Fool.com: Rawlings Picked Up off Waivers (News) December 31, 1999

Rawlings Picked Up off Waivers

By Dave Marino-Nachison (TMF Braden)
December 31, 1999

Though home-run duels and affable Dominicans have helped Major League Baseball reclaim its post as chief among America's midsummer diversions, Rawlings Sporting Goods (Nasdaq: RAWL) hasn't been able to boast a similar return to prominence.

The company's shares have slumped like an aging catcher over the past two years, and Wall Street has been losing interest. On Dec. 15, CIBC World Markets, one of the few brokerages still following the stock, cut the company from its coverage list.

It's not surprising. Rawlings is coming off a fiscal year (ended August 31) during which it lost $3.4 million amid spiraling marketing costs and a slew of unexpected charges. Ridden with debt, Rawlings has looked about as appealing as an RFK Stadium hot dog, which is probably the real reason they won't bring baseball back to D.C.

Like a veteran baseball man signing on to manage the Milwaukee Brewers, Rawlings management believes there is still hope of better days at the ballpark. Earlier this month, the company ended a nearly six-month strategic review (more buzzwords in this Foolish feature) with the announcement that it intends to sell some businesses, cut jobs, refocus marketing, and rejigger its manufacturing operations with an eye toward a return to profitability.

And today the company worked to allay concerns that it might be following Joltin' Joe to Kevin Costner's Iowa backyard by announcing that it snagged a five-year, $75 million credit pact from General Electric's (NYSE: GE) GE Capital Corp. to replace another arrangement that was going to run its course in April. Company auditor Arthur Andersen, after considering the news, reversed its "going-concern opinion" on the company, which in essence reflected worry that Rawlings was heading into the bottom of the ninth in serious need of a pinch hit.

A few investors were willing to take a swing on the news, the shares rising about 5% -- not much in real-dollar terms -- this morning. Should you? While the company's balance sheet isn't exactly pristine, the GE Capital arrangement should ease investors' minds about whether Rawlings will be around to help baseball into the next thousand years, which means their concerns can return to the evaluation of management's ability to make their restructuring go. Some value types like to look for out-of-favor American institutions to round out their portfolios, and heading into the year 2000 Rawlings certainly fits the bill.

The next time investors are likely to hear from Rawlings will probably be Jan. 13, as the company has scheduled a conference call for 3 p.m. EST to discuss both full-year fiscal 1999 results and Q1 2000. Rawlings appears to have reached a fork in the road. The question now, former New York Yankee Lawrence Peter "Yogi" Berra -- who shares a hometown, St. Louis, with Rawlings -- might have said, is whether the company will take it.

Related Links:

  • Rawlings
  • Rawlings Message Board
  • 1999: The Year in Review
  • About Yogi Berra, who, this link will show, is proof that Branch Rickey's judgment was not infallible.
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