FENTON, Mo., Jan. 9 /PRNewswire-FirstCall/ -- Rawlings Sporting Goods Company, Inc. (Nasdaq: RAWL) announced today first quarter fiscal year 2003 operating results for the three months ended November 30, 2002. Earnings per share (EPS) for first quarter fiscal year 2003 improved to a loss of ($0.08) versus a loss of ($0.10) in first quarter fiscal year 2002. Net loss for first quarter fiscal year 2003 was $0.7 million compared to a loss in first quarter fiscal year 2002 of $0.8 million. Because of the seasonal nature of Rawlings' business, the Company typically reports losses in its first and fourth quarters. Rawlings' first quarter fiscal year 2003 sales were $30.0 million, down 10.3% from first quarter fiscal year 2002 sales of $33.4 million. The sales decline primarily reflected the loss of NCAA basketball sales and a drop in low-end football sales. These declines were partially offset by stronger baseball and softball equipment sales versus a year ago. Gross profit for first quarter fiscal year 2003 was $8.9 million, down 5.3% from the first quarter fiscal year 2002 of $9.4 million. Gross profit margin for first quarter 2003 was 29.9% versus 28.3% for first quarter fiscal 2002. Improvements in gross margin percentage on baseball equipment, footballs and apparel drove this increase. Selling, general and administrative (SG&A) expenses in first quarter fiscal year 2003 were $9.5 million, down 5.7% from first quarter fiscal year 2002 of $10.0 million. Royalty expense reductions represented most of this decrease. Continuing the debt reduction trend from prior fiscal years, Rawlings bank debt net of cash at the end of first quarter fiscal year 2003 was $39.4 million, down 12.8% from $45.2 million at the end of first quarter fiscal year 2002. Commenting on the results, Steve O'Hara, Chairman and CEO, noted, "We are pleased that the forecasted gross profit margin improvements and expense reductions materialized as expected, enabling us to improve earnings despite the drop in sales. We are encouraged that our core baseball and softball sales continue to grow as anticipated. We continue to expect significant earnings improvements in fiscal year 2003 from our cost reduction efforts on basically flat sales, as baseball and softball revenue gains offset declines in other categories." Mr. O'Hara continued, "We continue to move forward with our previously announced merger plans with K2, Inc. and expect to file soon a joint proxy statement as part of K2's registration statement on Form S-4, as well as our pre-merger notification under the Hart Scott Rodino Act." Rawlings is a leading marketer and manufacturer of baseball equipment in the United States. Rawlings is the official baseball of Major League Baseball and the NCAA baseball Championships. Over half of all Major League players use a Rawlings glove, including such stars as Derek Jeter, Alex Rodriquez, Ken Griffey, Jr., and Pedro Martinez. Over one third of all Major League players use a Rawlings bat. Rawlings is also a leading marketer of basketballs, footballs, and team apparel, including the new patented Rawlings Ten basketball, a new ten seam basketball to provide greater ball control, and the new patented Rawlings VR5 football, a 5 panel football for better handling. Rawlings announced previously that a conference call would be held at 4:00 p.m. CST on Thursday, January 9, 2003 to discuss first quarter results. The dial in number is (800) 450-0821 in the United States and (612) 332-0820 internationally. Participants should ask for the Rawlings First Quarter Earnings Release conference call. A replay of the call may be heard by calling (800) 475-6701 in the United States and (320) 365-3844 internationally and using the access code 670149. The replay will be available through February 9, 2003. Certain information contained in this press release are forward looking statements that involve risks and uncertainties such as the Company's plan to: achieve targeted sales and gross margin levels, reduce expenses through various actions, improve operating income, increase EBITDA and earnings per share, improve the Company's balance sheet by reducing indebtedness or other means, execute new plans successfully, and successfully complete the planned merger with K2, Inc. It is important to note that actual results could differ materially from those expressed in such forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the ability of the Company to deliver planned results, changes in customer buying patterns, a general economic slowdown, changes in retail sell rates for the Company's products, changes in the Company's financial position, changes in the competitive environment and any other material adverse changes in Rawlings' or K2's businesses. Other risks and uncertainties are detailed from time to time in the Company's SEC filings, including the Company's Report on Form 10-K for the year ending August 31, 2002. Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Statements of Income (Amounts in thousands, except per share data) (Unaudited) Quarter Ended November 30, 2002 2001 Net revenues $29,974 $33,408 Cost of goods sold 21,026 23,963 Gross profit 8,948 9,445 Selling, general and administrative expenses 9,459 10,029 Operating loss (511) (584) Interest expense 533 634 Loss before income taxes (1,044) (1,218) Benefit for income taxes (386) (420) Net loss $(658) $(798) Net loss per common share, basic and diluted $(0.08) $(0.10) Shares used in computing per share amounts: Basic 8,138 8,080 Assumed exercise of stock options 46 - Diluted 8,184 8,080 Rawlings Sporting Goods Company, Inc. and Subsidiaries Consolidated Balance Sheets (Amounts in thousands, except share data) November 30, August 31, November 30, 2002 2002 2001 (Unaudited) (Unaudited) Assets Current assets: Cash and cash equivalents $268 $603 $913 Accounts receivable, net of allowance of $2,940, $2,861 and $3,055 respectively 28,735 24,107 31,500 Inventories 40,879 31,796 42,476 Deferred income taxes 3,115 3,115 4,277 Prepaid expenses 975 396 462 Total current assets 73,972 60,017 79,628 Property, plant and equipment 7,637 7,742 7,446 Deferred income taxes 22,394 21,983 22,816 Long-term receivables 417 417 - Other assets 1,570 1,674 2,054 Total assets $105,990 $91,833 $111,944 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt and revolving credit agreement $36,988 $27,037 $42,122 Accounts payable 12,789 7,689 17,475 Accrued liabilities 9,708 9,613 8,465 Total current liabilities 59,485 44,339 68,062 Long-term debt, less current maturities 2,673 2,941 3,975 Other long-term liabilities - - 9,291 Total liabilities 62,158 47,280 81,328 Stockholders' equity: Preferred stock, none issued - - - Common stock, 8,088,656; 8,088,656 and 8,030,249 shares issued and outstanding, respectively 81 81 80 Additional paid-in capital 39,742 39,742 31,216 Stock subscription receivable - - (1,421) Cumulative other comprehensive loss (1,680) (1,617) (1,549) Retained earnings 5,689 6,347 2,290 Stockholders' equity 43,832 44,553 30,616 Total liabilities and stockholders' equity $105,990 $91,833 $111,944
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