Evenflo & Spalding Holdings Corp. Rtgs Lowered by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 12/23/97 --Standard & Poor's Tuesday lowered its corporate credit and bank loan ratings of Evenflo & Spalding Holdings Corp. to single-'B'-minus from single-'B'-plus. The rating on the company's $200 million senior subordinated notes due 2006 was lowered to triple-'C' from single-'B'-minus. The downgrades reflect the company's poor operating performance and negative discretionary cash flow Discretionary cash flow Cash flow that is available after the funding of all positive net present value (NPV) capital investment projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on. , which have strained flexibility. The rating also considers the company's positions in the juvenile and golf products industries, offset by thin operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. coverage of interest expense, and increasing bank debt amortization requirements commencing in September 1998. The ratings outlook is negative. Evenflo has a good market position in infant feeding products and juvenile furniture. However, Evenflo's operating cash flow was lackluster lack·lus·ter adj. Lacking brightness, luster, or vitality; dull. See Synonyms at dull. Adj. 1. lackluster - lacking brilliance or vitality; "a dull lackluster life"; "a lusterless performance" in 1997 due to high safety campaign expenses and competitive pricing. Spalding's Top-Flite brand holds a leading golf ball market share in the low-margin, low-price point mass merchant channel. The company has been significantly increasing investment spending in an attempt to expand its presence in premium and custom balls, clubs, and shoes. However, Spalding's operating cash flow, which accounts for about two-thirds of the total, declined sharply in 1997 as increased endorsement, advertising, and promotional expenses Noun 1. promotional expense - the cost of promoting a product business expense, trade expense - ordinary and necessary expenses incurred in a taxpayer's business or trade has not yet stimulated operating performance. Additionally, Spalding faces keen competition in the premium golf products market. Financial risk has risen due to poor operating performance since the 1996 leveraged acquisition of the company by Kohlberg Kravis Roberts Kohlberg Kravis Roberts & Co (commonly referred to as KKR) is a New York City-based private equity firm that focuses primarily on late-stage leveraged buyouts. It was founded in 1976 by Jerome Kohlberg, Jr., and cousins Henry Kravis and George R. & Co. L.P. Operating cash flow coverage of interest expense was thin at 1.11 times (x) for the fiscal year ended Sept. 30, 1997. A large negative cash flow deficit was incurred in 1997 due to poor profitability and large working capital and capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. requirements. OUTLOOK: NEGATIVE The company will need to improve operating performance and generate free cash flow to service escalating bank debt maturities. Failure to meaningfully improve profitability and cash flow in 1998 would further reduce the company's overall flexibility, and would likely prompt another review for downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. . -- CreditWire CONTACT: Hal F. Diamond, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , 212/208-1331 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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