-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tz+dFnjmoHagIM5Gjgac6yGn4RGWB/LrR2sm19mpv9QtPqlMtQY8i3GXpBRo34f+ CHP3L5i4pleBWwZUa21QIQ== 0000897069-98-000407.txt : 19980813 0000897069-98-000407.hdr.sgml : 19980813 ACCESSION NUMBER: 0000897069-98-000407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAYCORE INC CENTRAL INDEX KEY: 0000888916 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 363808989 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20450 FILM NUMBER: 98683344 BUSINESS ADDRESS: STREET 1: 1212 BARBERRY DRIVE CITY: JANESVILLE STATE: WI ZIP: 53545 BUSINESS PHONE: 6087554777 FORMER COMPANY: FORMER CONFORMED NAME: SWING N SLIDE CORP DATE OF NAME CHANGE: 19950721 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-20450 PlayCore, Inc. (Exact name of registrant as specified in its charter.) Delaware 36-3808989 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1212 Barberry Drive, Janesville, Wisconsin 53545 (Address of principal executive office) Registrant's telephone number, including area code (608) 755-4768. 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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date: as of August 7, 1998 there were 7,908,964 shares of Common Stock, par value, $.01 per share, outstanding. PLAYCORE, INC. FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1998 INDEX Part I. Financial Information: Page Unaudited Consolidated Balance Sheets - December 31, 1997 and June 30, 1998 3 Unaudited Consolidated Interim Statements of Operations and Retained Earnings - Three Months Ended June 30, 1997 4 Six Months Ended June 30, 1997 Three Months Ended June 30, 1998 and Six Months Ended June 30, 1998 Unaudited Consolidated Interim Statements of Cash Flows- Six Months Ended June 30, 1997 and 5 Six Months Ended June 30, 1998 Notes to Unaudited Interim Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 Part II. Other Information Item 4 Submissions of Matters to Vote Item 6 Exhibits and Reports on Form 8-K 11 Signature 12 PlayCore, Inc. Consolidated Balance Sheets (unaudited) (in thousands, except share data) December 31, June 30, ASSETS 1997 1998 Current assets: Cash $ 677 $ 1,226 Accounts receivable, less allowance for doubtful accounts of $407 and $469 13,295 23,902 Other receivables 162 2,559 Inventories 12,533 11,793 Refundable income taxes 1,157 - Prepaid expenses 1,586 2,445 Deferred income taxes 765 765 ------- ------- Total current assets 30,175 42,690 Property, plant and equipment, net 20,535 20,645 Deferred financing and other costs, net of accumulated amortization of $868 and $1,201 3,639 3,356 Identifiable intangible assets, net of accumulated amortization of $527 and $686 6,909 6,752 Goodwill, net of accumulated amortization of $4,049 and $4,598 39,907 39,978 -------- -------- $ 101,165 $ 113,421 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving loan $ 7,615 $ 15,160 Accounts payable 5,949 6,529 Accrued income taxes - 1,643 Accrued expenses 9,396 10,771 Current portion of long-term debt 9,457 6,847 -------- -------- Total current liabilities 32,417 40,950 Long-term debt, net of current portion 49,590 47,170 Convertible subordinated debentures payable to stockholders 5,869 6,161 Deferred income taxes 1,595 2,395 Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued or outstanding - - Common stock, $.01 par value, 25,000,000 shares authorized, 11,542,268 and 11,543,349 shares issued 115 115 Class B common stock, $.01 par value, 1,750,000 shares authorized, no shares issued or outstanding - - Additional paid-in capital 37,518 37,524 Excess purchase price over predecessor basis (5,627) (5,627) Retained earnings 20,199 25,244 Less 3,634,385 common shares held in treasury, at cost (40,511) (40,511) -------- -------- Total stockholders' equity 11,694 16,745 -------- -------- $ 101,165 $ 113,421 Note: The consolidated balance sheet at December 31, 1997 has been derived from the audited consolidated balance sheet at that date. See notes to interim consolidated financial statements PlayCore, Inc. Consolidated Interim Statements of Operations and Retained Earnings (unaudited) (in thousands, except per share amounts)
Three months Six months Three months Six months ended ended ended ended June 30, June 30, June 30, June 30, 1997 1997 1998 1998 Net sales $ 34,923 $ 45,772 $ 36,856 $ 62,113 Cost of goods sold 17,187 23,066 17,880 31,547 -------- -------- -------- -------- Gross profit 17,736 22,706 18,976 30,566 Operating expenses: Selling 5,630 7,746 6,193 12,138 General and administrative 2,339 4,061 2,197 5,157 Amortization of intangible assets 527 871 518 1,037 ------- -------- -------- -------- 8,496 12,678 8,908 18,332 Operating income 9,240 10,028 10,068 12,234 Other expense: Interest expense 2,277 3,502 2,023 3,948 Other, net 39 55 64 136 ------- ------- -------- ------- Total other expense 2,316 3,557 2,087 4,084 ------- ------- -------- ------- Income before income taxes and extraordinary item 6,924 6,471 7,981 8,150 Income tax expense 2,633 2,462 3,045 3,105 ------- -------- -------- --------- Income before extraordinary item 4,291 4,009 4,936 5,045 Extraordinary item, net of income tax benefit of $540 - 860 - - ------- ------- -------- -------- Net income 4,291 3,149 4,936 5,045 Retained earnings at beginning of period 17,880 19,022 20,308 20,199 ------- -------- -------- -------- Retained earnings at end of period $ 22,171 $ 22,171 $ 25,244 $ 25,244 ======= ======== ======== ======== Basic earnings per share: Income before extraordinary item $ 0.61 $ 0.60 $ 0.62 $ 0.64 Extraordinary loss - (0.13) - - ------- -------- -------- -------- Net income $ 0.61 $ 0.47 $ 0.62 $ 0.64 ======= ======== ======== ======== Diluted earnings per share: Income before extraordinary item $ 0.49 $ 0.50 $ 0.51 $ 0.53 Extraordinary loss - (0.10) - - -------- -------- -------- -------- Net income $ 0.49 $ 0.40 $ 0.51 $ 0.53 ======== ======== ======== ========
See notes to interim consolidated financial statements PlayCore, Inc. Consolidated Interim Statements of Cash Flows (unaudited) (in thousands) Six months Six months ended ended June 30, June 30, 1997 1998 Operating activities Net income $ 3,149 $ 5,045 Adjustments to reconcile net income to net cash provided by operating activities: Write-off of unamortized deferred financing costs 1,400 - Amortization of debt discount 106 182 Deferred income taxes 430 800 Depreciation 847 1,222 Amortization of intangible assets 871 1,037 Interest converted to convertible subordinated debentures 265 292 Changes in operating assets and liabilities (6,406) (8,488) ------- -------- Net cash provided by operating activities 662 90 Investing activities Purchase of property, plant and equipment (675) (1,290) Acquisitions, net of cash acquired (42,566) (590) -------- -------- Net cash used by investing activities (43,241) (1,880) Financing activities Increase in revolving loan 6,695 7,545 Issuances of long-term debt 63,777 - Debt issuance costs incurred (3,027) - Proceeds from issuance of commom stock warrants 2,723 - Proceeds from issuance of common stock, net of offering costs 4,550 6 Payments of long-term debt (31,571) (5,212) -------- --------- Net cash provided by financing activities 43,147 2,339 Increase in cash 568 549 Cash at beginning of period 1 677 -------- --------- Cash at end of period $ 569 $ 1,226 ======== ========= Supplemental disclosure of cash flows information-cash paid (received) during period for: Interest $ 1,972 $ 2,754 Income taxes, net of refunds received 369 (520) See notes to interim consolidated financial statements Notes to Interim Consolidated Financial Statements Unaudited (in thousands) June 30, 1998 1. Basis of presentation of unaudited consolidated financial statements The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for year end financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. 2. Earnings per share The following table sets forth the computation of basic and diluted earnings per share:
Three months Six months Three months Six months ended June 30, ended June 30, ended June 30, ended June 30, 1997 1997 1998 1998 Numerator: Numerator for basic and diluted earnings per share - income before extraordinary item $ 4,291 $ 4,009 $ 4,936 $ 5,045 Effect of diluted securities - 10% convertible subordinated debentures 86 167 95 183 --------- --------- --------- --------- Numerator for diluted earnings per share $ 4,377 $ 4,176 $ 5,031 $ 5,228 ========= ========= ========= ========= Denominator: Denominator for basic earnings per share - weighted average shares 7,091 6,665 7,909 7,909 Effect of diluted securities: Employee stock options (treasury stock method) 37 37 87 54 Warrants 592 359 624 622 10% convertible subordinated debentures 1,155 1,132 1,274 1,248 -------- -------- --------- --------- Denominator for diluted earnings per share 8,875 8,193 9,894 9,833 ======== ======== ========= ========= Inventories Inventories consist of the following: December 31, June 30, 1997 1998 Finished goods and work in process $ 7,112 $ 6,477 Raw materials 5,421 5,316 -------- -------- $ 12,533 $ 11,793 ======== ========
Management's Discussion and Analysis of Financial Condition and Results of Operations Special Note Regarding Forward-Looking Statements Certain matters discussed herein are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those currently anticipated. Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward- looking statements. The forward-looking statements made herein are only made as of the date of this report and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Results of Operations: On March 13, 1997, the Company acquired GameTime, Inc. (GameTime), a leading manufacturer of modular and custom commercial outdoor playground equipment for schools, parks and municipalities. GameTime was merged into Newco, Inc. the Company's wholly owned operating subsidiary, as an independent business unit. The acquisition of GameTime was accounted for using the purchase method. Therefore, the results of GameTime are included with those of the Company beginning with the date of the acquisition. In April 1998, the Company changed its name to PlayCore, Inc. from Swing-N- Slide Corp. Three Months Ended June 30, 1998, Compared to the Three Months Ended June 30, 1997. Net Sales. Net sales increased $1.9 million, or 5.5 percent, to $36.8 million for the three months ended June 30, 1998 as compared to $34.9 million for the same period a year ago. The increase is primarily due to the growth in sales of commercial playground equipment driven by new safety standards and an expanding economy. Gross Profit. Gross profit increased $1.3 million, or 7.0 percent, to $19.0 million and increased as a percentage of net sales to 51.5 percent for the three months ended June 30, 1998 as compared to $17.7 million and 50.8 percent for the same period a year ago. The impact of higher sales volume on fixed overhead costs and ongoing efficiency improvements led to the increase in gross profit margin. Selling Expense. Selling expense increased $0.6 million, or 10.0 percent, to $6.2 million and increased as a percentage of net sales to 16.8 percent for the three months ended June 30, 1998 as compared to $5.6 million and 16.1 percent for the three months ended June 30, 1997. The increase as a percentage of net sales primarily results from a greater percentage of commercial sales, which have higher selling costs as a percentage of net sales. General and Administrative Expenses. General and administrative expenses decreased $0.1 million, or 6.1 percent, to $2.2 million and decreased as a percentage of net sales to 6.0 percent for the three months ended June 30, 1998 as compared to $2.3 million and 6.7 percent for the same period a year ago. The main reason for the decrease as a percentage of net sales is the impact of higher sales volume on fixed general and administrative expenses. Amortization of Intangible Assets. Amortization of financing fees, goodwill and other identifiable intangible assets was $0.5 million for the three months ended June 30, 1998 and for the same period a year ago. Other Expense. Interest expense decreased $0.3 million to $2.0 million for the three months ended June 30, 1998. This decrease was primarily due to the pay down of $3.0 million on the Company's term note in 1997 and the pay-off of the $2.5 million Junior Subordinated Bridge Note on December 31, 1997. Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997. Net Sales. Net sales for the six months ended June 30, 1998 increased $16.3 million, or 35.7 percent, to $62.1 million as compared to $45.8 million for the same period in 1997. The main reason for the increase is the inclusion of GameTime sales for the entire first six months of 1998 versus the inclusion of GameTime sales from March 13 through June 30, 1997. Gross Profit. Gross profit increased $7.9 million, or 34.6 percent, to $30.6 million but decreased slightly as a percentage of net sales to 49.2 percent for the six months ended June 30, 1998 as compared to $22.7 million and 49.6 percent for the same period a year ago. The main reason for the decrease in gross profit margin is a greater percentage of sales of the Company's lower margin product categories. Selling Expense. Selling and marketing expenses increased $4.4 million, or 56.7 percent, to $12.1 million and increased as a percentage of net sales to 19.5 percent for the six months ended June 30, 1998 as compared to $7.7 million and 16.9 percent for the same period a year ago. The dollar increase is mainly due to the inclusion of GameTime's selling and marketing expenses for the full six months in 1998. The increase as a percentage of net sales is primarily due to the higher selling costs as a percentage of net sales inherent in the commercial playground area. General and Administrative Expenses. General and administrative expenses increased $1.1 million, or 27.0 percent, to $5.2 million but decreased as a percentage of sales to 8.3 percent for the six months ended June 30, 1998 as compared to $4.1 million and 8.9 percent for the six months ended June 30, 1997. The dollar increase is primarily due to the inclusion of GameTime general and administrative expenses for the entire first half of 1998. The main reason for the decrease as a percentage of net sales is the impact of higher sales volume on fixed general and administrative expenses. Amortization of Intangible Assets. Amortization of financing fees, goodwill and other identifiable intangible assets was $1.0 million for the six months ended June 30, 1998 as compared to $0.9 million for the same period a year ago. Additional amortization resulted from goodwill, identifiable intangible assets and financing fees associated with the GameTime acquisition. Other Expense. Interest expense increased $0.4 million to $3.9 million for the six months ended June 30, 1998. This increase in interest expense was due to the additional debt that was incurred in connection with the GameTime acquisition on March 13, 1997. Seasonality The Company's sales pattern is seasonal and is concentrated in the period from April 1 through September 30 (approximately 67 percent). The timing of initial stocking orders and fluctuations in customer demand through the spring and summer months contribute to this pattern. Liquidity and Capital Resources During the six months ended June 30, 1998, total indebtedness increased $2.8 million primarily as a result of increased levels of working capital. The Company expects that debt levels will decline over the second half of 1998 due to the shipment of inventories and collection of receivables. The Company's primary sources of working capital are cash flow from operations and borrowings under Newco's senior credit facility that was entered into in March 1997 and runs through June 2003. The facility consists of (a) a $20.0 million revolving credit facility; (b) a $45.0 million Term A facility and (c) a $4.5 million Term B facility. The entire facility is guaranteed by PlayCore, Inc. and secured by a first priority mortgage or security interest in all of Newco's tangible and intangible assets, as well as the pledge of all of the outstanding shares of Newco Common Stock. In addition, the Company and Newco are subject to certain restrictive covenants which include, among other things, restrictions on the payment of dividends and a limitation on additional indebtedness. Borrowings under the revolving loan facility are limited to specified percentages of inventories and accounts receivable, not to exceed $20.0 million. At June 30, 1998, the outstanding amount of the revolving loan facility was $15.2 million. The Company made capital expenditures totaling approximately $1.3 million in the six months ended June 30, 1998. The Company continues to evaluate opportunities for both internal and external growth and believes that funds generated from operations and its current and future capacity for borrowing will be sufficient to fund current business operations as well as future capital expenditures and growth opportunities. Impact of Year 2000 Certain of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, such older computer programs could misinterpret a date using "00" as the year 1900 rather than the year 2000. The computer software at Swing-N-Slide has been updated to address year 2000 issues. GameTime is in the process of updating its computer software and is expected to complete the updating process by the end of 1998. There is no assurance, however, that the Company will be successful in addressing all year 2000 issues or that the year 2000 issues will not cause problems for the Company or its suppliers or customers. PART II. OTHER INFORMATION ITEM 1. SUBMISSIONS OF MATTERS TO VOTE At the Company's annual meeting of stockholders held on June 4, 1998, Terence S. Malone, Frederic L. Contino, David S. Evans, George N. Herrera, Timothy R. Kelleher, Gary A. Massel and Caroline L. Williams were elected as directors of the Company for terms expiring in 1999. All directors were elected by 6,872,191 shares, with 158,617 shares withholding authority. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K None. SIGNATURE 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. Swing-N-Slide Corp. Date: August 11, 1998 /s/ Richard E. Ruegger Richard E. Ruegger, Vice President-Finance and Chief Financial Officer (Duly authorized officer and Principal Financial and Accounting Officer) Exhibit Index Page Exhibit No. Description 27 Financial Data Schedule EX-27 2
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1,226 0 23,902 469 11,793 42,690 28,348 7,703 113,421 40,950 53,331 0 0 115 16,630 113,421 62,113 62,113 31,547 18,332 136 55 3,948 8,150 3,105 5,045 0 0 0 5,045 .64 .53
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