual Report to Stockholders, 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.
(a) (3) Exhibits
2.1 Asset Purchase Agreement, dated September 10,
1997 among Les Equipments Sportif Davtec,
Inc. USA Skate Corporation, California Pro
Sports, Inc., Rawlings Canada, Inc. and the
Company, included as Exhibit 2.1 to the
Company's Form 8-K filed on October 21, 1997
is hereby incorporated herein by reference.
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 included as exhibit 3.3 to
the Company's Form 10-K for the fiscal year
ended August 31, 1996, is hereby incorporated
herein by reference.
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 Amendment of Rights Agreement dated November
21, 1997 between the Company, Boatmen's Trust
Company and ChaseMellon Shareholder Services,
Inc., included as Exhibit 4.2 to the
Company's Form 8-K dated November 21, 1997 is
hereby incorporated herein by reference.
4.3 Common Stock Purchase Warrant dated November
21, 1997 issued by the Company to Bull Run
Corporation included as Exhibit 4.1 to the
Company's Form 8-K dated November 21,1997 is
hereby incorporated herein by reference.
<PAGE>
10.1 Amended and Restated Credit Agreement dated
as of September 12, 1997 among the Company,
The First National Bank of Chicago, as agent,
and certain lenders named therein included as
Exhibit 99.1 to the Company's Form 8-K filed
on October 21,1997 is hereby incorporated
herein by reference.
10.1.1 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 agent,
and certain lenders named therein included as
Exhibit 10 to the Company's Form 10-Q for the
quarter ended May 31, 1998, is hereby
incorporated herein by reference.
10.2 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.
10.3 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.
10.4 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.
*10.5 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.
*10.6 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.
10.7 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.
<PAGE>
*10.8 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.
*10.9 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.
10.10 Investment Purchase Agreement dated November
21, 1997 between the Company and Bull Run
Corporation, included as Exhibit 99.1 to the
Company's Form 8-K dated November 21, 1997 is
hereby incorporated herein by reference.
10.11 Standstill Agreement dated November 21, 1997
between the Company and Bull Run Corporation,
included as Exhibit 99.2 to the Company's
Form 8-K dated November 21, 1997 is hereby
incorporated herein by reference.
l0.12 Registration Rights Agreement dated November
21, 1997 between the Company and Bull Run
Corporation, included as Exhibit 99.3 to the
Company's Form 8-K dated November 21,1997 is
hereby incorporated herein by reference.
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to the Item
14(c) of this report.
13. Annual Report to Stockholders for the Fiscal Year
Ended August 31, 1998.
21. Subsidiaries of the Company.
23. Consent of Arthur Andersen LLP.
27. Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter
ended August 31, 1998.
<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 19, 1998 By: /s/ Paul E. Martin
Paul F. 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/ Stephen M O'Hara November 19, 1998
Stephen M. O'Hara
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Paul E. Martin November 19, 1998
Paul E. Martin
Chief Financial Officer
(Principal Financial Officer
and Accounting Officer)
By: /s/ Andrew N. Baur November 19, 1998
Andrew N. Baur
Director
By: /s/ Linda L. Griggs November 19, 1998
Linda L. Griggs
Director
By: /s/ Charles L. Jarvie November 19, 1998
Charles L. Jarvie
Director
<PAGE>
By: /s/ Michael McDonnell November 19, 1998
Michael McDonnell
Director
By: /s/ Robert S. Prather Jr. November 19, 1998
Robert S. Prather Jr.
Director
By: /s/ Michael J. Roarty November 19, 1998
Michael J. Roarty
Director
By: /s/ William C. Robinson November 19, 1998
William C. Robinson
Director
FIVE-YEAR 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, 1998, 1997, 1996 and 1995, the eight months ended
August 31, 1994 and the year ended December 31, 1993.
(Amounts in thousands Years Ended August 31,
except per share data) 1998 1997 1996 1995
INCOME STATEMENT
DATA: /1/
Net revenues $170,604 $147,600 $149,735 $144,141
Operating income 9,989 11,880 11,666 11,598
Net income 3,660 5,470 5,272 4,584
Net income per share 0.47 0.71 0.69 0.60
BALANCE SHEET DATA:
Total assets $132,532 $101,264 $102,252 $ 97,783
Long-term debt,
including current
maturities 57,109 32,673 38,700 43,900
Eight Months
Ended Year Ended
(Amounts in thousands August 31, December 31,
except per share data) 1994 1993
INCOME STATEMENT
DATA: /1/
Net revenues $81,174 $139,615
Operating income 2,935 7,138
Net income 1,335 3,922
Net income per share (1) (1)
BALANCE SHEET DATA:
Total assets $93,752 $ 67,616
Long-term debt,
including current
maturities 39,480 1,262
/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.
NET REVENUES BY PRINCIPAL PRODUCT LINE AND BY GEOGRAPHIC AREA (UNAUDITED)
Years Ended August 31,
(Amounts in millions) 1998 1997 1996 1995
BY PRINCIPAL
PRODUCT LINE:
Equipment:
Baseball $ 94.0 $ 86.3 $ 93.8 $ 94.7
Basketball, football
and volleyball 34.4 29.7 25.3 24.3
Hockey 8.6 0.7 0.9 0.5
Apparel 20.7 16.9 14.7 10.4
Licensing 5.9 6.5 6.9 6.2
Miscellaneous 7.0 7.5 8.1 8.0
NET REVENUES $170.6 $147.6 $149.7 $144.1
BY GEOGRAPHIC AREA:
Domestic $155.1 $137.5 $139.2 $131.9
Foreign 15.5 10.1 10.5 12.2
NET REVENUES $170.6 $147.6 $149.7 $144.1
Eight Months
Ended Year Ended
August 31, December 31,
(Amounts in millions) 1994 1993
BY PRINCIPAL
PRODUCT LINE:
Equipment:
Baseball $ 50.9 $ 91.1
Basketball, football
and volleyball 14.5 22.6
Hockey 0.2 0.9
Apparel 5.3 10.1
Licensing 5.6 4.5
Miscellaneous 4.7 10.4
NET REVENUES $ 81.2 139.6
BY GEOGRAPHIC AREA:
Domestic $ 70.8 $127.8
Foreign 10.4 11.8
NET REVENUES $ 81.2 $139.6
<PAGE>
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 1998 Annual Report on Form 10-K.
YEAR ENDED AUGUST 31, 1998 COMPARED TO THE YEAR ENDED AUGUST 31,
1997
RESULTS OF OPERATIONS
Net revenues for the year ended August 31, 1998 (1998) were
$170,604,000 or 15.6 percent higher than net revenues of
$147,600,000 for the year ended August 31, 1997 (1997). Net
revenues in 1998 excluding the impact of the Victoriaville (Vic)
hockey business acquired in September 1997 increased 9.8 percent
over 1997. The Company experienced 8.9 percent growth in net
revenues of baseball-related products including net revenues from
new products (new aluminum bat line and the radar speed-sensing
baseballs) and a resurgence in baseball glove sales. The recent
changes in the National Collegiate Athletic Association (NCAA)
regulations regarding adult aluminum baseball bats has created
uncertainty in the aluminum bat category. This uncertainty may
delay the Company's plans to aggressively grow the aluminum bat
category. However, baseball's continued resurgence is expected to
result in continued sales growth in all other major baseball-related
categories. Net revenues from basketball, football and
volleyball equipment increased 15.9 percent primarily fueled by
growth at major accounts. The Company anticipates continued
growth in these categories in fiscal 1999. Apparel net revenues
increased 23.1 percent and the Company expects continued double-digit
growth in fiscal 1999 and beyond.
Gross margin in 1998 was 30.2 percent, down 0.6 of a margin point
from the 1997 gross margin of 30.8 percent. Decreased licensing
revenues and the write-off associated with early adoption of the
new NCAA aluminum bat standard were primarily responsible for the
decrease.
Selling, general and administrative (SG&A) expenses for 1998 were
$39,989,000 or 19.0 percent higher than SG&A expenses of
$33,609,000 in fiscal 1997. As a percent of net revenues SG&A
expenses were 23.4 percent in fiscal 1998 compared to 22.8
percent in fiscal 1997. Higher variable salesmen compensation,
royalties, advertising and promotion costs and the costs
associated with the write-off of the prior computer system were
primarily responsible for the increase.
Unusual charges of $1,475,000 in 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 the Chief Executive
Officer's position. This charge included severance and related
benefits, legal costs and other costs associated with changes in
the Chief Executive Officer's position.
Excluding the unusual charges, write-offs relating to aluminum
bats and the Company's prior computer system and the results of
the licensing and hockey businesses, our core business had an
exceptional year with operating income increasing 35.8 percent
and net revenues gaining 11.2 percent. The hockey business
performance was disappointing, but with the majority of the U.S.
transition issues resolved, the Company is poised for improved
hockey results in 1999. Our licensing business suffered from the
negative currency impact of the devaluation of the Japanese yen.
The actions taken to improve hockey combined with the accelerated
rate of baseballs' recovery have us optimistic that improvements
in sales and earnings are achievable in 1999.
Interest expense of $4,218,000 in 1998 was 35.4 percent higher
than interest expense of $3,115,000 in 1997. Higher average debt
outstanding resulting from the Vic hockey acquisition and higher
working capital levels were primarily responsible for the
increase.
The effective tax rate of 33.7 percent in 1998 was 3.3 points
lower than the effective tax rate of 37.0 percent in 1997. The
decrease in the effective tax rate is primarily the result of a
change in the mix of foreign and domestic income.
<PAGE>
YEAR ENDED AUGUST 31, 1997 COMPARED TO THE YEAR ENDED AUGUST 31,
1996
RESULTS OF OPERATIONS
Net revenues for 1997 were $147,600,000, or 1.4 percent below net
revenues of $149,735,000 for the year ended August 31, 1996
(1996). Lower net revenues from baseball-related products,
partially offset by higher net revenues from basketball, football
and volleyball equipment and apparel were primarily responsible
for the decrease. Net revenues of baseball-related products
decreased 8.0 percent resulting from a) lower sales of baseball
gloves as a result of significant reductions at two major
warehouse club chains who decided to stop selling baseball-related
products and a reduction in net revenues at a third major
account, which entered the selling season with excess inventory
and b) lower sales of baseballs primarily as a result of reduced
net revenues from memorabilia baseballs. Net revenues for
basketball, football and volleyball equipment increased 17.1
percent as a result of higher net revenues related to major
corporate promotions and increased back-to-school programs.
Apparel net revenues increased 14.8 percent as a result of
increases in both the custom and stock uniform business.
Gross margin in 1997 was 30.8 percent, down 0.2 of a point from
the 1996 gross margin of 31.0 per cent. Increased net revenues of
lower margin products including basketball, football and
volleyball equipment and apparel were primarily responsible for
the decrease. The Company achieved continued improvement in the
gross margin on apparel products in 1997.
SG&A expenses for 1997 of $33,609,000 were $1,141,000, or 3.3
percent below SG&A expenses of $34,750,000 in 1996. As a percent
of net revenues, the SG&A expenses in 1997 were 22.8 percent
compared to 23.2 percent in 1996. Lower royalties, commissions
and advertising and promotion costs were primarily responsible
for the decrease.
Interest expense of $3,115,000 in 1997 decreased 14.8 percent
from $3,656,000 in 1996 as a result of lower average borrowings
and average interest rates.
The effective tax rate of 37.0 percent in 1997 was 4.9 points
higher than the effective tax rate of 32.1 percent in 1996. The
increase in the effective tax rate is the result of 1996
including an adjustment for the lower foreign effective tax rates
on a portion of the Company's income generated and indefinitely
reinvested in Costa Rica.
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 generally represent approximately 50
percent to 65 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 35 percent to 50 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 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<PAGE> 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.
INTEREST RATE AND FOREIGN CURRENCY MANAGEMENT ACTIVITIES
The Company has engaged in interest rate and foreign currency
management activities with the objective of limiting exposure to
interest rate increases related to the Company's long-term debt
by converting a portion of the Company's variable rate debt to a
fixed rate and limiting the exposure to foreign currency exchange
rate fluctuations. The interest rate and foreign currency
objectives are achieved through the use of interest rate swaps as
described in Note 9 to the financial statements and the foreign
currency contracts as described in Note 1 to the financial
statements.
ENVIRONMENTAL MATTERS
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 surround-
ing 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 unan-
ticipated, 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 recorded a
$975,000 charge to remediate the additional unanticipated wood
pitch, which is reflected in unusual charges in the accompanying
consolidated statement of income for 1998. In the year ended
December 31,1993, the Company recorded a charge of $1,559,000
which included the estimated clean up costs at this Site. The
Company's reserve for remediation costs as of August 31, 1998 was
$1,082,000. 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 and there can be no assurance that any
amount will be recovered.
<PAGE>
YEAR 2000 ISSUES
The Company has initiated a comprehensive program to replace its
computer systems and applications with a Year 2000 compliant
enterprise-wide system. The assessment phase of the Company's
system migrations is complete and the systems testing and
implementation stages are in progress. To date, a majority of the
Company's locations and processes have been successfully migrated
to the new system with completion expected by June 1999. The
Company has incurred capital expenditures, including hardware,
software, outside consultants and other expenses, of
approximately $2.5 million on its new enterprise-wide system and
expects that full implementation of the system will require an
additional $500,000 over the next year. In addition, the Company
incurred approximately $300,000 in software selection and
training costs that were expensed during fiscal 1998 and fiscal
1997.
The Company has formally communicated with its major vendors and
suppliers to determine the extent to which the Company may be
vulnerable to those third parties' failure to remediate their own
Year 2000 issues. The first phase, which included sending Year
2000 surveys and questionnaires to customers and vendors is
complete and the response evaluation phase is currently in
progress. The Company has not had sufficient response from
vendors to provide an estimate of the potential impact of
non-compliance on the part of such vendors. Management is currently
developing contingency plans which include, but are not limited
to, evaluating alternative vendors who are Year 2000 compliant
and evaluating inventory management plans. It is too early to
determine to what extent, if any, these contingency plans will
have to be implemented. Although the Company expects to be Year
2000 compliant by mid-1999 and does not expect to be materially
impacted by the external environment, such future events cannot
be known with certainty. Furthermore, the Company's estimates of
future migration costs and completion dates are based on
presently available information and will be updated, as
additional information becomes available.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by
operating activities and the amended and restated credit
agreement with a bank group more fully described in Note 9 to the
financial statements. The Company's primary use of cash is to
fund its working capital needs, capital expenditures,
acquisitions 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, 1998
Operating activities used cash of $8,584,000 primarily the result
of increases in accounts receivable and inventories partially
offset by net income and depreciation and amortization. Operating
cash flows were $17,135,000 lower than 1997 primarily as a result
of higher inventories and lower net income. Investing activities
used cash of $17,698,000 primarily for the acquisition of the Vic
hockey business and capital expenditures for normal property and
plant improvements and to purchase and implement the Company's
new computer system. With the ongoing upgrade of the Company's
computer system and other planned expenditures for improved
production efficiencies the Company expects capital expenditures
of $2,500,000 to $3,000,000 in 1999. Financing activities
provided cash of $26,412,000 which included net borrowings of
$24,436,000 and the issuance of warrants and common stock of
$1,976,000.
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 prevail-<PAGE>
ing 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, 1997
Operating cash flows of $8,551,000 were primarily the result of
net income adjusted for non cash charges and lower inventory
levels partially offset by lower accounts payable and higher
accounts receivable. Operating cash flows were $3,321,000 higher
than 1996 primarily as a result of lower inventory levels and a
smaller increase in accounts receivable partially offset by a
reduction in accounts payable in 1997 compared to an increase in
1996. Investing activities used cash of $2,844,000 primarily for
capital expenditures for normal property and plant improvements,
the upgrading of certain plants to improve production capacity
and efficiency and to upgrade the Company's systems. Financing
activities used cash of $5,764,000 which included a net debt
repayment of $6,027,000 partially offset by issuance of common
stock of $263,000.
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 the year ended August 31, 1995
(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. 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.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued SFAS
No. 130 "Reporting Comprehensive Income," which establishes
standards for reporting and disclosure of comprehensive income
and its components; SFAS No.131 "Disclosures about Segments of an
Enterprise and Related Information," which establishes annual and
interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services,
geographic areas and major customers; SFAS No.132 "Employers'
Disclosures about Pension and Other Postretirement Benefits,"
which standardizes the disclosure requirements for pensions and
other postretirement benefits and expands disclosures on changes
in benefit obligations and fair values of plan assets; and SFAS
No. 133 "Accounting for Derivative Instruments and Hedging
Activities," which requires that all derivatives be recognized as
either assets or liabilities in the statement of financial
position at fair value unless specific hedge criteria are met.
The Company is required to adopt the provisions of SFAS 130, 131
and 132 in 1999 and SFAS 133 in 2000. Adoption of these
statements is not expected to significantly impact the Company's
consolidated financial position, results of operations or cash
flows, and any effect will be limited primarily to the form and
content of its disclosures.
<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) as of August 31, 1998 and 1997 and
the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period
ended August 31, 1998. 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, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended
August 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
October 7, 1998
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Years Ended August 31,
(Amounts in thousands, 1998 1997 1996
except per share data)
<S> <C> <C> <C>
Net revenues $170,604 $147,600 $149,735
Cost of goods sold 119,151 102,111 103,319
Gross profit 51,453 45,489 46,416
Selling, general and administrative expenses 39,989 33,609 34,750
Unusual charges (See Note 5) 1,475 -- --
Operating income 9,989 11,880 11,666
Interest expense 4,218 3,115 3,656
Other expense, net 251 83 250
Income before income taxes 5,520 8,682 7,760
Provision for income taxes 1,860 3,212 2,488
Net income $ 3,660 $ 5,470 $ 5,272
Net income per common share:
Basic $ 0.47 $ 0.71 $ 0.69
Diluted $ 0.47 $ 0.71 $ 0.69
Shares used in computing per share amounts:
Basic 7,777 7,712 7,680
Assumed exercise of stock options 41 6 1
Diluted 7,818 7,718 7,681
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
August 31,
(Amounts in thousands, except share and per share data) 1998 1997
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 862 $ 732
Accounts receivable, net of allowance of
$2,043 and $1,627, respectively 40,352 32,968
Inventories 43,573 29,781
Prepaid expenses 673 935
Deferred income taxes 4,946 4,083
Total current assets 90,406 68,499
Property, plant and equipment, net 12,911 9,802
Other assets 568 760
Deferred income taxes 20,321 22,203
Goodwill, net 8,326 --
Total assets $132,532 $101,264
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 61 $ 59
Accounts payable 9,047 7,856
Accrued liabilities 12,547 9,901
Total current liabilities 21,655 17,816
Long-term debt, less current maturities 57,048 32,614
Other long-term liabilities 9,577 10,637
Total liabilities 88,280 61,067
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, 7,794,483 and 7,725,814 shares issued and
outstanding, respectively 78 77
Additional paid-in capital 29,479 26,083
Stock subscription receivable (1,421) --
Cumulative translation adjustment (1,581) --
Retained earnings 17,697 14,037
Stockholders' equity 44,252 40,197
Total liabilities and stockholders' equity $132,532 $101,264
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Additional Stock Cumulative
(Amounts in thousands, Common Stock Paid-in Subscription Translation Retained
except share data) Shares Amount Capital Receivable Adjustment Earnings Total
<S> <C> <C> <C> <C> <C> <C> <C>
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
Net income -- -- -- -- -- 5,470 5,470
Issuance of
common stock 28,287 -- 263 -- -- -- 263
Balance,
August 31, 1997 7,725,814 77 26,083 -- -- 14,037 40,197
Net income -- -- -- -- -- 3,660 3,660
Issuance of
common stock 68,669 1 704 -- -- -- 705
Issuance of
warrants -- -- 2,692 (1,421) -- -- 1,271
Translation
adjustments -- -- -- -- (1,581) -- (1,581)
Balance,
August 31, 1998 7,794,483 $78 $29,479 $(1,421) $(1,581) $17,697 $44,252
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended August 31,
(Amounts in thousands) 1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,660 $ 5,470 $ 5,272
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,781 1,220 1,123
Loss (gain) on disposal of equipment 101 (150) --
Deferred income taxes 1,019 2,642 1,857
Changes in operating assets and liabilities:
Accounts receivable, net (3,742) (2,878) (5,927)
Inventories (10,608) 2,634 (1,069)
Prepaid expenses 279 537 135
Other assets 93 (242) 60
Accounts payable 19 (1,263) 2,731
Accrued liabilities and other (1,186) 581 1,048
Net cash (used in) provided by operating
activities 8,584 8,551 5,230
Cash flows from investing activities:
Capital expenditures (3,600) (2,994) (1,193)
Acquisition of a business (14,098) -- --
Proceeds from sale of equipment -- 150 --
Net cash used in investing activities (17,698) (2,844) (1,193)
Cash flows from financing activities:
Borrowings of long-term debt 108,450 41,448 54,400
Repayments of long-term debt (84,014) (47,475) (59,600)
Issuance of warrants 1,271 -- --
Issuance of common stock 705 263 340
Payment from former parent related
to purchase price settlement -- -- 275
Net cash provided by (used in)
financing activities 26,412 (5,764) (4,585)
Net increase (decrease) in cash and cash
equivalents 130 (57) (548)
Cash and cash equivalents, beginning of year 732 789 1,337
Cash and cash equivalents, end of year $ 862 $ 732 $ 789
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,216 $ 3,159 $ 3,548
Income taxes 631 383 247
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share data)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Rawlings Sporting Goods Company, Inc. and all of its
subsidiaries (Rawlings or the Company). All significant
intercompany transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid
investments with a 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 5-12 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 in accordance with Statement of Financial Accounting
Standards No.109, Accounting for Incomes Taxes (SFAS No.109).
TRANSLATION AND HEDGING OF FOREIGN CURRENCIES
The assets and liabilities of foreign branches and subsidiaries
are translated into U.S. dollars at current exchange rates and
profit and loss accounts are translated at average annual
exchange rates. Resulting translation gains and losses are
included as a separate component in Stockholders' Equity.
Foreign exchange transaction losses of $25 and $12 were
included in the results of operations for the fiscal years
ended August 31, 1997 and 1996, respectively.
The Company utilizes forward foreign currency contracts to
minimize the impact of currency movements on anticipated
royalty payments denominated in Japanese yen. In June and
September 1998, the Company entered into forward contracts to
sell Yen 75 million and Yen 150 million Japanese yen with fixed
exchange rates and maturity dates which align with the
anticipated royalty payments in February and August 1999,
respectively.
FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments
approximates their carrying amounts. Fair value for all
financial instruments other than long-term debt, for which no
quoted market prices exist, was based on appropriate estimates.
The value of the Company's long-term debt is estimated based on
market prices for similar issues or on the current rates
offered to the Company for debt of the same remaining
maturities.
NET INCOME PER SHARE
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 1998, and all prior period earnings per share data
has been presented on this basis.
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 require the use of certain estimates
by management, in determining the Company's assets,
liabilities, revenues and expenses. Resolution of certain
matters could differ significantly from the resolution that is
currently expected.
<PAGE>
NOTE 2. 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 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 with accumulated
amortization as of August 31, 1998 of $204. The purchase price
allocation is as follows:
Net assets $ 5,568
Goodwill 8,530
Total purchase price $14,098
NOTE 3. INVENTORIES
Inventories consist of the following:
August 31, 1998 1997
Raw materials $ 9,552 $ 5,571
Work in process 2,497 2,027
Finished goods 31,524 22,183
Inventories $43,573 $29,781
NOTE 4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
August 31, 1998 1997
Buildings and improvements $ 6,143 $ 5,926
Machinery and equipment 17,598 14,350
Other 2,926 2,697
Total property, plant and
equipment 26,667 22,973
Less - Accumulated depreciation (13,756) (13,171)
Property, plant and equipment,
net $ 12,911 $ 9,802
NOTE. 5 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 recorded a $975
charge to remediate the additional unanticipated wood pitch,
which is reflected in unusual charges in the accompanying
consolidated statement of income for 1998. In the year ended
December 31, 1993, the Company recorded a charge of $1,559
which included the estimated clean up costs at this Site. The
Company's reserve for remediation costs as of August 31, 1998
was $1,082. In management's view, this amount is adequate to
cover the expected remediation activities at the wood pitch
Site.
<PAGE>
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 and there can be no assurance that any amount will be
recovered.
CHANGE IN CHIEF EXECUTIVE OFFICER
In October 1997, the Company recorded a $500 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. In October
1998, Stephen M. O'Hara was named Chairman and Chief Executive
Officer of Rawlings.
NOTE 6. SUPPLEMENTAL INCOME STATEMENT INFORMATION
Set forth below is a comparative summary of certain net revenue
and expense items:
1998 1997 1996
Licensing revenues $5,870 $6,531 $6,880
Royalty and licensing expenses 6,121 5,028 5,536
Operating lease expenses 2,184 2,300 2,426
NOTE 7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
August 31, 1998 1997
Salary, benefits and other taxes $ 4,670 $3,400
Royalties 1,975 2,187
Payable to former parent 1,346 1,346
Environmental 1,082 893
Other 3,474 2,075
Accrued liabilities $12,547 $9,901
NOTE 8. INCOME TAXES
The income tax provision (benefit) is as follows:
1998 1997 1996
Current:
Federal $ 724 $ 472 $ 564
State and other 117 98 67
Total current 841 570 631
Deferred:
Federal 1,184 2,464 1,658
Foreign (281) -- --
State and other 116 178 199
Total deferred 1,019 2,642 1,857
Total income tax
provision $1,860 $3,212 $2,488
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:
1998 1997 1996
Amount % Amount % Amount %
Expected provision $1,932 35.0 $3,039 35.0 $2,716 35.0
at the statutory
rate
State and other 232 4.2 365 4.2 326 4.2
taxes, net of
federal tax
benefit
Lower tax rates
on foreign income (265) (4.8) (118) (1.4) (554) (7.1)
Other (39) (0.7) (74) (0.8) -- --
Total income tax
provision $1,860 33.7 $3,212 37.0 $2,488 32.1
<PAGE>
The significant components of deferred taxes which are included
in the accompanying balance sheets are as follows:
1998 1997
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
Intangible assets $22,440 $ -- $23,837 $ --
Operating loss
carryforward 316 -- 128 --
Foreign tax
credits 851 -- 1,042 --
Receivable
reserve 157 -- 647 --
Environmental
reserve 410 -- 346 --
Inventory 718 -- 609 --
Other accruals 1,442 -- 904 --
Other 433 1,500 -- 1,227
Total $26,767 $ 1,500 $27,513 $ 1,227
The Company believes a valuation allowance against deferred
income tax assets as of August 31, 1998 is not necessary. The
Company's net operating loss carryforward expires in 2013 and
the foreign tax credits expire in 2000 to 2003. Income taxes
have not been provided on the undistributed income
(approximately $2,330) of a foreign subsidiary which the
Company does not intend to be remitted to the U.S.
NOTE 9. LONG-TERM DEBT
Long-term debt consists of the following:
August 31, 1998 1997
Credit agreement with banks due
2003, average interest rate
of 6.64% and 6.78%, respectively $56,850 $32,350
Obligation under capital lease,
average interest rate of 4.90% 259 323
Total debt 57,109 32,673
Less current maturities of long-
term debt (61) (59)
Total long-term debt $57,048 $32,614
In 1997, the Company maintained a $72,000 variable rate
unsecured credit agreement with a bank group. 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 1, 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. In June 1998, the
Company amended the credit agreement to, among other matters,
exclude the unusual charges from the minimum fixed charge
coverage covenant. The Company is in compliance with the
amended covenants. 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.
As of August 31, 1998 the Company had outstanding letters of
credit of $3,948 and available borrowing capacity of $29,202
under the credit agreement with banks.
In October 1995 the Company entered into a two-year interest
rate swap agreement with a commercial bank under which the
Company received a floating rate based on three month LIBOR
through September 1997 on $25,000 and paid a fixed rate of 6.50
percent. 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 7.00
percent. These transactions effectively convert a portion of
the Company's debt from a floating rate to a fixed rate.
The Company uses interest rate swaps, with the objective of
reducing exposure to increases in short-term interest rates, by
fixing the interest rate on a portion of its debt for a period
of time. The interest differential, to be paid or received on
an interest rate swap, is recognized as an adjustment to
interest expense as the differential occurs.
<PAGE>
NOTE 10. OTHER LONG-TERM LIABILITIES
In July 1994, Figgie International, Inc. (the former parent)
transferred the net assets of the Rawlings business to the
Company. The assets and liabilities transferred to Rawlings
were 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. 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 percent 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 amount of the obligation to pay
the former parent that is not expected to be paid in the next
year is recorded as other long-term liabilities.
NOTE 11. EMPLOYEE BENEFITS
COMPANY-SPONSORED DEFINED CONTRIBUTION PLANS
Beginning December 1, 1994, substantially all U.S. salaried
employees and certain U.S. 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 $327, $242 and $299 in 1998,
1997 and 1996, respectively.
MULTI-EMPLOYER PENSION PLANS
Certain union employees participate in multi-employer defined
benefit pension plans. Contributions to the plans were $194,
$201 and $186 in 1998, 1997 and 1996, respectively.
NOTE 12. STOCK OPTIONS
The 1994 Rawlings Long-Term Incentive Plan, as amended (the
1994 Incentive Plan), provides for the issuance of up to
1,125,000 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.
The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No.123, "Accounting
for Stock-Based Compensation." Accordingly, no compensation
cost has been recognized for the stock option plans. Had
compensation cost for the Company's stock option plans been
determined based on the fair value at the grant date for awards
in 1998, 1997 and 1996 consistent with the provisions of this
statement, the Company's net income and net income per share
would have been as follows (in thousands, except net income per
share):
1998 1997 1996
Net income $2,956 $4,910 $4,659
Net income per share $ 0.38 $ 0.64 $ 0.61
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1998,
1997 and 1996: dividend yield of 0 percent, expected volatility
of 40.0 percent, 54.0 percent and 54.0 percent in 1998, 1997
and 1996, respectively, risk-free interest rate of 5.4 percent,
6.4 percent and 6.1 percent in 1998, 1997 and 1996,
respectively and expected life of six years.
<PAGE>
Option activity is as follows:
1998 1997 1996
Outstanding at
beginning of year 631,137 483,185 346,610
Granted 178,000 160,378 192,125
Exercised (44,548) (1,000) --
Cancelled (153,779) (11,426) (55,550)
Outstanding at end
of year 610,810 631,137 483,185
Shares exercisable 313,899 327,541 175,077
Price of stock
options:
Granted $11.88-$13.63 $8.31-$12.13 $7.88-$ 9.94
Exercised $ 9.00-$ 9.75 $ 8.00 --
Cancelled $ 9.00-$13.63 $9.00-$ 9.75 $9.00-$13.88
Outstanding $ 7.88-$13.88 $7.88-$13.88 $7.88-$13.88
At August 31, 1998, 518,642 shares of Rawlings common stock
were available for future awards under the plans.
NOTE 13. WARRANTS
In November 1997, the Company issued warrants to purchase
925,804 shares of common stock at $12.00 per share 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 percent 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 14. 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 percent ownership interest. In December 1995, the
director sold his 40 percent ownership interest in the office
space. Lease payments made during the period the outside
director maintained an ownership interest in the building were
$233 in 1996.
NOTE 15. COMMITMENTS AND CONTINGENCIES
Future minimum payments under noncancelable leases, royalty and
licensing agreements as of August 31, 1998 are as follows:
Royalty and
Operating Licensing
Leases Agreements
Fiscal 1999 $1,167 $ 3,697
Fiscal 2000 917 2,974
Fiscal 2001 283 2,681
Fiscal 2002 80 2,383
Fiscal 2003 -- 65
Thereafter -- 237
Total minimum lease
payments $2,447 $12,037
One customer's purchases of products sold by Rawlings are 12
percent, 12 percent and 11 percent of net revenues of Rawlings
for 1998, 1997 and 1996, respectively.
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 wood pitch located at its facility in Dolgeville, New York.
(See Note 5 Unusual Charges for additional discussion of the
Dolgeville environmental matter.)
Rawlings is periodically subjected to product liability claims
and proceedings involving its patents and other legal
proceedings; such proceedings have not had a material adverse
effect on Rawlings.
In the opinion of management, ultimate liabilities resulting
from pending environmental matters and other legal proceedings
will not have a material adverse effect on the financial
condition or results of operations of Rawlings.
<PAGE>
STOCKHOLDER INFORMATION
CORPORATE OFFICE
Rawlings Sporting Goods Company, Inc.
1859 Intertech Drive
Fenton, Missouri 63026
(314) 349-3500
Visit our website at www.rawlings.com
ANNUAL AND 10-K REPORTS
Copies of the Company's annual report on Form 10-K and
quarterly reports an Form 10-Q, as filed with the Securities
and Exchange Commission, are available free of charge upon
request. Write to:
Rawlings Sporting Goods Company, Inc.
Investor Relations
1859 Intertech Drive
Fenton, Missouri 63026
STOCK EXCHANGE LISTING
Rawlings' Common Stock is quoted on the Nasdaq National Market
System under the symbol RAWL. As of August 31, 1998, there
were 630 shareholders of record.
COMMON STOCK HIGH LOW CLOSE
1998 4th Qtr. $16 1/2 $ 8 7/8 $ 9
3rd Qtr. 15 5/8 11 5/8 15 3/8
2nd Qtr. 12 1/4 10 3/8 11 7/8
1st Qtr. 11 5/8 9 3/4 11 1/8
1997 4th Qtr. $10 3/4 $ 7 7/8 $10 9/16
3rd Qtr. 10 1/2 7 3/4 8 3/4
2nd Qtr. 14 1/8 7 5/8 9
1st Qtr. 10 3/8 7 5/8 7 7/8
The Company has paid no dividends.
STOCKHOLDER INQUIRIES
Communications concerning stockholder records, including
changes of address, should be directed to our transfer agent
and registrar:
ChaseMellon Shareholder Services
Record Keeping Services
P.O. Box 3315
South Hackensack, New Jersey 07606-1915
(888) 213-0965
Security analysts, investment professionals and stockholders
should direct their financial inquiries to:
Rawlings Sporting Goods Company, Inc.
Investor Relations
1859 Intertech Drive
Fenton, Missouri 63026
(314) 349-3500
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1010 Market Street
St. Louis, Missouri 63101
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services
Record Keeping Services
P.O. Box 3315
South Hackensack, New Jersey 07606-1915
EXHIBIT 21
RAWLINGS SPORTING GOODS COMPANY, INC.
Rawlings Sporting Goods Company, Inc., a Delaware corporation
(the "Company") is the parent. The subsidiaries of the Company,
each of which is wholly-owned by the Company, are as follows:
Jurisdiction of Incorporation
Name or Organization
Rawlings de Costa Rica Costa Rica
Rawlings Sporting Goods Company Missouri
of Missouri
Rawlings Canada, Inc. Nova Scotia
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, 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 and Registration
Statement No. 33-86354.
/s/ Arthur Andersen
St. Louis, Missouri
November 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED AUGUST 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> AUG-31-1998
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<ALLOWANCES> 2,043
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<PP&E> 26,667
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<TOTAL-ASSETS> 132,532
<CURRENT-LIABILITIES> 21,655
<BONDS> 66,625
0
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<COMMON> 78
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<TOTAL-LIABILITY-AND-EQUITY> 132,532
<SALES> 170,604
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