10-K 1 c73252e10vk.txt FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 31, 2002. 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 Identification No.) of incorporation or organization) 1859 Bowles Avenue, Fenton, Missouri 63026 ------------------------------------------ -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (636) 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 October 31, 2002 was $44,164,062. The number of shares of the registrant's Common Stock, $.01 par value, outstanding as of October 31, 2002 was 8,088,656. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's proxy statement for the annual meeting of stockholders are incorporated by reference into Items 10, 11, 12 and 13 of Part III of this report TABLE OF CONTENTS

ii PART I ITEM 1. BUSINESS. General Rawlings Sporting Goods Company, Inc. ("Rawlings" or the "Company"), is the leading marketer and manufacturer of baseball equipment in North America and also is a leading supplier of other team sports equipment in North America and, through its licensee, of baseball equipment and uniforms in Japan. Under the Rawlings(R) brand name, the Company provides an extensive line of equipment and team uniforms for the sports of baseball, basketball and football. 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 baseball products, including the logos of Major League Baseball (MLB), All-Star Game and World Series games, and National Collegiate Athletic Association (the "NCAA"). In addition, Rawlings' products are endorsed by more than 35 college coaches, 28 sports organizations and numerous athletes, including approximately 700 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. Recent product innovations include the three-finger Vise glove and the ten panel (Ten) basketball. 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, team uniforms and various team sports accessories. In addition, licensees of the Company sell numerous products including athletic shoes, socks, and apparel, using the Rawlings(R) 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 2005 for the All-Star Game and World Series games. In 1999, Rawlings extended its exclusive rights to the National and American Leagues through 2005 and in 2000 amended this agreement to combine both league balls to one MLB ball. Since 1994, the Company has been the exclusive supplier of baseballs to 19 Minor Leagues with the agreement expiring in 2003. The Company is the leading supplier of baseball gloves to Major and Minor League players. 1 In 1999, Rawlings became the official supplier of baseballs for the NCAA baseball World Series and tournament with an agreement expiring in 2004. Since 1986, Rawlings had 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 under an agreement, that expired in August 2002 and was not renewed. In October, 2002 Rawlings became the official sponsor of the National Federation of State High School Associations (NFHS) for baseballs, softballs, basketballs, footballs, soccer balls, and volleyballs. Products and Markets The following is a summary of net revenues by principal product line for the three fiscal years ended August 31, 2002. Also, refer to Note 17 of the financial statements for additional information on the Company's operating segments. Net Revenues by Segment and Primary Product Category (Amounts in millions) (Unaudited)

Sports 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 approximately 138 styles, which are often customized to meet customer preferences. Its gloves range in retail price from $5.99 for beginners to more than $330.00 for the Pro Preferred(R) series introduced in 2000. Rawlings' Heart of the Hide(R) series and the Pro Preferred(R) series 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 2 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(R) pocket design featuring a modified web giving the appearance of a six-finger glove, the Fastback(R) closed back design, the Basket-Web(R) pocket design which features interwoven strips forming a natural break on the back to assist in closing the glove and the Pad Lock(TM) design which uses an adjustable inner cushion pad and velcro wrist strap to stabilize the hand inside the glove. In 2002 the Company introduced the Vise glove which has a three-finger design with an expanded pocket area which causes the glove to collapse around the ball. 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 to the professional baseballs that are sold to Major League Baseball teams. Rawlings' baseballs are systematically weighed, measured, tested and inspected to ensure that they meet Rawlings' quality standards. The Major League Baseball teams, 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. 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 and organizations including the NCAA, 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. Rawlings believes that it is the leading supplier of baseball protective equipment in North America. In 2001, the Company introduced the new 950 series of protective equipment, which molds the catcher's chest protector and leg guard to the catcher's body shape. 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. The Rawlings' line of wood bats is manufactured at its Dolgeville, New York facility under the Rawlings(R) and Adirondack(R) names. The Company has launched a line of aluminum baseball and softball bats, highlighted by its new 1050 series and slow-pitch Silverback bats. The Company has targeted aluminum bats for 3 aggressive growth in future years. The Company is also seeking growth in softballs and batter's gloves which are categories the Company believes it has substantial growth potential. Basketball, Football, Soccer and Volleyball. Rawlings sells 30 different models of basketballs, including full-grain, composite and synthetic leather and rubber basketballs for men and women in both the youth and adult markets. Rawlings recently introduced its patented Ten basketball which uses ten panels to improve handling, grip, control, and shooting. The Company is the official supplier of basketballs to the National Association of Intercollegiate Athletics and the National Junior College Athletic Association. Since 1986, Rawlings had 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 expired in August 2002 and was not renewed. Rawlings sells 28 different models of footballs, including full-grain and split leather, vinyl and rubber for both the youth and adult markets. In addition, the Company sells college football shoulder pads, other protective gear (other than football helmets) and accessories. Rawlings supplies the official football to the National Association of Intercollegiate Athletics. In October, 2002 Rawlings signed an agreement to be the official sponsor of NFHS basketballs, footballs, soccer balls, and volleyballs, as well as baseballs and softballs. The Company expects to promote the NFHS balls at retail. The Company has also recently launched new soccer ball and volleyball lines for retail sale and team use. Apparel. Rawlings has been selling team uniforms for approximately 100 years. Under an agreement with Major League Baseball, Rawlings is the official uniform for eight Major League Baseball teams and has the exclusive retail rights for authentic uniforms for these teams. The Company also sells uniforms to 80 Minor League teams. The Company determined that the cost of the Major League Baseball uniform contract was not an economically justifiable expense therefore the Company does not expect to renew the contract when it expires in December 2002. Apparel comprised 14.3 percent of the net revenues of the Company in the year ended August 31, 2002. Approximately 37 percent of the apparel revenues were from sales of custom uniforms, which are manufactured in the Company's Licking, Missouri facility. Rawlings has announced its intention to close the Licking facility in mid 2003 and move production to the Company's Costa Rica and Washington, Missouri facilities. Rawlings believes it has growth opportunities in its current team apparel business, as well as, in the larger active wear apparel market. The Company has recently reorganized its marketing team to better focus on building its apparel business. Miscellaneous. Rawlings derives other net revenues from its outlet store and from its leather tanning facility. The outlet store sells seconds, irregular quality, discontinued and overstocked items. Approximately 35 percent of the leather tanned at Rawlings' tanning facility is sold to third parties for use in a variety of products. 4 Licensing For the year ended August 31, 2002, the Company generated $5.5 million of licensing revenues on approximately $121 million of sales made by third parties in Japan, the United States and Italy of products on which the Rawlings(R) 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(R) 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 clothing sold in Japan. In 2000, the license with ASICS Corporation was expanded to include all active wear in Japan. In the United States, Rawlings currently has licensing agreements with 12 companies, which are using the Rawlings(R) brand name on various products including shoes, socks, games and toys, golf equipment, sports bags, apparel and baseball accessories. The Company also has a licensing agreement with a company in Italy selling activewear. The Company retains the right under its licensing agreements to sample and inspect all licensed products to ensure that products bearing the Rawlings(R) brand name meet the Company's quality standards. The Company intends to continue to license the Rawlings(R) 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. In July 2002 Rawlings entered into an agreement with Equity Management, Inc., a licensing management firm, to expand the Company's licensing line and manage the overall program. Foreign The Company's foreign net revenues constituted approximately 4.7 percent of its total net revenues in the year ended August 31, 2002. Rawlings currently distributes its products in more than 55 countries primarily through independent distributors. Of the Company's foreign net revenues in the year ended August 31, 2002, approximately $4.2 million, or 2.4 percent of total net sales, 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 Puerto Rico and various foreign countries. 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 4,700 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 Gart's and The Sports Authority) and mass merchandisers (such as Wal-Mart, Target and Kmart). In recent years, sales to sporting goods chains and mass merchandisers have accounted for an increasing 5 amount of the net revenues of Rawlings. Sales to the ten largest customers of Rawlings constituted approximately 43 percent of the total net revenues of Rawlings in the year ended August 31, 2002 including one customer (Wal-Mart) which accounted for approximately 17 percent of 2002 net revenues. The Company has 42 direct sales employees and six manufacturers' representatives who sell its products in the United States. The Company has two separate sales forces, one to serve larger retail accounts and one to service institutional dealers and local sporting goods stores. Sales in Canada are handled by seven manufacturers' representatives. In addition, seven employees directly 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 currently distributed from its facilities in Washington and Licking, Missouri; Dolgeville, New York; Tullahoma, Tennessee and Brantford, Ontario, Canada. The consolidation of the Company's distribution facilities formerly located in Springfield, Missouri to a single location in Washington, Missouri was completed in the fourth quarter of fiscal 2001. Distribution formerly at Ava, Missouri was consolidated into Washington in the first quarter of 2002 and distribution currently handled in Licking, Missouri is expected to be consolidated into Washington in 2003. The Company utilizes a variety of promotional techniques to build brand awareness. Since 1958, Rawlings has annually presented the Rawlings Gold Glove Award(R) to the best fielder at each position in each of the National and American Leagues. The Rawlings Gold Glove Award(R) 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 other promotional vehicles. 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. 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 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. 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: Major League Baseball Properties, Inc. (National League, American League, All-Star, World Series, Divisional Playoffs and League Championship Series games); the NCAA (baseball games); 19 Minor Leagues (Minor League games); the NFHS; 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 700 Major League Baseball players such as Ken Griffey Jr., Derek Jeter, Randy Johnson, Pedro Martinez, Alex Rodriquez and Sammy Sosa. The Company's basketball products carry 6 endorsements from approximately 24 college coaches including basketball's Lute Olson, Quin Snyder, and Kristy Curry. The Company's football products are endorsed by Peyton Manning of the Indianapolis Colts. 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, select 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 licensing agreements with Major League Baseball Properties, Inc. and the 19 Minor Leagues, under which Rawlings is licensed to produce the baseballs used in the Major League games, All-Star, World Series, Divisional Playoffs and League Championship Series games, the official baseballs for the Minor League games; the NCAA baseball contract, and the NFHS baseball, softball, basketball, football, soccer ball and volleyball contract, provide that the agreements will be subject to termination upon a change of control of Rawlings, as defined in the agreements, unless the change of control is approved by Major League Baseball Properties, Inc., the Minor Leagues, the NCAA or the NFHS. Manufacturing, Product Procurement and Raw Materials Products manufactured in Rawlings' five plants constituted approximately 23 percent of its net revenues in the year ended August 31, 2002 and the balance was derived from the sale of products manufactured by third-parties in Asia, Latin America, Canada, South Africa, and the United States, and from licensing fees. The third-party sourced products are manufactured according to the Company's specifications. Five third-party manufacturers account for approximately 61 percent of the Company's raw material and finished goods purchases. 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 of its non U.S. manufacturers while causing temporary difficulties 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 five manufacturing facilities in the United States and Costa Rica where it makes baseballs, apparel, baseball gloves, injection molded batter's helmets and wood baseball bats, tans leather and performs other miscellaneous value added processes. The Company recently announced its intention to close the Licking, Missouri apparel manufacturing facility in mid 2003. Production will be moved to Rawlings' Costa Rica and Washington, Missouri facilities. The relocation of the manufacturing operations performed at Ava, Missouri to the new location in Washington, Missouri began in the fourth quarter of fiscal 2001 and was completed in the first quarter of fiscal 2002. The Company's philosophy is to manufacture internally when it provides a competitive advantage; otherwise, the Company seeks to outsource production. Rawlings obtains its raw materials from various sources which it considers to be adequate for 7 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 Pro Preferred(R) and Heart of the Hide(R) baseball gloves. 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(R) brand name and logo and the red "R"(R) logo as well as a number of product trademarks, including Finest in the Field(R), Rawlings Gold Glove Award(R), The Mark of a Pro(R), and ProPreferred(R) are protected trademarks in various countries. As of August 31, 2002, Rawlings held 35 U.S. and 8 non U.S. patents, and had 3 U.S. and 23 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.), Nike, Easton, Hillerich & Bradsby, and Mizuno Company Limited in the baseball product line; Wilson Sporting Goods Company, Spalding, Nike and Riddell Sports Inc. in the basketball and football lines; and Russell Corporation, Majestic 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 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 determines the Company's net revenues and profitability between November 1 and February 28. 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 8 receivable. Most of the Company's large customers are on automatic replenishment systems; therefore, more orders are received on a ship-at-once basis. This results in the Company producing or purchasing inventory against customer forecasts and shipping to the customer closer to the time the products are actually sold. This process to meet orders for immediate delivery increases inventory and debt levels and creates inventory forecast risks. To offset these risks, the Company has a Port of Entry (POE) program to encourage retailers to place and receive early orders. The sell-through of baseball-related products also affects the amount of inventory held by customers at the end of the season, which is carried over by the customer for sale in the next baseball season. Customers typically adjust their pre-season orders for the next baseball season to account for the level of inventory carried over from the preceding baseball season. Football equipment and team uniforms are both shipped by the Company and sold by retailers primarily in the period between March 1 and September 30. 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. Employees As of August 31, 2002, Rawlings employed approximately 935 people on a full-time basis, of whom 482 were based in the United States, 445 in Costa Rica and 8 in Canada. Of the total number of employees, approximately 780 were engaged in manufacturing and distribution, 108 were engaged in marketing and sales and 47 were engaged in administration. Approximately 128 of Rawlings' domestic employees are represented by the Union of Needletrades of Industrial Textile Employees, 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 2002 and February 2003, respectively. Both of these agreements automatically renew for a period of twelve months from year to year thereafter, unless modified or terminated by written notice at least sixty days prior to any subsequent anniversary date. The Union of Needletrades of Industrial Textile Employees, AFL-CIO-CLC Agreement has been extended until November 2003. 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. In addition, as of August 31, 2002 approximately 172 people were engaged in manufacturing and distribution at the Company's Washington, Missouri location under an employee lease agreement. CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS, FINANCIAL CONDITION OR BUSINESS Statements made in this report, other reports and proxy statements filed with the Securities and Exchange Commission, communications to stockholders, press releases and oral statements made by representatives of the Company that are not historical in nature, or that state the Company's or management's intentions, hopes, beliefs, expectations, or predictions of the future, are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and involve risks and uncertainties. The words "should," "will be," "intended," "continue," "believe," "may," "expect," "hope," "anticipate," "goal," "forecast" and similar expressions are intended to identify such forward-looking statements. It is important to note that any such performance, and actual 9 results, financial condition or business 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, those discussed below as well as those discussed elsewhere in reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise forward-looking statements including the financial projections to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time. Dependence on Baseball. Sales of baseball-related products constituted approximately 63 percent of the total net revenues of Rawlings in the year ended August 31, 2002. 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. The loss of the Major League Baseball exclusive supplier contract could have a material adverse effect on the Company's sales as could poor weather conditions during the spring baseball retail-selling season. Dependence on Foreign Manufacturing. The Company's dependence on foreign manufacturing is described above under "Manufacturing, Product Procurement and Raw Materials" and is subject to the risks of doing business abroad, such as changes in import duties, trade restrictions, work stoppages, labor laws, political instability, shipping delays due to increased security, 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). However, a large part of the Company's orders arrive after February as ship-at-once orders against a retailer's forecast or as fill-in 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 April 30. This seasonality requires working capital and expense investments before revenues are certain. Inaccurate forecasting could inflate working capital, depress profitability and increase debt. Reliance on Certain Customers. Sales to the ten largest customers of Rawlings constituted approximately 43 percent of the total net revenues of Rawlings in the year ended August 31, 2002, including one customer, Wal-Mart, which accounted for approximately 17 percent of 2002 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, employee matters and other legal proceedings which have not historically had a material adverse effect on the Company. See "Legal Proceedings." 10 Competition. Rawlings competes with numerous national and international companies, which manufacture and distribute broad lines of sporting goods and related equipment and sports clothing. Some of the Company's competitors (e.g. Nike) are larger and have substantially greater financial and other resources than Rawlings. A change in the competitive environment could have an adverse effect on the Company's results of operations and financial condition. Credit Agreement Restrictions. In December 1999, the Company refinanced its long-term credit facility. The credit facility is asset-based and supported by the Company's receivables, inventory and property, plant and equipment. Additionally, the facility provides for an incremental seasonal advance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The Company's credit agreement with its existing lender contains certain restrictions on the Company, including maintaining certain financial ratios, restricting payment of cash dividends, restricting incurrence of additional indebtedness and limiting capital expenditures. 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. Consideration of Strategic Alternatives. From time to time, the Company has been and may continue to be approached by parties interested in acquiring all or a portion of the Company or its business. The Board may desire to consider a proposal made by such parties, in which case significant expenses may be incurred, while no assurance can be obtained that a transaction acceptable to the Board or the shareholders of the Company will be consummated. Such expenses may adversely affect the Company's results of operations and financial condition. Further, it is the Company's policy that it will not comment on pending discussions regarding merger and acquisition proposals. 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) changes in the currency exchange rate related to the Japanese yen; (v) 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 (vi) the ability to attract and retain capital for growth and operations on competitive terms. (See discussion above on Credit Agreement restrictions.) 11 EXECUTIVE OFFICERS OF THE REGISTRANT

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 was a direct marketer of niche consumer products. From November 1991 through November 1994, Mr. O'Hara was President of SC's largest subsidiary, Wigs by Paula, Inc. Prior to 1991, Mr. O'Hara held various marketing and general management 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 November 1992 to October 1997 Mr. Keene held a variety of positions with 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. Mr. Keene has an undergraduate degree from Southern Illinois University. Ted C. Sizemore has served as Senior Vice President, Worldwide Baseball Affairs for 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. Mr. Sizemore has an undergraduate degree from the University of Michigan. William F. Lacey has served as Vice President and Chief Financial Officer since December 2000. From December 1998 until joining the Company, Mr. Lacey served as Vice President and Chief Financial Officer of Collins Signs, Inc., a corporate identification company. From September 1997 12 until December 1998 Mr. Lacey served as Chief Financial Officer of Paklite Corporation, a manufacturer of packaging and custom foam products. From October 1984 until September 1997 Mr. Lacey held various positions, ultimately Chief Financial Officer of DP Fitness, Inc. (aka Diversified Products Corporation) a manufacturer of home fitness products. Mr. Lacey has an undergraduate degree from the University of Alabama. 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. Mr. Thompson has an undergraduate degree from the University of Southern Colorado. James M. Hughes has served as Vice President, Pro Baseball since August 2001, with primary responsibility for promoting the Company's brand name in professional baseball. Mr. Hughes joined Rawlings in June 1982 as a professional and college representative and was promoted in January 1993 to Director Pro Department. Prior to 1982, Mr. Hughes was a Major League and Minor League Baseball player including pitching for the Minnesota Twins in 1974 through 1977. Mr. Hughes has an undergraduate degree from Cal State Fullerton. Kenneth C. West has served as Vice President, Manufacturing since June 2002. From April 2000 to June 2002 Mr. West served as Vice President, Manufacturing and Distribution. From December 1997 until April 2000, Mr. West was Vice President, Operations of Designer Checks, Inc., a manufacturer of direct to consumer bank checks. From December 1994 to December 1997 Mr. West served as Director of Engineering, ultimately Vice President, Manufacturing of DP Fitness, Inc. (aka Diversified Products Corporation) a manufacturer of home fitness products. Prior to 1994 Mr. West held various manufacturing and engineering positions at consumer products companies including Ryobi Motor Products, Inc., Toastmaster Inc., W.L.Jackson Manufacturing Company and Olin Corporation. Mr. West has an undergraduate degree from Columbia College. Stanley W. Lippelman has served as Vice President, Marketing since June 2002. From October 2000 until May 2002, Mr. Lippelman served as the Director of Consumer Marketing and assumed responsibility for Research and Development in November 2001. Prior to 2000, Mr. Lippelman held various marketing positions at General Mills and Noble and Associates, a full service advertising and promotional agency. Mr. Lippelman has a MBA degree from The Darden School of Business at the University of Virginia and an undergraduate degree from Southwest Missouri State University. 13 ITEM 2. PROPERTIES The following table sets forth certain information as of August 31, 2002 relating to Rawlings' principal properties:

In addition, Rawlings leases 6,615 square feet for an outlet store in Reading, Pennsylvania. Rawlings also leases space for four regional sales offices and an office for the Vice President, Pro Baseball. 14 ITEM 3. LEGAL PROCEEDINGS. 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 intends to vigorously defend all product liability matters and patent claims. 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. None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. STOCK EXCHANGE LISTING Rawlings' common stock is quoted on the Nasdaq National Market System under the symbol RAWL. As of August 31, 2002, there were 691 shareholders of record. The following table indicates the quarterly high and low closing prices for the stock and the quarter-end closing prices.

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. These warrants expired in November 2001. The Company has paid no dividends. The Company's existing amended and restated credit agreement has certain requirements including a restriction on the Company's ability to pay cash dividends. 15 DISCLOSURE WITH RESPECT TO THE COMPANY'S EQUITY COMPENSATION PLANS The Company maintains the Rawlings Sporting Goods Company, Inc. 1994 Long-Term Incentive Plan (the "Incentive Plan"), the Rawlings Sporting Goods Company, Inc. 1994 Non-Employee Directors' Stock Plan (the "1994 Directors' Plan") and the Rawlings Sporting Goods Company, Inc. 2000 Non-Employee Directors' Stock Plan (the "2000 Directors' Plan"). In addition, the Company has entered into an individual arrangement with its Chairman of the Board and Chief Executive Officer, Mr. Stephen O'Hara, providing for the grant of options in certain circumstances described below.

(1) Represents options granted under the Incentive Plan and the 1994 Directors' Plan, each of which was previously approved by the Company's shareholders. (2) Includes 32,499 shares available under the Incentive Plan that may be issued upon the exercise of stock options or granted in the form of stock appreciation rights, restricted stock, deferred stock, dividend equivalent rights, bonus stock or stock in lieu of certain cash obligations; and 123,555 shares available under the 1994 Directors' Plan that may be issued upon the exercise of stock options or granted as deferred stock in lieu of cash directors' fees. (3) Represents options granted under the 2000 Directors' Plan and the Company's employment agreement with Mr. O'Hara. 16 (4) Includes 11,375 shares available under the 2000 Directors' Plan that may be issued upon the exercise of stock options or granted as deferred stock in lieu of cash directors' fees. Description of Non-Shareholder Approved Plans. The terms of the 2000 Directors' Plan are described in Note 13 of the Notes to Consolidated Financial Statements contained herein. The Company's employment agreement with Mr. O'Hara provides for an initial grant of options to purchase shares of the Company's common stock that became exercisable in five equal annual installments commencing on October 30, 1998. The options expire on November 1, 2003. In addition, Mr. O'Hara receives an option to purchase two shares of the Company's common stock for each share of common stock Mr. O'Hara purchases up to the first 20,000 shares purchased annually. The exercise price of such options is equal to the price at which Mr. O'Hara purchases the common stock. Any options granted to Mr. O'Hara as a result of his open market purchases expire on the fifth anniversary of the date such options are granted. ITEM 6. SELECTED FINANCIAL DATA. 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 five fiscal years ended August 31, 2002. (Amounts in thousands, except per share data)

17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations may constitute "forward-looking statements." These statements are not guarantees of future financial condition, performance or operations and involve certain risks and uncertainties that are difficult to quantify or, in some cases, to identify. A description of the important factors that could cause the Company's future results to differ materially from past results is set forth in Item 1, above. YEAR ENDED AUGUST 31, 2002 COMPARED TO THE YEAR ENDED AUGUST 31, 2001 RESULTS OF OPERATIONS Net revenues for the year ended August 31, 2002 (2002) were $173,712,000 or 0.5 percent below net revenues of $174,528,000 for the year ended August 31, 2001 (2001). The decrease in net revenues was primarily due to lower sales of footballs, basketballs and apparel partially offset by higher sales of baseball-related products. Licensing revenues for 2002 were $5,546,000 or $475,000 above 2001. $373,000 of the increase is attributable to a golf products licensee, primarily due to a 2002 early termination fee of the license agreement. Improved revenues from the Company's footwear licensee partially offset by lower revenues from Asics, the Japanese licensee, also contributed to the higher revenues in 2002. Gross profit in 2002 was $48,776,000, $1,244,000, or 2.6 percent, greater than the gross profit of $47,532,000 in 2001. The gross profit margin of 28.1 percent for 2002 was 0.9 margin points above 2001. The increase in gross profit was primarily due to higher margins for baseball-related products partially offset by decreased margins for basketballs and footballs. Selling, general and administrative (SG&A) expenses of $41,158,000 in 2002 were 2.2 percent above SG&A expenses in 2001. As a percent of net revenues SG&A expenses were 23.7 percent in 2002 compared to 23.1 percent in the prior year. Increased distribution costs partially offset by lower professional fees accounted for the higher SG&A expenses. In 2001 $1,527,000 of transition costs were incurred during the relocation of distribution facilities to a new single location in Washington, Missouri. These transition costs offset by the $1,115,000 gain on the sale of the Springfield, Missouri distribution center were included as unusual expenses in the Consolidated Statement of Income. Interest expense for 2002 was $2,452,000 or $2,058,000 below 2001. Lower average rates of 3.5 percentage points and lower average borrowings of $5,500,000 accounted for the decrease in interest expense. Income taxes in 2002 of $1,819,000 were $1,233,000 greater than 2001. Higher pretax income and a higher effective tax rate accounted for the income tax increase. The low 2001 effective tax rate of 25 percent was impacted by foreign source income. 18 Net income was $3,347,000 in 2002 or $1,590,000 greater than 2001. In 2002 income per share of $0.41 was 86.4 percent above the $0.22 per share in 2001. YEAR ENDED AUGUST 31, 2001 COMPARED TO THE YEAR ENDED AUGUST 31, 2000 RESULTS OF OPERATIONS Net revenues for 2001 of $174,528,000 were $625,000, or 0.4 percent higher than the year ended August 31, 2000 (2000). The increase in net revenues was primarily the result of higher sales of apparel, footballs, and baseballs offset by lower sales of baseball gloves and reduced licensing revenue. Revenues from licensing were $5,071,000 in 2001 or 8.8 percent below licensing revenues of $5,563,000 in 2000. The decrease in revenues was primarily due to a decline in Asics, the Company's Japanese licensee, (lower revenues and unfavorable currency exchange rates). The Company's activewear licensee and the footwear licensee also contributed to the lower revenues partially offset by improved revenues from the Company's sock licensee. Gross margin in 2001 was 27.2 percent down 1.6 margin points from the prior year. The decrease reflects lower margins on baseballs and baseball gloves and the reduced licensing revenues. SG&A expenses decreased $173,000 in 2001. SG&A expenses as a percent of sales in 2001 were 23.1 percent compared to 23.3 percent in 2000. Lower depreciation, sales commissions and expenses related to sales meetings offset by increases in advertising and promotion and endorsement contracts were primarily responsible for the net decrease. In connection with the relocation of distribution facilities to a new single location in Washington, Missouri, the Springfield, Missouri distribution center was sold in September 2000. The move to Washington was completed in the fourth quarter of fiscal 2001. Transition and facility clean up costs incurred during the move to Washington of $1,527,000, offset by the gain on the sale of Springfield of $1,115,000, were included as unusual expenses in the Consolidated Statement of Income in fiscal 2001. Interest expense of $4,510,000 in 2001 was $1,554,000 or 25.6 percent lower than the prior year. Lower debt levels partially due to debt repayments resulting from the proceeds from the sale of the Springfield distribution center and from the sale of the discontinued operation along with lower rates accounted for the reduction in interest expense. The effective tax rate for 2001 was 25 percent which is lower than the statutory rate of 35 percent because foreign income which has lower tax rates represented a higher percent of income and there was a decrease in the Company's valuation allowance. Income from continuing operations increased $476,000, or 37.2 percent to $1,757,000 continuing the improvement trend, which began in 2000. 19 The sale of the Vic hockey business was completed during the third quarter of fiscal 2001 under substantially the same terms as originally provided in 2000. SEASONALITY See discussion on Seasonality in Part I, Item 1 of this document. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are cash provided by operating activities and the credit agreement negotiated with a financing company in December 1999 as amended, which is more fully described in Note 9 to the financial statements. The agreement provides for borrowings based on a percentage of qualified receivables and inventory coupled with seasonal advances during the Company's peak selling period in addition to term loans. The Company's primary use of cash is to fund its working capital needs, capital expenditures 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 September 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 financing. Detailed information on the Company's cash flows is presented in the Consolidated Statements of Cash Flows. The Company believes its capital structure and current credit facility are adequate to provide for its short term and long term operations to the extent that the Company is able to satisfy the EBITDA and other covenants set forth in the credit facility. YEAR ENDED AUGUST 31, 2002 Net cash provided by operating activities in 2002 was $8,857,000 or $5,557,000 greater than 2001. The increase was due to a reduction in accounts receivable, an increase in accrued liabilities in 2002 compared to a decline in 2001 and improved net income in 2002 partially offset by a lower decline in inventories. Capital expenditures of $1,861,000 comprised the cash used in investing activities in 2002. Capital expenditures were $510,000 greater than 2001 primarily related to implementation and expansion of the Company's computer systems. Cash provided by investing activities in 2001 included proceeds from the sales of the Springfield distribution center and the discontinued operations. $7,314,000 was used in financing activities in 2002 primarily to reduce the Company's outstanding debt. YEAR ENDED AUGUST 31, 2001 Combined operating activities of continued and discontinued operations provided $3,300,000 of cash during 2001. The cash provided from operations was $3,408,000 lower than 2000 primarily due to decreases in accounts payable and accrued liabilities offset by cash generated by lower inventory levels. Net cash provided by investing activities totaled $2,499,000, which included proceeds from the sale of the Springfield distribution center of $2,376,000 and proceeds from the sale of the discontinued operations of $1,474,000. Capital expenditures were $1,351,000 in 2001 compared to $938,000 in 20 2000. The increase in capital expenditures was primarily related to equipment at the new Washington distribution center. The Company used $6,302,000 in financing activities primarily to reduce its debt outstanding. YEAR ENDED AUGUST 31, 2000 Combined operating activities of continued and discontinued operations provided $6,708,000 of cash during 2000. The cash provided from operations was $361,000 lower than 1999 as the Company increased inventories and receivables. Capital expenditures were $994,000 lower in 2000 compared to 1999 and totaled $938,000. The Company used $5,250,000 in financing activities primarily to reduce its debt outstanding. NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued SFAS No. 143, "Asset Retirement Obligations." The new standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The standard is effective for fiscal years beginning after June 15, 2002. Adoption of SFAS No. 143 is not expected to impact our consolidated financial position. The Company will adopt SFAS No. 143 in fiscal 2003. The Financial Accounting Standards Board has issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The new standard replaces FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The primary objectives of this statement were to develop one accounting model, based on the framework established in Statement 121, for long-lived assets to be disposed of by sale and to address significant implementation issues. Statement 144 requires that all long-lived assets, including discontinued operations, be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The standard is effective for fiscal years beginning after December 15, 2001. Adoption of SFAS No. 144 is not expected to impact our consolidated financial position. The Company will adopt SFAS No. 144 in fiscal 2003. The Financial Accounting Standards Board has issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. Adoption of SFAS No. 146 is not expected to impact our consolidation financial position. The Company will adopt SFAS No. 146 in fiscal 2003. CRITICAL ACCOUNTING POLICIES As discussed in Note 1 to the Company's Consolidated Financial Statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of 21 America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgements, including those related to inventory valuation; the allowance for doubtful accounts; depreciation and recoverability of long-lived assets; deferred income tax assets and the related valuation allowance and revenue recognition. Management bases its estimates and judgements on its historical experience and other relevant factors, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. See Note 1 to the Company's Consolidated Financial Statements for a discussion of the Company's significant accounting policies. While the Company believes that the historical experience and other factors considered provide a meaningful basis for the accounting policies applied in the preparation of the consolidated financial statements, the Company cannot guarantee that its estimates and assumptions will be accurate, which could require the Company to make adjustments to these estimates in future periods. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. INTEREST RATE AND FOREIGN CURRENCY MANAGEMENT ACTIVITIES As of August 31, 2002 the Company did not have any outstanding interest rate swaps or foreign currency contracts. Due to the relative size of the Company's foreign operations, the Company believes it does not have any material exposure to foreign currency fluctuations although a long-term decline in the United States of America dollar could increase the cost of purchased goods. The Company has market risk exposure related to interest rates. The Company is exposed to market risks related to fluctuations in interest rates for its variable rate borrowings of $29,978,000 as of August 31, 2002. A change in interest rates of 1 percent on the balance outstanding at August 31, 2002 would cause a change in total annual pretax earnings and cash flows of $300,000 assuming other factors are held constant. 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE STOCKHOLDERS OF RAWLINGS SPORTING GOODS COMPANY, INC.: We have audited the accompanying consolidated balance sheet of Rawlings Sporting Goods Company, Inc. (a Delaware corporation) and subsidiaries (the Company) as of August 31, 2002 and the related consolidated statements of income, stockholders' equity and cash flows for the year ended August 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The accompanying consolidated financial statements of Rawlings Sporting Goods Company, Inc. as of August 31, 2001 and for the years ended August 31, 2001 and August 31, 2000, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated October 25, 2001. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides a reasonable basis for our opinion. In our opinion, the 2002 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, 2002 and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP St. Louis, Missouri October 23, 2002 23 This is a copy of a report previously issued by Arthur Andersen LLP and has not been reissued by Arthur Andersen LLP. 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, 2001 and 2000 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended August 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2001, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP St. Louis, Missouri October 25, 2001 24 RAWLINGS SPORTING GOODS COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share data)

The accompanying notes are an integral part of these consolidated balance sheets. 25 RAWLINGS SPORTING GOODS COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data)

The accompanying notes are an integral part of these consolidated statements. 26 RAWLINGS SPORTING GOODS COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Amounts in thousands, except share data)

The accompanying notes are an integral part of these consolidated statements. 27 RAWLINGS SPORTING GOODS COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)

The accompanying notes are an integral part of these consolidated statements. 28 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 wholly-owned subsidiaries (Rawlings or the Company). All significant intercompany transactions and balances have been eliminated. BUSINESS Rawlings manufactures and distributes an extensive line of sports equipment and uniforms for team sports such as baseball, basketball and football predominately in the United States. INVENTORIES Inventories are valued at the lower of cost or market with cost determined on a first-in, first-out method. Cost includes materials and conversion costs. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost and depreciated on a straight-line basis over the estimated useful life. The principal estimated useful lives are as follows: ~~Buildings and improvements 20-30 years Machinery and equipment 5-12 years Other 4-10 years~~

When equipment is sold or retired, its cost and accumulated depreciation are removed from the balance sheet, and any gain or loss is included in income during the period of the disposition. Repair and maintenance is charged to expense as incurred. LONG-LIVED ASSETS Long-lived assets, primarily property plant and equipment, are periodically reviewed for impairment by comparing the carrying value of the assets with the expected future undiscounted cash flows before consideration of income taxes. If an impairment has occurred on assets held for use, the loss is calculated as the difference between the carrying value and fair value. Long-lived assets that are to be disposed are recorded at the lower of carrying value or fair value less costs to sell. 29 REVENUE RECOGNITION Revenue from product sales, including shipping fees, is reported net of returns and sales allowances. Revenue is recognized when title and risk of loss passes to the customer, which is typically when the product is shipped. INCOME TAXES Income taxes are accounted for using a balance sheet approach known as the liability method. The liability method accounts for deferred income taxes by applying the statutory tax rates in effect at the date of the balance sheet to the differences between the book basis and the tax basis of the assets and liabilities. TRANSLATION 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 in Cumulative Other Comprehensive Loss, a separate component in Stockholders' Equity. Foreign exchange transaction losses of $2, $26 and $0 were included in the results of operations for the fiscal years ended August 31, 2002, 2001 and 2000, respectively. FINANCIAL INSTRUMENTS The fair value of the Company's financial instruments approximates their carrying amounts. The Company's debt is primarily variable in nature and accordingly the fair value approximates the carrying value. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and temporary investments purchased with an original maturity of three months or less. STOCK-BASED COMPENSATION The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and provides the pro forma disclosures of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation". RECLASSIFICATIONS Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation. The reclassifications had no impact on previously reported net income (loss) or total stockholders' equity. 30 USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued SFAS No. 143, "Asset Retirement Obligations." The new standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The standard is effective for fiscal years beginning after June 15, 2002. Adoption of SFAS No. 143 is not expected to impact our consolidated financial position. The Company will adopt SFAS No. 143 in fiscal 2003. The Financial Accounting Standards Board has issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The new standard replaces FASB Statement No. 121," Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The primary objectives of this statement were to develop one accounting model, based on the framework established in Statement 121, for long-lived assets to be disposed of by sale and to address significant implementation issues. Statement 144 requires that all long-lived assets, including discontinued operations, be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. The standard is effective for fiscal years beginning after December 15, 2001. Adoption of SFAS No. 144 is not expected to impact our consolidated financial position. The Company will adopt SFAS No. 144 in fiscal 2003. The Financial Accounting Standards Board has issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. Adoption of SFAS No. 146 is not expected to impact our consolidated financial position. The Company will adopt SFAS No. 146 in fiscal 2003. NOTE 2. DISCONTINUED OPERATIONS On June 26, 2000 the Company made a strategic decision to seek a buyer for its Vic hockey business. Vic provided an extensive line of equipment for hockey teams including hockey sticks, hockey protective equipment and goalie protective equipment. The sale of the Vic hockey business was completed during the third quarter of fiscal 2001 under substantially the same terms as originally provided. Proceeds from the sale totaled $2,551 including cash of $1,474 at closing and $1,077 of 7% notes to be received through April 2004 which are included in Other Assets on the Consolidated 31 Balance Sheet. This asset is secured by a building and the Vic trademark. Operating results for the hockey business are included in the Consolidated Statements of Income as net loss from discontinued operations through May 31, 2000. Operating results subsequent to May 31, 2000 are included in the provision for operating losses during the phase-out period that was recorded in the third quarter of fiscal 2000. Results for the discontinued operations are as follows:

The loss on disposal included the writedown of assets of the hockey business ($10,750) to estimated net realizable value, the provision for operating losses during the phaseout period of $1,500 and the estimated costs to dispose of this business of $750. NOTE 3. ALLOWANCE FOR DOUBTFUL ACCOUNTS

NOTE 4. INVENTORIES Inventories consist of the following:

32 NOTE 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:

NOTE 6. LONG-TERM RECEIVABLES On January 22, 2002 Kmart Corporation filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. As of the date of the bankruptcy filing, the Company had accounts receivable from Kmart of $1,213. Of this amount, $667 less an allowance for doubtful accounts of $250 is included in Long-term Receivables on the Consolidated Balance Sheet. The remaining $546 is included in Accounts Receivable with a corresponding amount in Allowance for Doubtful Accounts on the Consolidated Balance Sheet. The net receivable of $417 represents the Company's best estimate of recovery on pre-petition Kmart receivables. NOTE 7. INCOME TAXES The income tax provision from continuing operations is as follows:

33 A reconciliation between the provision for income taxes computed at the federal statutory rate and the effective tax rate from continuing operations is as follows:

The significant components of deferred taxes which are included in the accompanying consolidated balance sheets are as follows:

The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred income tax asset will not be realizable. As of August 31, 2002, the Company has provided a valuation allowance of $2,146 related to a capital loss carry forward that expires in 2006 generated from the sale of the hockey business. The valuation allowance decreased (increased) by $369, $538, and ($1,807) during 2002, 2001, and 2000, respectively. The valuation allowance provision of $1,807 recorded in 2000 was reflected through discontinued operations. In order to recognize the deferred tax asset as of August 31, 2002, the Company would need to generate approximately $76 million of pretax income. The Company's net operating loss carry-forward deferred tax asset of $9,780 as of August 31, 2002 expires from 2019 to 2021. Income taxes have not been provided on the undistributed income (approximately $8,857 as of August 31, 2002) for a foreign subsidiary, which the Company does not intend to be remitted to the U.S. In July 1994, Figgie International, Inc. (the former parent, presently a subsidiary of Tyco International) 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 resulted in a step-up of the basis of the assets transferred determined by the fair value paid by the Company for the Rawlings business. The tax-effected book versus tax difference related to the tax step-up is recorded as a deferred tax asset titled asset step-up in the above 34 table as of August 31, 2002 and 2001. Under the terms of a tax sharing and separation agreement between the Company and the former parent, the Company was 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 was realized. The Company executed an agreement with Tyco International to terminate the tax sharing agreement in return for a $1,000 payment from Rawlings to Tyco, payable in two equal $500 installments in November 2002 and May 2003. The settlement is included in Accrued Liabilities on the August 31, 2002 Consolidated Balance Sheet. The amount of the obligation that was not expected to be paid in 2002 ($9,291) was recorded and titled as Other Long-term Liabilities on the August 31, 2001 Consolidated Balance Sheet. The Company recorded the difference between the amount expected to be paid under the tax sharing and separation agreement of $9,291 and the settlement amount of $1,000 as an increase in stockholders' equity (APIC) of $8,291. NOTE 8. ACCRUED LIABILITIES Accrued liabilities consist of the following:

NOTE 9. DEBT Debt consists of the following:

35 On December 28, 1999, the Company refinanced its credit facility by entering into a five-year credit agreement expiring December 1, 2004 with a financial institution. Actual availability is based on the Company's outstanding receivables and inventories. Total unused availability under the credit facility at August 31, 2002 was approximately $7,198. The facility also allows for a $2,000 seasonal advance from August 2002 through February 2003. On November 14, 2002 the Company and its lenders amended the credit agreement to increase the seasonal advance to $5,000 for the period from November 2002 through January 2003. Borrowings under the agreement are based on an interest rate of LIBOR plus 2.50 percent. A commitment fee of 0.50 percent is charged on any unused portion of the facility. The credit facility includes various covenants, including requirements that the Company achieve certain EBITDA levels as defined in the agreement, maintain a fixed charge ratio, limit capital expenditures and restrict the payment of dividends. EBITDA and fixed charge ratio for the twelve months ended August 31, 2002 were $9,386 and 1.44, respectively. The covenants for EBITDA and fixed charge ratio for that period were $9,000 and 1.15, respectively. The EBITDA requirement increases $125 for each of the fiscal 2003 quarter-end compliance calculations that are based on a rolling four quarters of EBITDA resulting in a $9,500 requirement for the twelve months ending August 31, 2003. The covenant for fixed charge ratio for each quarter-end calculation in fiscal 2003 is 1.20. As of August 31, 2002, the Company is in compliance with the debt covenants related to the credit facility. The Company believes its capital structure and current credit facility are adequate to provide for its short term and long term operations to the extent that the Company is able to satisfy the EBITDA and other convenants set forth in the credit facility. In accordance with EITF 95-22 "Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include Both a Subjective Acceleration Clause and a Lock-Box Arrangement", the Company has classified the revolving credit facility as a current obligation. The extraordinary item of $646 recorded in fiscal 2000 was due to the write-off of deferred financing costs associated with the early extinguishment of the previous credit facility. The Company's principal debt maturities on its term debt for the three years subsequent to August 31, 2002 are $1,302, $1,302 and $1,639, respectively. NOTE 10. TERMINATION OF RIGHTS AGREEMENT At the Company's Annual Meeting of Stockholders held on May 15, 2001, holders of a majority of the shares of common stock represented at the meeting voted against the retention of the Company's Rights Agreement, dated July 1, 1994. Accordingly, the Board of Directors of the Company authorized the redemption of the rights and the termination of the Rights Agreement effective December 31, 2001. All rights holders of record as of December 31, 2001 were entitled to redemption price of $.01 per right held. The Company paid the redemption price in common shares of the Company at the value of $2.8337 per share. A total of 31,008 common shares were issued as a stock dividend. 36 NOTE 11. UNUSUAL EXPENSE 2001 UNUSUAL EXPENSE In connection with the relocation of distribution facilities to a new single location in Washington, Missouri, the Springfield, Missouri distribution center was sold in September 2000. The move to Washington was completed in the fourth quarter of fiscal 2001. Transition and facility clean up costs incurred during the move to Washington of $1,527, offset by the gain on the sale of Springfield of $1,115, have been included as unusual expenses in the Consolidated Statement of Income in fiscal 2001. 2000 UNUSUAL EXPENSE During the first quarter of 2000, the Company completed a voluntary early retirement program for certain of its employees. The cost of the program totaled approximately $759 and was substantially paid out as of August 31, 2000. The costs primarily related to severance and medical benefits. Additionally, during the first half of 2000, the Company completed a review of its strategic alternatives that cost approximately $738. NOTE 12. EMPLOYEE BENEFITS COMPANY-SPONSORED DEFINED CONTRIBUTION PLANS 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 $288, $286 and $303 in 2002, 2001 and 2000, respectively. MULTI-EMPLOYER PENSION PLANS Certain union employees participate in multi-employer defined benefit pension plans. Contributions to the plans were $21, $38 and $65 in 2002, 2001 and 2000, respectively. NOTE 13. 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 (the 1994 Directors Stock Plan), as amended, provides for the issuance of up to 250,000 shares of Rawlings common stock to non-employee directors upon the exercise of stock options or in lieu of director's fees. The 2000 Non-Employee Directors Stock Plan (the 2000 Directors Stock Plan) provides for the issuance of up to 25,000 shares of Rawlings common stock to non-employee directors upon exercise of stock options or in lieu of directors' fees. The Employment Agreement by and between Rawlings and Stephen M. O'Hara, Chief Executive Officer (the Employment Agreement), provides for the issuance of up to 450,000 shares of Rawlings common stock upon exercise of stock options. 37 Stock options granted under the 1994 Incentive Plan, the 1994 Directors Stock Plan and the 2000 Directors Stock Plan have exercise prices equal to the market price on the date of grant, primarily 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 2002, 2001, and 2000 consistent with the provisions of this statement, the Company's net income and net income per share would have been as follows:

For purposes of the pro forma disclosure, the fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

38 The following table summarizes the stock option transactions pursuant to the Company's stock incentive and stock option plans for the three-year period ended August 31, 2002:

The following table summarizes information about stock options outstanding at August 31, 2002:

39 NOTE 14. 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. These warrants expired unexercisable on November 21, 2001 and accordingly, these warrants were not included in the Company's earnings per share calculation. 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 expiration of the warrants. The receivable of $1,421 plus interest was paid by Bull Run Corporation during fiscal 2002. The receivable for the unpaid portion of the warrants at August 31, 2001 is classified as a stock subscription receivable in the accompanying balance sheet. NOTE 15. RELATED PARTY TRANSACTIONS During 2002, 2001 and 2000, the Company sold approximately $413, $442 and $355, respectively, of products to a professional baseball club in which two of the Company's directors are part owners and one of which is the secretary and treasurer. Additionally, the Company purchased goods and services of $101, $110, and $71 during 2002, 2001, and 2000, respectively, from the club. The Company believes that the terms and prices for the sales and purchases of these products are no less favorable than those obtained from unaffiliated parties. During the fiscal years ended August 31, 2002, 2001 and 2000, the Company purchased approximately $28, $33 and $140, respectively, of catalogs, promotional items and web services from a company in which one of the Company's former directors is the Chief Executive Officer. The Company believes that the terms and prices for these purchases are no less favorable than those obtained from unaffiliated parties. NOTE 16. COMMITMENTS AND CONTINGENCIES The Company operates certain facilities and equipment under operating lease agreements. The lease expense was $3,261, $2,845, and $2,144 for years 2002, 2001 and 2000, respectively. Future minimum payments under noncancelable leases, royalty and licensing agreements as of August 31, 2002 were as follows:

40 As of August 31, 2002 the Company had the following future minimum revenues to be received under noncancelable royalty and licensing agreements.

The Company has conducted 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. During October 2000, the Company completed the excavation and removal of the wood pitch. Based on reports from legal counsel and environmental engineers, NYSDEC has accepted the final technical report memorializing the excavation and off-site disposal of the wood pitch impacted soil and the subsequent groundwater monitoring and no further remedial work on the Site is necessary. The Company does not anticipate incurring any future expense related to this item. A roll-forward of the Company's environmental reserve is as follows:

Rawlings is periodically subjected to product liability claims and other legal proceedings. In the opinion of management, the ultimate liabilities resulting from various pending legal proceedings will not have a material adverse effect on the financial condition or results of operations of the Company. NOTE 17. OPERATING SEGMENTS Operating segments are components of an enterprise about which separate financial information is 41 available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has identified operating segments based on internal management reports. Aggregation of similar operating segments into a single reportable operating segment is permitted if the businesses are considered to have similar long-term economic characteristics. The Company has four operating segments based on its product categories, which in applying the aggregation criteria, have been aggregated into two reportable segments: Sports Equipment and Licensing.

The sports equipment segment manufactures and distributes sports equipment and uniforms for team sports including baseball, basketball, and football. The licensing segment licenses the Rawlings brand name on products sold by other companies and includes products such as footwear and activewear. There are no significant determinable operating expenses or interest costs for the licensing segment. The accounting policies of the segments are the same as those described in Note 1 for the Company. The revenues generated and long-lived assets located outside the United States are not significant for separate presentation. One customer's (Wal-mart) purchases of products sold by Rawlings were 17 percent, 17 percent and 15 percent of net revenues of Rawlings for 2002, 2001 and 2000, respectively. 42 NOTE 18. QUARTERLY RESULTS (UNAUDITED) Quarterly results are determined in accordance with annual accounting policies. They include certain items based upon estimates for the entire year. Summarized quarterly results for the last two years were:

(1) Earnings per share were computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of computing average quarterly shares outstanding for each period. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On June 13, 2002, the Company's Board of Directors, based on the recommendation of its Audit Committee, dismissed Arthur Andersen LLP ("Andersen") as the Company's independent public accountants and engaged KPMG LLP ("KPMG") to serve as the Company's independent public accountants for the fiscal year 2002. Andersen's reports on the Company's consolidated financial statements for each of the fiscal years ended August 31, 2001 and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended August 31, 2001 and 2000 and through June 13, 2002, there were 43 no disagreements with Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to Andersen's satisfaction, would have caused them to make reference to the subject matter in connection with their report on the Company's consolidated financial statements for such years; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. The Company requested Andersen to furnish a letter addressed to the Securities and Exchange Commission stating whether Andersen agreed with the statements made above by the Company. A copy of this letter addressed to the Securities and Exchange Commission, dated June 13, 2002, is filed as Exhibit 16 hereto. During the years ended August 31, 2001 and 2000 and through June 13, 2002, the Company did not consult KPMG with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K. 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. (c) Compliance with Section 16(a) of the Exchange Act Information with respect to the filing of certain securities reports required to be filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 is set forth under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" contained in the Company's proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference. 44 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 14 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, which information is incorporated herein by reference. ITEM 14. CONTROLS AND PROCEDURES. Within 90 days prior to the filing of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's senior management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in its periodic filings with the SEC, including annual reports such as this Report, is reported accurately and suitably within the time periods specified in the SEC's rules and forms. Based upon that evaluation, senior management concluded that the Company's disclosure controls and procedures are effective in causing material information related to the Company (including its consolidated subsidiaries) to be recorded, processed, summarized and reported by the Company's management on a timely basis and to ensure that the quality and timeliness of the Company's public disclosures comply with applicable disclosure obligations. There were no significant changes in the Company's internal controls, implemented during the quarter ended August 31, 2002, or in other factors that in management's estimation could significantly affect these internal controls after the date of the Company's most recent evaluation. ITEM 15. 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 45 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. 4.3 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. 10.1 Credit Agreement, dated as of December 28, 1999, by and among the Company as Borrower, certain other credit parties named therein, and certain Lenders signatory thereto, included as Exhibit 10 to the Company's Form 8-K dated December 28, 1999, is hereby incorporated herein by reference. 10.2 Amendment No. 1 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and LaSalle Bank National Association dated February 29, 2000, included as Exhibit 10.2 to the Company's Form 10-K for the fiscal year ended August 31, 2000, is hereby incorporated herein by reference. 10.3 Amendment No. 2 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and LaSalle Bank National Association dated May 15, 2000, included as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended May 31, 2000, is hereby incorporated herein by reference. 10.4 Amendment No. 3 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and LaSalle Bank National Association dated July 20, 2000, included as Exhibit 10.4 to the Company's Form 10-K for the fiscal year ended August 31, 2000, is hereby incorporated herein by reference. 10.5 Amendment No. 4 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and LaSalle Bank National Association dated May 15, 2001. 46 10.6 Amendment No. 5 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and LaSalle Bank National Association dated July 9, 2001. 10.7 Amendment No. 6 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and LaSalle Bank National Association dated September 17, 2001. 10.8 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. 10.9 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. 10.10 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. * 10.11 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. * 10.12 The Company's 1994 Non-Employee Directors' Stock Plan, as amended, included as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (File No. 333-70368) is hereby incorporated herein by reference. 10.13 The Company's 2000 Non-Employee Directors' Stock Plan, included as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (File No. 333-43124) is hereby incorporated herein by reference. 10.14 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. * 10.15 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. * 10.16 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. 47 10.17 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. 10.18 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. 10.19 Amendment Number 1 of Standstill Agreement dated April 23, 1999, between the Company and Bull Run Corporation included as Exhibit 99.1 to the Company's Form 8-K dated April 30, 1999, is hereby incorporated herein by reference. 10.20 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. * 10.21 Employment Agreement entered into between the Company and Stephen M. O'Hara, dated as of November 2, 1998, as amended, included as Exhibit 4.2 to the Company's Registration Statement on Form S-8 (File No. 333-43124) is hereby incorporated herein by reference. 10.22 Standstill Agreement, dated April 23, 1999 among the Company and the Shapiro Parties, included as Exhibit 99.2 to the Company's Form 8-K dated April 30, 1999 is hereby incorporated herein by reference. * 10.23 Employment Agreement, dated as of September 1, 2001, by and between Rawlings Sporting Goods Company, Inc. and Ted Sizemore, included as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended November 30, 2001, is hereby incorporated herein by reference. 10.24 Amendment No. 7 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and the other Credit Parties signatory thereto dated November 27, 2001, included as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended November 30, 2001, is hereby incorporated herein by reference. * 10.25 Employment Agreement, dated as of January 1, 2002, by and between Rawlings Sporting Goods Company, Inc. and Howard B. Keene, included as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended February 28, 2002, is hereby incorporated herein by reference. 10.26 Amendment No.8 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and the other Credit Parties signatory thereto dated March 5, 2002, included as Exhibit 10.2 to the Company's Form 10-Q for the quarter ended February 28, 2002, is hereby 48 incorporated herein by reference. 10.27 Waiver to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and the other Credit Parties signatory thereto dated April 9, 2002, included as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended May 31, 2002, is hereby incorporated herein by reference. 10.28 Amendment No. 9 to the Credit Agreement among Rawlings Sporting Goods Company, Inc., General Electric Capital Corporation and the other Credit Parties signatory thereto dated November 14, 2002. 16. Letter of Arthur Andersen, LLP regarding the change in certifying accountant dated June 13, 2002, included as Exhibit 16 to the Company's Form 8-K dated June 13, 2002 is hereby incorporated by reference. 21. Subsidiaries of the Company. 23.1 Consent of KPMG LLP. 23.2 Consent of Arthur Andersen LLP. * Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to the Item 14(c) of this report. (b) Reports on Form 8-K (i) A current report on Form 8-K, filed on June 18, 2002, regarding the dismissal of Arthur Andersen LLP and the engagement of KPMG LLP, as the Company's independent public accountants. (ii) A current report on Form 8-K, filed on July 2, 2002, regarding the dismissal of Arthur Andersen LLP and the engagement of KPMG LLP, as the Company's Savings Plan's independent public accountants. (iii) A current report on Form 8-K, filed on September 20, 2002, regarding the termination of the tax sharing agreement between the Company and Tyco International. 49 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 21, 2002 By: William F. Lacey ----------------------------- William F. Lacey Vice President and 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: Stephen M. O'Hara ----------------------------------- --------------------------- Stephen M. O'Hara Chairman of the Board and Chief Executive Officer (Principal Executive Officer) By: William F. Lacey ----------------------------------- --------------------------- William F. Lacey Vice President and Chief Financial Officer (Principal Financial Officer and Accounting Officer) By: Andrew N. Baur ----------------------------------- --------------------------- Andrew N. Baur Director By: Michael McDonnell ----------------------------------- --------------------------- Michael McDonnell Director By: William C. Robinson ----------------------------------- --------------------------- William C. Robinson Director By: Edward F. Ryan ----------------------------------- --------------------------- Edward F. Ryan Director 50 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Stephen M. O'Hara, certify that: 1. I have reviewed this annual report on Form 10-K of Rawlings Sporting Goods Company, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal 51 controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 21, 2002 By: Stephen M. O'Hara ---------------------------------- Stephen M. O'Hara Chairman of the Board and Chief Executive Officer 52 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14 AND 15d-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, William F. Lacey, certify that: 1. I have reviewed this annual report on Form 10-K of Rawlings Sporting Goods Company, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal 53 controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 21, 2002 By: William F. Lacey --------------------------------- William F. Lacey Vice President and Chief Financial Officer 54

RAWLINGS SPORTING GOODS CO INC 10-K