8-K 1 q220018k.txt 2ND QUARTER 2001 8-K PRESS RELEASE C:\WINDOWS\TEMP\0106 Results.doc UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) August 10, 2001 SPALDING HOLDINGS CORPORATION (Exact name of registrant as specified in its charter) Delaware 333-14569 59-2439656 (State or other jurisdiction of (Commission (I.R.S. Employer Incorporation or Organization) File Number) Identification No.) 425 Meadow Street, Chicopee, Massachusetts 01013 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (413) 536-1200 Item 5. Other Events Spalding Holdings Corporation issued a press release dated August 3, 2001 to report financial results for the three and six fiscal months ended June 30, 2001 ("2001 First Quarter and 2001 Six Months"). Item 7. Financial Statements and Exhibits (c) The following is filed as an Exhibit to this Report Exhibit No. Description of Exhibit 99.1 Press release announcing 2001 Second Quarter Results Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Spalding Holdings Corporation (Registrant) By: /s/ Daniel S. Frey ----------------------- Daniel Frey Chief Financial Officer (an officer and authorized signatory) Date: August 10, 2001 Exhibit 99.1 News Release 425 Meadow Street Daniel S. Frey Chicopee, MA 01013 Chief Financial Officer (413) 536-1200 SPALDING HOLDINGS CORPORATION Announces 2001 Second Quarter Results Chicopee, Massachusetts, August 3, 2001 - Spalding Holdings Corporation (the "Company"), the parent of Spalding Sports Worldwide, Inc. ("Spalding"), today reported earnings for the second quarter ended June 30, 2001 ("2001 Second Quarter") and the six months ended June 30, 2001 ("2001 Six Months"). Higher Sales and Income Despite Difficult Business Environment -------------------------------------------------------------- Driven by innovative new products and lower operating costs, Spalding achieved higher net sales and operating income for both the 2001 Second Quarter and 2001 Six Months. These results occurred despite a difficult business environment including a decrease in rounds of golf played, weaker than expected foreign currency rates and increased competition in the golf market. Net Sales Increase 8% --------------------- Spalding's net sales grew 8% to $139.0 million during the 2001 Second Quarter compared to the second quarter ended July 1, 2000 ("2000 Second Quarter"). Excluding the translation impact of weaker foreign currencies, net sales grew 10%. This growth was driven by increases in both the Company's golf and sporting goods product lines. Increased sales of premium golf balls and golf clubs contributed to the increase in the golf product line during the 2001 Second Quarter as compared to the 2000 Second Quarter. Strong consumer response to the new Strata(R) Tour Ultimate(TM) premium golf ball, Ben Hogan(R) Apex Edge(TM) irons and Top-Flite(R) XL 2000(TM) irons drove this increase as compared to the 2000 Second Quarter. In sporting goods, basketball sales achieved significant growth led by sales of the Spalding(R) Infusion(TM) basketball. This innovative new basketball has a built-in micro pump to enable consumers to properly inflate the ball "anytime, anywhere" without the hassle of finding a separate pump and needle. The Company's net sales for the 2001 Six Months increased $11.3 million, or 5%, to $247.0 million compared to the six months ended July 1, 2000 ("2000 Six Months"). Excluding the translation impact of weaker foreign currencies, net sales grew 7%. Higher Operating Income for the Seventh Consecutive Quarter ----------------------------------------------------------- Income from operations improved for the seventh consecutive quarter as compared to the corresponding quarter of the prior year. The aforementioned increase in net sales and a planned reduction in selling, general and administrative expenses were the key factors responsible for the higher operating income. Operating income reached $22.0 million in the 2001 Second Quarter, up 2% from the 2000 Second Quarter. For the 2001 Six Months, operating income increased 7% to $30.1 million. Record Level of Quarterly Net Income ------------------------------------ Net income for the 2001 Second Quarter reached $5.8 million, up 42% from the 2000 Second Quarter. This represents the highest level of net income for any quarter since the Company's reorganization (in which it was separated from Evenflo Company, Inc.) in August 1998. For the 2001 Six Months, the increase in income from operations was offset by an increase in interest expense and currency losses as compared to the prior year, resulting in a net loss of $2.1 million as compared to a net loss of $1.7 million in the 2000 Six Months. Adjusted EBITDA Increases 5% ---------------------------- Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, extraordinary items, noncash and nonrecurring items and net currency gains/losses. Adjusted EBITDA is included as a basis upon which the Company assesses its financial performance, and certain covenants in the Company's borrowing arrangements are tied to this measure. Adjusted EBITDA was up 5%, to $26.0 million for the 2001 second quarter as compared to $24.8 million for the 2000 second quarter. For the 2001 Six Months, Adjusted EBITDA was up 4% to $38.2 million as compared to $36.9 million for the 2000 Six Months. Jim Craigie, Spalding's President & CEO stated, "Spalding's strong second quarter and year-to-date results in a very difficult business environment demonstrate our ability to drive sales growth through innovative technology, while simultaneously lowering operating costs. This two pronged strategy will be the key to Spalding's transformation into one of the premier consumer products companies in the sporting goods industry." Liquidity --------- The Company believes that its existing credit facilities, together with cash generated from operations, will be sufficient to fund the Company's business needs. There can be no assurance, however, that measures implemented by the Company will be successful to the extent necessary for the Company to remain current on its obligations or that the Company will remain in compliance with the covenants in its credit facility. Availability under the Company's U.S. credit facilities was $25.6 million at June 30, 2001. Founded in 1876, Spalding is a leading manufacturer and licensor of branded consumer products serving the golf and sporting goods markets under the Spalding(R), Top-Flite(R), Ben Hogan(R), Strata(R), Etonic(R) and Dudley(R) brand names. Headquartered in Chicopee, Massachusetts, Spalding markets a broad range of professional quality recreational and athletic goods, including products used in golf, basketball, softball, volleyball, soccer and football. Certain matters discussed in this press release are forward-looking statements based on the Company's current expectations and estimates as to prospective events about which the Company can give no firm assurance. These forward-looking statements are based on management's expectations as of the date hereof, and the Company does not undertake any responsibility to update any of these statements in the future. Actual future performance and results could differ from that contained in or suggested by these forward-looking statements as a result of the factors set forth in filings with the Securities and Exchange Commission. See Spalding Holdings Corporation's cautionary statement relating to forward-looking statements filed with the Securities and Exchange Commission on Form 8-K on November 7, 2000. SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS For the three and six fiscal months ended June 30, 2001 and July 1, 2000 (Dollar amounts in thousands)

~~Exhibit~~(Unaudited) No(Unaudited) Three Months Ended Six Months Ended ------------------ ---------------- June 30, July 1, June 30, July 1, 2001 2000 2001 2000 ---- ---- ---- ---- Net sales......................................................... ~~Description~~$139,006 $128,648 $246,997 $235,651 Cost of ~~Exhibit~~sales.................................................. 9971,972 60,006 130,677 113,753 ------ ------ ------- ------- Gross profit...................................................... 67,034 68,642 116,320 121,898 Selling, general and administrative expenses................... 47,268 49,965 91,130 98,820 Royalty income, net............................................ (2,188) (2,876) (4,898) (5,141) ------ ------ ------ ------ Income from operations............................................ 21,954 21,553 30,088 28,219 Interest expense, net.......................................... 14,984 14,828 30,875 29,476 Currency (gain) loss, net...................................... (805) 734 1,875 ~~Press~~1,312 ~~release~~---- ~~announcing~~--- ~~2001~~----- ~~First~~----- ~~Quarter~~Income ~~Results~~(loss) before income taxes................................. 7,775 5,991 (2,662) (2,569) Income tax expense (benefit)................................... 2,010 1,918 (599) (905) ----- ----- ---- ---- Net income (loss) ................................................ $5,765 $4,073 $(2,063) $(1,664) ====== ====== ======= =======

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