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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                             ----------------------



                                    FORM 10-K

                                   (MARK ONE)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                      FOR THE YEAR ENDED DECEMBER 31, 2000

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(D) OF  THE SECURITIES
     EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 333-14569

                          SPALDING HOLDINGS CORPORATION

               (FORMERLY EVENFLO & SPALDING HOLDINGS CORPORATION)

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                 DELAWARE                                   59-2439656
     (STATE OR OTHER JURISDICTION OF                     (I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NO.)

           425 MEADOW STREET,
         CHICOPEE, MASSACHUSETTS                              01013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                   (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (413) 536-1200

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                   NAME OF EACH EXCHANGE
        TITLE OF EACH CLASS                         ON WHICH REGISTERED
        -------------------                         -------------------
               None                                        None



        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

     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 such
filing requirements for 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
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. [X]
     The number of shares of the  registrant's  Common stock, par value $.01 per
share, outstanding at March 20, 2001, was 98,901,747 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None.

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                          SPALDING HOLDINGS CORPORATION

                             FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

PART I

Item 1    Business.........................................................   3
Item 2    Properties.......................................................  10
Item 3    Legal Proceedings................................................  10
Item 4    Submission of Matters to a Vote of Security Holders..............  10

PART II

Item 5    Market for Registrant's Common Equity and Related
          Stockholder Matters..............................................  11
Item 6    Selected Financial Data..........................................  12
Item 7    Management's Discussion and Analysis of Financial Condition
          and Results of Operations........................................  13
Item 7A   Quantitative and Qualitative Disclosures About Market Risk.......  22
Item 8    Financial Statements and Supplementary Data......................  25
Item 9    Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure.........................................  47

PART III

Item 10   Directors and Executive Officers of the Company..................  47
Item 11   Executive Compensation...........................................  49
Item 12   Security Ownership of Certain Beneficial Owners and Management ..  53
Item 13   Certain Relationships and Related Transactions...................  55

PART IV

Item 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K..  57


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                                     PART I

ITEM 1:  BUSINESS

    Spalding  Holdings  Corporation and subsidiaries (the "Company") is a global
manufacturer  and  marketer of branded  consumer  products  serving the sporting
goods  markets  under  the  primary  trade  names   SPALDING(R),   TOP-FLITE(R),
ETONIC(R),  STRATA(R), BEN HOGAN(R) and DUDLEY(R). The primary subsidiary of the
Company is Spalding Sports Worldwide,  Inc.  ("Spalding").  Spalding markets and
licenses a variety of  recreational  and athletic  products  such as golf balls,
golf clubs,  golf shoes,  golf bags and accessories,  basketballs,  volleyballs,
footballs, soccer balls, and clothing and equipment for many other sports.

    On  September  30,  1996,  the  Company  underwent a  recapitalization  (the
"Recapitalization") under the Recapitalization and Stock Purchase Agreement (the
"Recapitalization  Agreement")  whereby Strata  Associates L.P.  ("Strata"),  an
entity  organized  by Kohlberg  Kravis  Roberts & Co.,  L.P.  ("KKR"),  acquired
control of the  Company  from Abarco N.V.  ("Abarco"),  the prior  parent of the
Company.

    Prior to August 20,  1998,  Evenflo  Company,  Inc.  ("Evenflo")  was also a
subsidiary of the Company. Evenflo markets specialty juvenile products under the
EVENFLO(R), GERRY(R) and SNUGLI(R) trade names including reusable and disposable
baby bottle feeding systems, breast-feeding aids, pacifiers and oral development
items, baby bath, health and safety items, monitors and other baby care products
and accessories,  as well as juvenile car seats,  stationary  activity products,
strollers,  high  chairs,  portable  play yards,  cribs,  dressers  and changing
tables, gates, soft carriers and frame carriers, child carriers and mattresses.

    On August 20, 1998,  the Company separated its two businesses,  Spalding and
Evenflo, into two stand-alone companies (the  "Reorganization").  As part of the
reorganization, KKR 1996 Fund L.P., an affiliate of the Company, acquired 51% of
the  outstanding  shares of common stock of Evenflo from Spalding for a purchase
price of $25.5  million  and  preferred  stock of Evenflo  from  Spalding  for a
purchase  price of $40.0  million.  In  addition,  Great  Star  Corporation,  an
affiliate of Abarco,  N.V. (a shareholder  of the Company)  acquired 6.6% of the
outstanding  shares  of  Evenflo  from  Spalding  for a  purchase  price of $3.3
million. Following completion of the Reorganization,  the Company's headquarters
in Tampa,  Florida  were closed and its  functions  transferred  to the separate
Spalding  and Evenflo  operations.  After giving  effect to the  Reorganization,
Spalding continued to own 42.4% of the common stock of Evenflo.  On December 23,
1999,  Spalding sold its remaining  investment in Evenflo's  common stock to the
KKR 1996 Fund L.P. for $23.6 million.

    Subsequent to the realignment of the businesses,  the Company elected  Edwin
L.  Artzt  (former  Chairman  and Chief  Executive  Officer  of Procter & Gamble
Company) in October 1998 as Chairman of the Board of  Directors  and hired James
R. Craigie  (formerly an Executive  Vice  President of Kraft,  Inc.) in December
1998 as President and Chief Executive  Officer.  Under this new leadership,  the
management  of the  Company  has  formulated  new brand  strategies  for its key
product lines and  repositioned its businesses to improve earnings and cash flow
and grow  market  share.  In concert  with its new brand  strategy,  the Company
repositioned its golf ball line under the brand names STRATA(R) and TOP-FLITE(R)
(TOP-FLITE XL(R) and XL 2000(R)) and  realigned  the golf club brands of BEN
HOGAN(R),  TOP-FLITE(R)  and  SPALDING(R)  to more  clearly  define their target
audience.

    On January 19, 1999 the Company  filed Form 8-K  electing to change its year
end from September 30 to December 31. The financial statements in this Form 10-K
include the consolidated  balance sheet as of December 31, 2000 and 1999 and the
statements of operations,  statement of consolidated  cash flows, and statements
of consolidated  shareholders'  equity (deficiency) for the years ended December
31, 2000 and 1999,  the period from  October 1, 1998  through  December 31, 1998
(the "Transition Period"), and for the fiscal year ended September 30, 1998.

    All  references  to fiscal  year in this Form 10-K refer to the fiscal  year
ending on  September  30th of each year.  For  periods  prior to the date of the
Reorganization,  references  to the Company  include  Spalding  and Evenflo on a
consolidated  basis.  After August 20, 1998,  references to the Company mean the
operations of Spalding and its equity  investment in Evenflo until  December 23,
1999.  References  to fiscal 1998  include the  operations  of Spalding  for the
entire fiscal year ending  September 30, 1998, the operations of Evenflo for the
period from  October 1, 1997 to August 20, 1998 and the  Company's  42.4% equity
investment in Evenflo from August 21, 1998 to September 30, 1998.

    All  references to market share and  demographic  data in this Form 10-K are
based on industry publications and Company data.

SPALDING

    Spalding  was  founded in 1876 by Hall of Fame  baseball  pitcher  Albert G.
Spalding  and is one  of the  oldest,  largest  and  best-known  sporting  goods
companies  in the world.  Spalding  produced  the first  official  major  league
baseball  in 1876 and the  first  basketballs  and  volleyballs  in the  1890's.
Additional early  achievements were the first U.S.-made  footballs,  golf clubs,
golf balls,  tennis  rackets and tennis  balls.  Spalding  introduced  the first
"dimpled"  golf ball in the United States in 1908;  the first  two-piece,  solid
core golf ball in 1966,  which today is the most  commonly  played type of ball;
the Surlyn cut-resistant golf ball cover in 1971; and the first multi-layer golf
ball in 1996.  Spalding  continues to focus on creating  innovative new products
and Spalding's products are endorsed by numerous leagues and players.

    With net sales  of $408.9  million  in 2000,  and  $431.2  million  in 1999,
Spalding is a leader in the $2.7 billion U.S. wholesale golf industry and in the
$60 billion U.S. wholesale sporting goods industry, with some of the most widely
recognized  branded  consumer  product names such as SPALDING(R),  TOP-FLITE(R),
ETONIC(R),  STRATA(R),  BEN HOGAN(R) and DUDLEY(R).  Spalding's  brand names are
currentLY  Featured  on over 2,000  products  with an  emphasis  on two  primary
categories:  (i) golf products and (ii) sporting goods  products.  Spalding also
licenses  the brand  names on an  assortment  of  athletic  products,  including
apparel and footwear.  To broaden Spalding's line of golf products, in July 1996
the Company acquired  Etonic's line of golf accessories and in November 1997 the
Company acquired the Ben Hogan line of golf clubs and accessories. Golf products
include golf balls sold under the STRATA(R),  TOP-FLITE(R)  and MOLITOR(R) brand
names;  golf clubs sold under the BEN  HOGAN(R),  TOP-FLITE(R)  and  SPALDING(R)
brand names; golf shoes sold under the ETONIC(R) brand name and accessories sold
under the  STRATA(R),  BEN HOGAN(R),  TOP-FLITE(R)  and  ETONIC(R)  brand names.
Sporting  goods  products  (other  than  golf) and  licensed  products  are sold
primarily under the SPALDING(R) and DUDLEY(R) brand names.

    For information on sales by industry segment, see Note G of the Notes to the
Consolidated Financial Statements appearing elsewhere in this Form 10-K.

    GOLF PRODUCTS

    GENERAL.   Golf products are Spalding's largest product category  generating
worldwide net sales of $342 million in 2000,  $334 million in 1999,  $30 million
in the Transition Period, and $407 million in fiscal 1998, or approximately 84%,
77%, 53% and 76% of Spalding's  total worldwide net sales,  in these  respective
periods.  Spalding  is one of  the  largest  manufacturers  of  golf  equipment,
primarily under its  TOP-FLITE(R),  STRATA(R),  BEN HOGAN(R) and ETONIC(R) brand
names,  as well  as an  industry  leader  in  introducing  innovative  new  golf
products.  Spalding offers a comprehensive  array of golf clubs,  golf shoes and
other golf  accessories.  Spalding's  golf products are endorsed by leading golf
professionals  including Lee Trevino,  Justin Leonard, Jim Furyk, Hal Sutton and
Kelli Kuehne.

    GOLF BALLS.  The  worldwide  market for golf ball sales was $1.2  billion in
1999. Spalding's worldwide net sales of golf balls totaled $243 million in 2000,
$235 million in 1999, $22 million in the  Transition  Period and $218 million in
fiscal 1998.  Spalding  currently  markets its line of golf balls under numerous
names including STRATA(R),  TOP-FLITE(R) and MOLITOR(R).  Spalding believes that
its  family of  TOP-FLITE(R)  golf balls has sold more golf balls than any other
family of golf balls in the world. Spalding focuses itS marketing efforts on pro
shops,  off-course golf specialty shops,  sporting goods stores and other retail
outlets  where the  STRATA(R),  TOP-FLITE(R)  and  MOLITOR(R)  names are  widely
recognized.

    Spalding  believes  that the golf ball  market is  highly  receptive  to new
product  development,  and  therefore,  Spalding  seeks to lead the  industry in
product innovation.  Through its research and development efforts,  Spalding has
successfully  introduced new lines of advanced performance golf balls in each of
the last five years.  Spalding also  customizes  its golf balls with  customers'
names or logos (a market which  management  believes to represent  approximately
20% of the U.S. golf ball market).

    GOLF  CLUBS.  In 1999,  the  worldwide  wholesale  sales of golf  clubs was
estimated at $3 billion.  Spalding's worldwide net sales of golf clubs generated
$49 million in 2000,  $51 million in 1999, $2 million in the  Transition  Period
and $112 million in fiscal 1998. Spalding's strategy is to design golf clubs for
men,  women and seniors of all ability  levels.  BEN HOGAN(R)  branded clubs are
premium forgings which are played on the  professional  tours and by the world's
most discriminating golfers. During the fourth quarter of 1999, the BEN HOGAN(R)
line successfully  introduced the APEX PLUS(R) irons. These clubs combine forged
craftsmanship with perimeter weighting and are designed for game improvement for
the better than  average  golfer.  In  February  2001,  the  company  added APEX
EDGE(TM) irons to the line,  the most  forgiving BEN HOGAN(R)  forged irons yet,
designed to help the majority of golfers  with  mid-to-high  handicaps.  The BEN
HOGAN(R)  line of irons are sold  primarily in  pro-shops  and  off-course  golf
specialty  stores.  TOP-FLITE(R)  clubs are premium metal  castings that utilize
design features such as perimeter  weighting and graphite  shafts.  TOP-FLITE(R)
branded clubs are played on the professional tours and are primarily sold in the
better pro shops,  off-course shops and sporting goods stores. During the fourth
quarter of 2000, the Company launched a new line of TOP-FLITE(R) irons under the
name XL 2000(TM).

    GOLF SHOES AND  ACCESSORIES.   In 1999, the worldwide  wholesale  market for
golf shoes and accessories was  approximately  $1 billion.  In the golf shoe and
accessories  category,  Spalding generated net sales of $50 million in 2000, $48
million in 1999, $6 million in the  Transition  Period and $78 million in fiscal
1998.  Spalding  is a  leading  designer  and  marketer  of  professional  grade
spikeless  golf  shoes  and  premium  golf  gloves  under the  ETONIC(R)  brand.
ETONIC(R) golf shoes and gloves are marketed under several brand names including
the  DIFFERENCE(R)  and  DIFFERENCE  2000(TM),  both of which are premium  grade
products used by touring professionals. Premium golf accessories, including golf
bags,  hats, club covers,  tees,  towels,  and sports luggage are sold under the
STRATA(R), BEN HOGAN(R), TOP-FLITE(R) and ETONIC(R) brand names.

SPORTING GOODS PRODUCTS

    GENERAL.   The  sporting  goods  products  segment   includes   basketballs,
volleyballs,  footballs,  soccer  balls,  softballs  and other sports  products.
Spalding's  sporting goods products  (other than golf) accounted for $68 million
of net sales in 2000, $97 million in 1999, $27 million in the Transition  Period
and $130 million in fiscal 1998.

    BASKETBALLS.  Spalding  produced  the  first  basketball  in 1894 and is the
worldwide  market share leader in the estimated $150 million (1999) U.S.  market
for basketballs and basketball accessories.  Net sales were $37 million in 2000,
$46  million in 1999,  $13 million in the  Transition  Period and $58 million in
fiscal 1998.  Spalding is the exclusive official  basketball of the NBA and WNBA
and has used these endorsements, as well as the endorsement of other leagues and
professional  players,  to gain U.S. and worldwide  market share in this product
category.  Spalding's  NBA license  extends  through  July 2001,  while its WNBA
license  extends  through  September  2002.  Spalding and the NBA are completing
negotiations  for an  extension.  Management  believes that Spalding and the NBA
have agreed on all the material terms and conditions,  and that Spalding and the
NBA will sign an extension  incorporating those terms and conditions in the near
term.  There can be no assurance,  however,  that such extension will be signed.
Internationally,   the  Spalding   basketball  is  the  official  basketball  of
professional leagues and national teams in more than 25 basketball markets.

    In the first quarter of 2001,  Spalding launched its latest innovation,  the
INFUSION(TM)  basketball  which has a built in pump  mechanism to ensure  proper
inflation at all times.  Spalding continues to develop its leadership in
the basketball market through innovative product designs.

    OTHER SPORTS  PRODUCTS.  Spalding  markets a number of  other sporting goods
and sports related products serving softball,  volleyball, soccer, football, and
other sports  activities.  Spalding's  worldwide net sales of such items totaled
$30 million in 2000, $51 million in 1999,  $14 million in the Transition  Period
and $72 million in fiscal 1998. No single  sporting  good product  accounted for
more than 10% of the  Company's  total  revenues in 2000.  Spalding's  DUDLEY(R)
brand is the leading  supplier  of  softballs  in the world.  Spalding is also a
leading provider of volleyballs in the U.S. and has the endorsement of the NCAA.

    LICENSING.  Spalding is  one of the leading  general sports brand  licensors
with  approximately 69 licensees and  sub-licensees  worldwide.  In exchange for
royalty fees,  Spalding  grants  licensees the exclusive  right to use specified
Spalding  trademarks in product categories and geographical areas where Spalding
does not enjoy  competitive  advantages as a  manufacturer  of sporting goods or
related  products.  The  SPALDING(R),  TOP-FLITE(R),  ETONIC(R) and BEN HOGAN(R)
brand  names are  licensed in over 100 product  categories.  Worldwide  sales of
licensed Spalding products totaled  approximately  $267 million in 2000 and $271
million in 1999.  The loss of any single  licensee  would not be material to the
Company.

    Spalding  maintains  quality  control by  inspecting  licensed  products  to
maintain  compliance with Spalding's quality  standards.  Spalding believes that
selectively  licensing  its brand  names for use on  quality  products  promotes
greater consumer awareness of its name and  increases  its  visibility  in the
marketplace.  Spalding expects continued growth and market  penetration  through
licensing of footwear, active apparel and accessories for most sports.

    INTERNATIONAL.  Spalding sells or licenses its products in over 95 countries
through approximately 100 independent  distributors and six wholly-owned foreign
subsidiaries in Australia,  Canada,  Japan,  New Zealand,  Sweden and the United
Kingdom.  Spalding's international sales were $104 million in 2000, $101 million
in 1999, $15 million in the Transition Period and $128  million in fiscal 1998,
due in large part to the  popularity of golf and  basketball  outside the United
States.

    SALES,  MARKETING AND DISTRIBUTION.  In the U.S.,  Spalding  primarily sells
its products directly to approximately 20,000 retailers, including pro shops and
ranges,  off-course  golf  specialty  shops,  sporting  goods  stores  and  mass
merchants.  The Company also markets to  corporations  for special  events,  the
military and warehouse clubs and generates  sales from catalogs.  Outside of the
U.S., Spalding maintains direct sales, marketing and distribution  activities in
Canada,  Australia,  United Kingdom, Sweden, and New Zealand. Liaison offices in
Japan and Italy assist in the co-ordination of the regional  distributors in the
Japanese/Southeast Asian markets and European markets,  respectively, as well as
assist in the development activity in the respective regions. During 2000, 1999,
the Transition  Period and fiscal 1998, one U.S.  customer amounted to 12%, 13%,
24% and 13%,  respectively,  of net sales.  Marketing  for  Spalding's  golf and
sporting goods products  utilizes the  endorsements of professional  and amateur
leagues  and  players.  Spalding  believes  that  endorsements  by  professional
athletes and affiliations with sports organizations enhance Spalding's image and
improve sales of its products.  Spalding's golf marketing campaign  incorporates
all of its golf  products  and is  intended  to develop  the  TOP-FLITE(R),  BEN
HOGAN(R),  STRATA(R) and ETONIC(R)  brands as premium  products that will enable
golfers at all abilities to improve their games.

    MANUFACTURING,  PRODUCT  PROCUREMENT  AND RAW MATERIALS.  The manufacture of
Spalding products involves a number of highly  specialized  processes.  Spalding
manufactures golf balls, finishes custom golf balls and assembles its golf clubs
at its own facilities.  Spalding's primary manufacturing  facility is located in
Chicopee,  Massachusetts  and  comprises  approximately  838,000  square feet of
manufacturing,  office and distribution space.  Spalding believes that it is one
of the lowest cost producers of golf balls in the world.

    Spalding  utilizes  third-party  manufacturers,  located primarily in China,
Thailand,  Taiwan and other  countries in Southeast Asia, to produce most of its
non-golf ball products.  Such third-party  manufacturers  produced  products and
components  representing  approximately  40%, and 57% of Spalding's net sales in
2000 and  1999,  respectively.  No  single  supplier  accounted  for  products
representing  more  than  10% of  Spalding's  2000 or 1999 net  sales.  Spalding
believes it has alternative  sources of suppliers for  substantially  all of the
products currently produced by third-party manufacturers.

    Sourced  products are  manufactured  according to Spalding's  strict quality
control  specifications.  To assure the  quality of its  sourced  products,  the
Company  works  closely  with  third-party  manufacturers,  emphasizing  product
reliability and performance  standards and strict quality  controls to which all
producers  must  adhere.  Spalding  monitors  its  sourced  products  to improve
quality.  Certain of Spalding's third-party  manufacturers produce only Spalding
products.  In addition,  Spalding  jointly develops new products with certain of
its  suppliers as part of Spalding's  increasingly  global  product  development
efforts.  Spalding  maintains  a  liaison  office  in  Taiwan to assist in order
expediting and quality control.

     The  principal  raw materials  used by Spalding in the  manufacture  of its
products  include  synthetic  rubber,  ionomers,   metals,  synthetic  leathers,
composite materials and other chemical compounds,  as well as plastic, paper and
cardboard in  packaging.  While all raw  materials  are  purchased  from outside
sources,  Spalding  is  not  dependent  upon  a  single  supplier  in any of its
operations  for  any  material  essential  to  its  business  or  not  otherwise
commercially available.  Spalding has not experienced,  and does not anticipate,
any material  shortages of sourced  products or supplies used in  manufacturing.
Certain materials used in the production of golf balls are petroleum derivatives
and are therefore sensitive to fluctuations in the price of oil.

     TRADEMARKS  AND  PATENTS.  Spalding has  proprietary  rights to a number of
trademarks   that  are  important  to  its  business,   including   SPALDING(R),
TOP-FLITE(R),   ETONIC(R),  STRATA(R),  DUDLEY(R)  and  BEN  HOGAN(R).  Spalding
actively guards against trademark infringement through legal and other measures.

    Spalding's policy is to protect  proprietary  products by  obtaining
patents for such products when practicable. At December 31, 2000, Spalding owned
292 patents and had 196  applications  pending at the U.S.  Patent and Trademark
Office. In addition, Spalding also maintains patent protection for certain of
its  products  in  other   countries.   Although  the  Company   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.  The sporting goods industry is highly  competitive.  Spalding
competes primarily on the basis of product features, brand recognition,  quality
and price. Spalding competes with numerous national and international  companies
that manufacture and distribute  sporting goods and related equipment and sports
apparel.  Certain of Spalding's  competitors offer types of sports equipment not
sold  by  Spalding.   Some  of  Spalding's   competitors  are  larger  and  have
substantially greater financial and other resources. Spalding competes in one or
several individual market segments against  competitors such as Acushnet Company
(a subsidiary of Fortune  Brands,  Inc.,  the producer of Titleist,  Footjoy and
Cobra golf products),  Callaway Golf Co., Karsten Manufacturing Corp. (producers
of Ping golf  products),  Nike,  Inc.,  Rawlings  Sporting Goods Company,  Inc.,
Taylor  Made (a  subsidiary  of  Adidas  AG) and  Wilson  Sporting  Goods Co. (a
subsidiary of Amer Group Ltd.).

RESEARCH AND DEVELOPMENT

    The Spalding  research and development  department  consists of more than 30
scientists,  engineers and  technicians.  Spalding  introduced the first dimpled
golf ball in the U.S., invented the first two-piece golf ball, and developed and
patented  the  blended  Surlyn  cut-resistant  golf  ball  cover  as well as the
multi-layer  golf  ball.  Spalding  has also  introduced  a number  of golf club
innovations,  including  one of the  first  titanium  irons  in the  market.  In
addition,  the popularity of Spalding's patented  ZK-Composite(R)  materials for
basketballs  has  contributed  to the number one  market  share in that  market.
Research and  development  expenditures as a percentage of net sales amounted to
1.4% in 2000 and 1.5% in 1999.

ENVIRONMENTAL MATTERS

    The  Company's   operations  are  subject  to  federal,   state,  and  local
environmental  laws and regulations that impose  limitations on the discharge of
pollutants  into the  environment  and  establish  standards  for the  handling,
generation,  emission, release, discharge,  treatment,  storage, and disposal of
certain materials,  substances,  and wastes and the remediation of environmental
contaminants  ("Environmental  Laws") that  continue to be adopted and  amended.
These  Environmental Laws regulate,  among other things, air and water emissions
and  discharges  at the  Company's  manufacturing  facilities;  the  generation,
storage, treatment,  transportation and disposal of solid and hazardous waste by
the Company;  the  remediation of  environmental  contamination;  the release of
toxic substances, pollutants and contaminants into the environment at properties
operated by the  Company and at other  sites;  and, in some  circumstances,  the
environmental  condition  of  property  prior to a transfer  or sale  (including
certain  facilities  previously  owned or  operated  by the  Company).  Risks of
significant  costs and liabilities are inherent in the Company's  operations and
facilities,  as they are with other companies  engaged in like  businesses.  The
Company  believes,  however,  that its operations are in substantial  compliance
with all applicable Environmental Laws.

    While  historically  the costs of  environmental  compliance  have not had a
material  adverse effect on the  consolidated  financial  condition,  results of
operations  or cash  flows of the  Company,  the  Company  cannot  predict  with
certainty its future costs of  environmental  compliance  because of continually
changing  compliance  standards and technology.  The Company expects that future
regulations and changes in the text or interpretation of existing  Environmental
Laws may subject its operations to increasingly stringent standards.  Compliance
with such requirements may make it necessary, at costs which may be substantial,
to retrofit existing facilities with additional  pollution-control equipment and
to  undertake  new  measures in  connection  with the  storage,  transportation,
treatment and disposal of by-products and wastes.

    The Company has been named as a potentially  responsible  party ("PRP") with
respect to the  generation  and disposal of hazardous  substances at three sites
under the federal  "Superfund"  statute and/or certain analogous state statutes.
Pursuant  to various  federal,  state and local laws and  regulations,  PRPs can
become liable for the costs of removal  and/or  remediation  of those  hazardous
substances  disposed on, in or about such properties.  The liability  imposed by
the  Superfund  statute and  analogous  state  statutes  generally  is joint and
several and imposed  without  regard to whether  the  generator  knew of, or was
responsible  for, the presence of such hazardous  substances.  In the opinion of
management,  these  matters  will  not have a  material  adverse  effect  on the
Company's consolidated financial position or results of operations.

    Regulations  resulting  from the 1990  Amendments  to the Clean Air Act (the
"1990 Amendments") that will pertain to the Company's  manufacturing  operations
are  currently  not  expected to be  promulgated  for 3 to 5 years.  The Company
cannot predict the level of required capital expenditures  resulting from future
environmental  regulations  such as those  forthcoming  as a result  of the 1990
Amendments;  however, the Company does not anticipate  expenditures that will be
required by such regulations to be material.

EMPLOYEES

    The Company's worldwide workforce consisted of approximately 1,554 employees
as of December 31, 2000.

    At the Company's facility in Chicopee,  Massachusetts,  approximately 574 of
the Company's employees are represented under a collective  bargaining agreement
that expires in August 2001.  The Company does not  anticipate any difficulty in
extending or negotiating  this agreement when it expires.  The Company  believes
that its labor  relations are good and no material labor cost  increases,  other
than in the ordinary course of business, are anticipated.

EVENFLO

     As previously indicated, prior to August 20, 1998, Evenflo was a subsidiary
of the Company.  On August 20, 1998, Spalding sold 51% of the outstanding shares
of Evenflo's common stock to an affiliate (KKR 1996 Fund).  From August 20, 1998
through December 23, 1999,  Spalding  accounted for its remaining  investment in
Evenflo (42.4% of Evenflo's common stock) as an equity  investment.  On December
23, 1999,  Spalding sold its remaining  investment in Evenflo's  common stock to
KKR 1996 Fund.

    Evenflo's  products are subject to the  provisions  of the Federal  Consumer
Product Safety Act and the Federal Hazardous  Substances Act, the Highway Safety
Act of 1970  (collectively,  the "Safety Acts") and the regulations  promulgated
thereunder.  The Safety Acts authorized the Consumer  Products Safety Commission
("CPSC") to protect the public from products that present a substantial  risk of
injury.  The Highway Safety Act of 1970 authorizes the National  Highway Traffic
Safety  Administration  ("NHTSA") to protect the public from risk of injury from
motor vehicles and motor vehicle equipment.  The CPSC, the NHTSA and the Federal
Trade  Commission  (the  "FTC")  can  initiate  litigation   requesting  that  a
manufacturer be required to remedy,  repurchase or recall articles which fail to
comply with federal regulations,  which contain a safety related defect or which
represent a substantial risk or injury to others.  They may also impose fines or
penalties  on the  manufacturer.  Similar laws exist in some states and in other
countries in which Evenflo markets its products.

    On August 20, 1998,  Spalding and Evenflo  entered  into an  indemnification
agreement (the "Indemnification Agreement") pursuant to which Spalding agreed to
indemnify  Evenflo for all losses and  liabilities  of any kind  relating to any
non-Evenflo  related matters,  and Evenflo agreed to indemnify  Spalding for all
losses  and  liabilities  of any  kind  relating  to the  Evenflo  business.  In
addition,  Spalding  agreed to  indemnify  Evenflo  for the  expense  of product
recalls and  corrective  actions  relating to products  manufactured  by Evenflo
prior to August 20,  1998.  As of  December  31,  2000,  Spalding  has  incurred
$825,000  to date  ($6,000  in  2000) in costs  related  to the  Indemnification
Agreement.  As of August 20, 1998, Evenflo is solely responsible for its product
liability  exposure  with  respect to products  manufactured  by it on and after
August 20, 1998.

ITEM 2:  PROPERTIES

    The Company's  manufacturing  and  distribution  facilities  and U.S.  sales
operations  are  generally  located  on owned or leased  premises.  The  Company
conducts a significant  portion of its international  sales operations on leased
premises, which have remaining terms generally ranging from one to ten years.

    Substantially  all leases  contain  renewal  options  pursuant  to which the
Company may extend the lease  terms in  increments  of three to five years.  The
Company  does not  anticipate  any  difficulties  in renewing its leases as they
expire.  The Company believes that its facilities are suitable for their present
and intended  purposes and are adequate for the  Company's  current and expected
levels of operations.

    The  following  table sets forth  information  as of December  31, 2000 with
respect to the  manufacturing,  warehousing  and office  facilities  used by the
Company in its businesses:

                                                             OWNED/    SQUARE
 LOCATION                          DESCRIPTION               LEASED    FOOTAGE
 --------                -----------------------------       ------    -------
 Chicopee, MA            Manufacturing/Warehousing/Office    Owned     560,500
 Chicopee, MA            Warehousing/Office                  Owned     166,650
 Chicopee, MA            Manufacturing/Warehousing/Office    Owned     110,725
 Fort Worth, TX          Manufacturing/Warehousing/Office    Leased     75,000
 Gloversville, NY        Manufacturing/Warehousing/Office    Owned      65,225
 West Palm Beach, FL     Golf Equipment Test Site            Leased        625
 Woodbridge, Ontario     Manufacturing/Warehousing/Office    Leased     93,649
 Australia               Manufacturing/Warehousing/Office    Owned      59,493
 Australia               Warehousing/Office                  Leased     18,955
 Italy                   Office                              Leased      2,603
 Japan                   Office                              Leased      1,306
 New Zealand             Warehousing/Office                  Leased      9,297
 Sweden                  Warehousing/Office                  Leased     15,424
 Taiwan                  Office                              Leased      3,744
 United Kingdom          Warehousing/Office                  Leased     25,860
 Richmond, ME            Currently not in use                Owned      61,000

Substantially  all of the assets of the Company are encumbered by liens securing
the Company's senior credit facilities.

ITEM 3:  LEGAL PROCEEDINGS

    From  time  to time  the  Company   is  involved  in  patent  and  trademark
infringement  actions. The Company believes that it is not presently a defendant
or plaintiff in any patent and trademark  infringement  actions,  the outcome of
which  would  have a  material  adverse  effect  on its  consolidated  financial
position, results of operations or cash flows.

    In  addition,  the  Company  is a party to various  lawsuits  arising in the
ordinary course of business.  None of these lawsuits are believed to be material
with respect to the business assets and continuing operations of the Company.

    Evenflo  has  recalled  certain of its  products,  in  response  to consumer
complaints and following  internal  company  testing.  Product recalls have been
primarily in the juvenile car seat and play yard categories.  Remedial  measures
have included  increasing  notices to consumers on the product itself and design
revisions. As part of the Reorganization, the Company retained the liability for
recalls of all  Evenflo  products  manufactured  prior to August 20,  1998.  See
"Certain  Relationships  and Related  Transactions."  As of December  31,  2000,
Spalding has incurred  $825,000 to date ($6,000 in 2000) in costs related to the
Indemnification Agreement.

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the Company's security holders other
than the  re-election  of the  members of the board of  directors  (through  the
solicitation of proxies or otherwise) during the year ended December 31, 2000.

<PAGE>

                                     PART II

ITEM 5:  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's common stock is not registered  under the Securities  Exchange
Act of 1934, as amended,  and no trading market exists for such common stock. As
of March 20, 2001, there were 95 holders of the Company's common stock.

     The  Company  has never paid  dividends  on the  common  stock and does not
intend to pay dividends in the foreseeable  future.  As a holding  company,  the
ability  of the  Company  to pay  dividends  is  dependent  upon the  receipt of
dividends or other payments from Spalding.  The payment of dividends by Spalding
to the Company is subjected to certain  restrictions  under the Company's credit
agreements. Any determination to pay cash dividends in the future will be at the
discretion  of the Company's  board of directors and will be dependent  upon the
Company's results of operations,  financial condition,  contractual restrictions
and other factors deemed relevant at that time by the Company's board.

ITEM 6:  SELECTED FINANCIAL DATA

    The following  table sets forth  certain  selected  historical  consolidated
financial data of the Company. The historical  consolidated financial statements
of the Company for the years ended  December 31, 2000 and 1999,  the  Transition
Period and the three fiscal years ended  September  30, 1998 have been  audited.
The historical consolidated financial data for the years ended December 31, 2000
and 1999,  the Transition  Period and fiscal year ended  September 30, 1998 have
been  derived  from,  and  should  be  read in  conjunction  with,  the  audited
consolidated  financial  statements of the Company and the related notes thereto
included elsewhere in this Form 10-K. See "Management's  Discussion and Analysis
of Financial  Condition and Results of  Operations"  included  elsewhere in this
Form 10-K.

<TABLE>
<CAPTION>



                                                                       OCTOBER 1,
                                                                         1998
                                                   YEARS ENDED         THROUGH
                                                   DECEMBER 31,      DECEMBER 31,        YEARS ENDED SEPTEMBER 30,
                                                2000         1999        1998(4)      1998         1997         1996
                                            ----------   ----------   ---------    ---------    ----------   ---------
                                                                                     (DOLLARS IN THOUSANDS)
OPERATING STATEMENT DATA(3)(5)

<S>                                         <C>          <C>          <C>          <C>          <C>          <C>
Spalding net sales ......................   $ 408,873    $ 431,172    $  56,774    $ 536,901    $ 553,436    $ 471,338
Evenflo net sales .......................                                            290,791      296,743      237,165
                                            ---------    ---------    ---------    ---------    ---------    ---------
Total net sales .........................     408,873      431,172       56,774      827,692      850,179      708,503
Cost of sales ...........................     200,199      249,729       77,420      557,417      560,179      446,425
                                            ---------    ---------    ---------    ---------    ---------    ---------
Gross profit (loss) .....................     208,674      181,443      (20,646)     270,275      290,000      262,078

Selling, general and administrative
  expenses ..............................     182,961      177,490       61,354      297,800      258,089      222,044
Royalty income, net .....................     (12,804)     (11,373)      (2,039)     (13,509)     (14,109)     (14,339)
Restructuring costs(1) ..................                      812        2,969       21,563       12,001
1994 Management Stock Ownership Plan
  expense ...............................                                                                       20,828
Recapitalization costs ..................                                                                        7,700
                                            ---------    ---------    ---------    ---------    ---------    ---------
Income (loss) from operations ...........      38,517       14,514      (82,930)     (35,579)      34,019       25,845
Interest expense, net ...................      60,427       54,970       13,911       78,041       71,326       37,718
Currency (gain) loss, net ...............       3,581         (543)      (2,595)       2,936        1,236          775
Equity in net (earnings) loss of
  Evenflo Company, Inc. .................                      248        3,768       (1,476)
                                            ---------    ---------    ---------    ---------    ---------    ---------
Loss before income taxes
  and extraordinary loss ................     (25,491)     (40,161)     (98,014)    (115,080)     (38,543)     (12,648)
Income taxes (benefit) ..................      (5,485)     (13,100)     (30,193)     (34,218)      (8,503)       9,206
                                            ---------    ---------    ---------    ---------    ---------    ---------
Loss before extraordinary
  loss ..................................     (20,006)     (27,061)     (67,821)     (80,862)     (30,040)     (21,854)
Extraordinary loss on early
extinguishment of debt, net of
income tax benefit of $0, $140, $0,
$3,182, $0, and $3,200,
respectively ............................                      260                     5,909                     5,987
                                            ---------    ---------    ---------    ---------    ---------    ---------
Net loss ................................   $ (20,006)   $ (27,321)   $ (67,821)   $ (86,771)   $ (30,040)   $ (27,841)
                                            =========    =========    =========    =========    =========    =========
Ratio of earnings to fixed
  charges(2) ............................          --           --           --           --           --           --

BALANCE SHEET DATA(3)(5)

Working capital .........................   $  52,782    $  19,440    $  48,965    $ 123,939    $ 127,877    $ 167,360
Total assets ............................     458,790      444,412      476,177      532,636      759,802      689,337
Long-term debt, including
  capital leases (net of current
  portion) and redeemable preferred
  stock .................................     559,528      510,700      524,519      503,074      609,900      775,800
Shareholders' deficiency ................    (245,867)    (226,212)    (211,441)    (140,477)    (172,060)    (350,020)

</TABLE>

----------

(1) See Note F of the Notes  to the Consolidated  Financial Statements appearing
    elsewhere in this Form 10-K.

(2) For purposes of determining the ratio of earnings to fixed charges, earnings
    are defined as earnings  (loss)  before income  taxes,  extraordinary  loss,
    cumulative effect of accounting changes,  and other  comprehensive  earnings
    (loss) plus "fixed charges" (except that capitalized  interest is excluded).
    "Fixed charges" consist of interest on all indebtedness, whether expensed or
    capitalized,  amortization  of deferred  financing  costs,  and one-third of
    rental  expense on  operating  leases,  representing  that portion of rental
    expense deemed by the Company to be attributable to interest. The deficiency
    of earnings to fixed charges for 2000,  1999, the Transition  Period and for
    fiscal 1998, 1997 and 1996 was approximately $20.0 million,  $40.2 million,
    $98.0   million,   $115.1   million,   $38.5  million  and  $12.6   million,
    respectively.

(3) Certain  reclassifications  have been made to prior year  amounts to conform
    with current year presentations.

(4) Following  fiscal 1998,  the Company  elected to change its  year-end  from
    September 30 to December 31.

(5) Prior to 1999, costs for a majority of the U.S.  inventories were determined
    by the use of the  last-in,  first out costing  method  ("LIFO").  Effective
    January 1, 1999, the Company changed its method of valuing U.S.  inventories
    from  LIFO  to the  first-in,  first-out  costing  method  ("FIFO")  to more
    properly reflect the method of product consumption.  All previously reported
    amounts have been restated to reflect the  retroactive  application  of this
    accounting change as required by generally accepted  accounting  principles.
    As of  December  31,  1998,  the effect of this  change  resulted  in a $5.1
    million  decrease in  inventory,  a $1.8  million  increase in deferred  tax
    assets and an overall $3.3 million decrease in equity. The accounting change
    increased  the net loss for the fiscal  years ended  September  30, 1998 and
    1996 by $1.9  million,  and $0.2  million,  respectively.  The effect on the
    fiscal year ended September 30, 1997 was insignificant.

ITEM 7: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

RESULTS OF OPERATIONS

  YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

    NET SALES  for 2000 were $408.9  million as  compared to $431.2  million for
1999,  representing a decrease of $22.3 million,  or 5.2%. Sales of discontinued
products included in 1999 were $36.7 million.  Excluding  discontinued products,
net sales increased 3.8% for 2000 compared to 1999.

    U.S. Golf net sales  increased $3.4 million,  or 1.4%, to $252.9 million for
2000 as compared to $249.5  million for 1999. The increase is driven by improved
net sales during 2000 of the  STRATA(R)  and  TOP-FLITE(R)  XL 2000(R) golf ball
lines as compared to 1999.  These gains were  partially  offset by a decrease in
net sales of other golf ball products,  golf clubs and golf shoes.  The decrease
in golf  club net sales is due to the  SPALDING(R)  and  TOP-FLITE(R)  family of
clubs as the  Company  reevaluated  its  strategy  for these  products  in 2000,
partially  offset by an increase in net sales of BEN  HOGAN(R)  clubs due to the
Company's  successful  introduction of the new APEX PLUS(R) irons in the fourth
quarter of 1999.

    Net sales of  U.S.  Sporting  Goods  decreased  to $52.0  million in 2000 as
compared to $80.5  million in 1999.  The  decrease is  primarily a result of the
Company's  SKU  rationalization  and  decision  to  exit  low-margin   products,
including  the  athletic  shoe  portion of the  ETONIC(R)  brand and to a lesser
extent from the decline in the net sales of basketballs.

    International  net  sales  increased  2.7%  to  $104.0  million  in  2000 as
compared to $101.2 million in 1999. Although  international net sales increased,
the  increase  was  negatively  impacted  by the  strength  of the U.S.  dollar.
Excluding the negative impact of foreign currency translation, international net
sales increased by 6.0%.  This increase was a result of the  introduction of BEN
HOGAN(R) irons in international markets during 2000.

    GROSS  PROFIT  improved  to $208.7  million  for 2000 as compared  to $181.4
million in 1999,  an increase of $27.3  million,  or 15.0%.  Gross margin (gross
profit as a % of sales)  increased  8.9  percentage  points to 51.0% for 2000 as
compared to 42.1% for 1999.  Improvements  in gross  profit and gross margin are
due to a shift in product mix  towards  higher-end  golf  products  namely,  BEN
HOGAN(R),  STRATA(R)  and  TOP-FLITE(R).  In  addition,  improvements  have been
generated by efficiencies and cost savings achieved in manufacturInG operations.
During 1999, the Company recorded an inventory write-down totaling $8.7 million.
Excluding  the  unfavorable  impact of the inventory  write-down in 1999,  gross
profit and gross  margin  improved  in 2000 by 9.7% and 7.0  percentage  points,
respectively.

    SELLING,  GENERAL AND ADMINISTRATIVE  ("SG&A") EXPENSES  increased to $183.0
million  for 2000 as  compared  to $177.5  million  for 1999.  The  increase  is
principally  due to higher  advertising  and  promotion  spending to drive sales
across all distribution channels.

    ROYALTY INCOME  increased $1.4 million to $12.8 million  in 2000 as compared
to $11.4 million in 1999. The increase was  principally  due to higher  footwear
royalties in the U.S. and increased license fees from other athletic products.

    RESTRUCTURING AND OTHER UNUSUAL COSTS.  The restructuring  costs incurred in
1999 of $0.8  million  were a result  of the  elimination  of  positions  at the
Company's  corporate  office  in  Chicopee,  Massachusetts  and  costs  for  the
consolidation of facilities.

    INTEREST EXPENSE  increased $5.4 million to $60.4 million in 2000 from $55.0
million for 1999,  an increase of 9.8%.  The increase is  principally  due to an
increased  average  borrowing  rate on domestic  debt of 10.5% from 9.7%, a 0.8%
increase. Additionally, the Company realized a net benefit of approximately $0.8
million  from an interest  rate cap in 1999  versus a net cost of  approximately
$0.2 million in 2000,  a $1.0 million  difference.  The  Company's  average debt
balance for 2000 was $548.6 million compared to $548.0 million during 1999.

    NET CURRENCY  LOSSES  increased to $3.6 million in 2000  from a gain of $0.5
million in 1999.  The losses in 2000 were a result of the  strengthening  of the
U.S.  dollar relative to the foreign  currencies in which the Company  generates
revenue.

     EVENFLO.  During  1999,  Spalding  incurred a loss of $0.2 million from its
42.4%  investment in the common stock of Evenflo  Company,  Inc. On December 23,
1999, the KKR 1996 Fund ("KKR 1996 Fund"), a limited partnership affiliated with
Kohlberg  Kravis  Roberts  & Co.,  L.P.  purchased  Spalding's  remaining  42.4%
investment  in  the  common  stock  of  Evenflo.  The  net  proceeds  from  this
transaction  of $23.0  million were used to repay term loans under the Company's
senior credit facilities.

    INCOME  TAXES  were a  benefit  of $5.5  million  in 2000 as  compared  to a
benefit of $13.1 million in 1999. The decrease in the tax benefit  totaling $7.6
million is a result of a decrease in the  Company's  loss before income taxes in
2000 as compared to 1999.  In addition,  during 2000,  the effective tax rate of
22% varied from the U.S.  federal  statutory rate of 35% due to actual  non-U.S.
witholding  taxes paid and  inability  to assure a tax  benefit  on losses  from
non-U.S. operations.

    YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
    ("PRO FORMA 1998").

    BASIS OF  PRESENTATION.  On August 20, 1998,  the Company  separated its two
businesses,  Spalding  and Evenflo,  into two  stand-alone  companies  (Spalding
retained a 42.4%  ownership in Evenflo).  From August 20, 1998 through  December
23, 1999,  the Company  accounted for its remaining  investment in Evenflo as an
equity  investment.  On  December  23,  1999,  the  Company  sold its  remaining
investment  in  Evenflo's  common  stock  to the KKR  1996  Fund.  In  addition,
effective October 1, 1998, the Company changed its year-end from September 30 to
December 31. For improved comparability, the Company has provided below, summary
pro forma  results of  operations  for the year ended  December  31, 1998 giving
impact to the  elimination of Evenflo from the historical  information as if the
Reorganization had occurred on January 1, 1998. The management's  discussion and
analysis  provides  analysis  comparing  results for the year ended December 31,
1999 to the pro forma year ended December 31, 1998.
<PAGE>


                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

                 CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS

               FOR THE YEAR ENDED DECEMBER 31, 1999 AND PRO FORMA

                      FOR THE YEAR ENDED DECEMBER 31, 1998

                          (DOLLAR AMOUNTS IN THOUSANDS)




                                                            YEARS ENDED
                                                            -----------
                                                                     PRO FORMA
                                                     DECEMBER 31,   DECEMBER 31,
                                                         1999           1998
                                                    ------------    -----------

 NET SALES.........................................   $431,172       $501,120
   Cost of sales...................................    249,729        344,706
                                                       -------        -------
 GROSS PROFIT......................................    181,443        156,414
   Selling, general and administrative expenses....    177,490        250,584
   Royalty income, net.............................    (11,373)       (11,225)
   Restructuring and other unusual costs...........        812         22,737
                                                       -------        -------
 INCOME (LOSS) FROM OPERATIONS.....................     14,514       (105,682)
   Interest expense, net...........................     54,970         66,441
   Currency gain, net..............................       (543)        (1,225)
   Equity in net loss of Evenflo Company, Inc......        248          2,292
                                                       -------        -------
 LOSS BEFORE INCOME TAXES AND EXTRAORDINARY LOSS...    (40,161)      (173,190)
   Income tax   benefit............................    (13,100)       (54,415)
                                                       -------        -------
 LOSS BEFORE EXTRAORDINARY LOSS....................    (27,061)      (118,775)
   EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF
      DEBT, NET OF INCOME TAX BENEFIT..............        260          4,609
                                                       -------        -------
 NET LOSS..........................................   $(27,321)     $(123,384)
                                                     ==========     ==========


    KEY DEVELOPMENTS.  During 1999, the Company achieved significant improvement
in its financial  results due to its  commitment in  implementing  the strategic
initiatives  developed during the Transition  Period of (i)  repositioning  core
brands for growth,  (ii)  restructuring the organization to increase  efficiency
and  effectiveness  and (iii)  re-engineering  business systems and practices to
lower working capital and operating  expenses.  Also driving these  improvements
was a new senior  management  team  committed to delivering  on these  strategic
initiatives.

    As a  result  of the  new  brand  strategy,  the  Company  launched  the new
TOP-FLITE(R) XL 2000(R) golf ball line that became the number one new golf ball
line of the year with sales more than double the combined  results from new golf
ball products from Nike, Cobra and Taylor-Made. In addition, the STRATA(R) brand
was  successfully  relaunched and sales increased by 76% over 1998. In 1999, the
Company also  introduced  the APEX  PLUS(R) line of BEN HOGAN(R)  irons.  These
forged  clubs are  designed  for game  improvement  for the better  and  average
golfer.

    In 1999, the Company  continued to increase the effectiveness and efficiency
of the organization  through the  restructuring of operations.  To this end, the
Company reviewed operations to rationalize its infrastructure.  As a result, the
Company  closed  its  warehousing   operations  in  Reno,  Nevada,   closed  the
manufacturing  facility  in  Richmond,   Maine  (Etonic)  and  consolidated  the
Gloversville, New York club assembly into the Chicopee,  Massachusetts location.
The  consolidation  of its facilities and increased  efficiency at its corporate
office resulted in the elimination of approximately 274 positions during 1999.

    During October 1999,  the Company substantially completed the implementation
of  a  fully-integrated  computer  system  for  its  domestic  operations.   The
implementation  included  significant changes to customer service,  warehousing,
distribution  and financial  processes.  The Company  encountered  some start-up
difficulties   that   primarily   affected  the   efficiency  of  warehouse  and
distribution  operations.  While the  Company  was able to process  and  fulfill
orders,  it was not able to do so at an adequate rate,  thus risking the loss of
future  business  if  immediate  action  was not taken to  fulfill  all  orders.
Accordingly,  the Company  returned to certain  components of its prior computer
system to deliver a level of  distribution  activity  that will meet the ongoing
demands for its products.  The financial modules of the new computer system were
successfully implemented in October 1999 and were in use throughout 2000. During
2000,  the Company  concluded  that those  aspects of the system  which had been
deactivated  during the fourth quarter of 1999 would not be  reactivated.  While
the Company's current computer systems environment adequately supports its basic
business needs, selected system upgrades are planned during 2001.

    NET SALES are gross sales net of returns,  allowances  and trade  discounts.
The Company's net sales  decreased  $69.9 million or 14.0% to $431.2 million for
1999. Of the total decrease,  $65.6 million occured in the first half of 1999 as
compared to the same period during Pro Forma 1998 due to the Company's strategic
decision to exit low margin products and loss generating business. U.S. Golf net
sales  decreased  9.5% to $249.5 million for 1999 compared to $275.7 million for
Pro Forma 1998. The decrease in net sales was expected as the Company  continued
its plan to exit  low  margin  products  and loss  generating  businesses.  U.S.
Sporting  Goods  decreased  23.8% to $80.5  million for 1999  compared to $105.6
million for Pro Forma 1998.  The  decrease is across all product  lines,  and is
also primarily  attributable to the Company's strategy of eliminating lower end,
less profitable products.  International sales decreased 15.5% to $101.2 million
for 1999  compared  to $119.8  million  for Pro Forma  1998.  The  international
decrease  is related to the 1998  closure of  subsidiary  operations  in Mexico,
Spain, Italy, France and Germany and the downsizing of operations in Japan.

    GROSS  PROFIT is net sales  less cost of  sales,  which  includes  the costs
necessary to make the Company's  products,  including the costs of raw materials
and production. Comparative discussions of gross profit exclude unusual and non-
recurring  charges for  inventory  write-downs  ($8.7 million for the year ended
December 31, 1999;  $20.6  million for the year ended  December 31,  1998).  The
Company's  gross profit  increased to $190.1 million in 1999 from $177.0 million
for Pro Forma 1998,  an increase of $13.1  million  despite the  decrease in net
sales noted above.  Gross profit as a percentage of net sales,  or gross margin,
increased to 44.1% for 1999 from 35.3% for Pro Forma 1998.

    The  increase in the gross  profit  margin  rates  was  primarily  driven by
improved  margins  in golf  balls,  golf  accessories,  basketballs,  as well as
increased international gross profit margins.  Improvements in gross margin were
also favorably impacted by the non-recurrence of downward pricing pressures that
resulted in a $10.6 million reduction of sales in 1998.

    SELLING,  GENERAL AND  ADMINISTRATIVE  ("SG&A") EXPENSE  decreased to $177.5
million  for 1999 from $250.6  million  for Pro Forma 1998,  a decrease of $73.1
million or 29.2%.

    SG&A in the U.S. decreased to $146.7 million from $199.9 million, a decrease
of $53.2 million or 26.6%.  The decrease is primarily  attributable to (i) $20.0
million  of lower  advertising  expenses  related  to golf  clubs and (ii) $41.7
million  of  reduced  selling  and  administrative  costs  associated  with  the
restructuring  of the sales  force and  corporate  office  activities  which was
offset by $8.5 million in implementation  costs associated with a new integrated
information system for domestic  operations.  Internationally,  the SG&A expense
decreased to $30.8  million from $50.7  million,  a decrease of $19.9 million or
39.3%.  The decrease in the  International  segment was  primarily the result of
expense  reductions  within  Japan's  downsized  operation  and the  closure  of
operations in Mexico,  Spain,  France,  Germany and Italy.  The remainder of the
reduction  is a result  of the  elimination  of U.S.  overheads  related  to the
international operations.

    ROYALTY INCOME  increased to $11.4 million in 1999 months from $11.2 million
for Pro Forma 1998.

    RESTRUCTURING  AND OTHER UNUSUAL COSTS.  During 1999,  the Company  recorded
$0.8 million of  restructuring  charges.  These charges  included  costs for the
further  consolidation  of facilities  and the  elimination  of positions at the
Company's  headquarters.  Restructuring  costs for 1998 were $22.7  million  and
included  severance costs,  closure of the Company's  corporate office in Tampa,
Florida and closing expenses for operations in France, Italy, Spain and Germany.
Refer to note F of the consolidated financial statements.

    INTEREST EXPENSE decreased $11.4 million to $55.0 million in 1999 from $66.4
million for Pro Forma 1998, a decrease of 17.2%. The decrease is principally due
to the sale of a majority  interest in Evenflo and the paydown of $278.8 million
of debt on August 20,  1998 with the  proceeds.  This  repayment  resulted  in a
decrease  in  average  borrowings  under  the  Company's  Credit  Facility.  The
Revolving Credit Facility and the Term Loans make up the outstanding  portion of
the  Company's  $650.0  million  Credit  Facility (the "Credit  Facility").  The
Company has outstanding  $200.0 million of 10 3/8% Series B Senior  Subordinated
Notes ("Notes") due 2006. The Company's average balance under the Notes,  Credit
Facility, certain non-U.S. borrowing and other financing agreements for 1999 was
$548 million compared to $674 million during Pro Forma 1998.

    NET CURRENCY  GAINS of $0.5 million were $0.7 million  lower in 1999 than in
Pro Forma 1998. See "Liquidity and Capital Resources".

    INCOME TAXES were a tax benefit of $13.1 million for 1999,  which represents
an effective  tax rate 32.6% in relation to a loss before  income taxes of $40.2
million.  For Pro Forma 1998,  the tax benefit was $54.4 million based on a loss
before taxes of $173.2 million, representing an effective tax rate of 31.4%. For
both years, the effective tax rates varied from the U.S. federal  statutory rate
of 35% due to the  inability  to utilize  the tax  benefit  of the  losses  from
non-U.S. operations, coupled with non-U.S. withholding taxes.

    NET LOSS was $27.3 million for 1999 compared to $123.4 million for Pro Forma
1998. The $96.1 million improvement was a result of a $120.2 million increase in
earning  from  operations  (driven  by  improvement  in gross  profit  and gross
margins,  decreases in SG&A and lower restructuring  costs), plus a decrease in
interest  expense  of  $11.4  million,  a  decrease  of $2  million  in the loss
associated with the Company's remaining investment in Evenflo and a $4.6 million
extraordinary loss incurred in 1998 for the early extinguishment of debt (net of
taxes) as compared to $0.3 million for 1999.  These gains were partially  offset
by $41.3 million of lower income tax benefits.

    PERIOD OF OCTOBER 1, 1998 THROUGH DECEMBER 31, 1998 ("TRANSITION PERIOD")
    COMPARED TO OCTOBER 1, 1997 THROUGH DECEMBER 31, 1997 ("1997 PERIOD")

     KEY  EVENTS  DURING  THE  TRANSITION  PERIOD.  During  October  1998 of the
Transition  Period,  Edwin L. Artzt (former Chairman and Chief Executive Officer
of  Proctor  &  Gamble   Company)  was  named  Chairman  of  the  Company  which
subsequently  hired James R. Craigie (former  Executive Vice President of Kraft,
Inc.) as President and Chief Executive  Officer in December 1998. Under this new
leadership,  the management of the Company  formulated  revised brand strategies
for its key product lines to reposition the  businesses to improve  earnings and
cash flow and grow market share.

    This new strategy  included  repositioning  the  SPALDING(R),  TOP-FLITE(R),
ETONIC(R),  STRATA(R),  BEN HOGAN(R) and DUDLEY(R)  brands To make the Company a
premier  competitor  in the  sporting  goods  industry.  It  also  included  the
transitioning  of a new senior  management  team, key personnel in the marketing
department,   a  review  of  the  Company's   distribution   and   manufacturing
infrastructure  and a  9-month  implementation  of the SAP  integrated  computer
software.

    To  implement  the new  brand  strategy,   the  Company  made the  strategic
decision to clear the market of certain  products by (i)  incurring  the cost of
repositioning TOP-FLITE(R) golf clubs to reflect pricing pressures and continued
softness in the club market  (including  price  adjustments  and  acceptance  of
higher  than normal  returns  rates),  (ii)  eliminating  discontinued  golf and
sporting goods products through close-out sales,  write-downs and write-offs and
(iii)  reducing  SKU's in all product  categories.  As a result of these actions
during the Transition  Period,  the Company incurred price  adjustments of $10.6
million,  made inventory  write-downs  or write-offs  totaling $20.6 million and
accepted  returns of $11.2 million.  Restructuring  costs of $3.0 million during
the  Transition   Period  are  comprised   primarily  of  closing  expenses  for
international  affiliates in central Europe and severance expense.  In addition,
the Company sold closed-out merchandise of $22.2 million (at negative margins).

     To achieve these  objectives,  golf balls were  separately  positioned  and
re-launched  under the STRATA(R) and  TOP-FLITE(R) XL 2000(R)  brands.  New golf
ball products were  introduced  under the STRATA(R) and TOP- FLITE(R) XL 2000(R)
brands that focus on key  attributes  that a golfer may want to improve in their
game. The new products  include  STRATA(R) TOUR  PROFESSIONAL(TM),  STRATA(R) ML
BALATA(TM),  STRATA(R)  DISTANCE(TM),  TOP-FLITE(R) XL 2000(R) EXCEPTIONAL SPIN,
TOP-FLITE(R) XL 2000(R) SUPER TITANIUM,  TOP-FLITE(R) XL 2000(R) EXTRA LONG, AND
TOP-FLITE(R)  XL  2000(R)  MAGNA  EXTRA  CONTROL(TM).  The  STRATA(R)  family of
products  will  continue  to  be  manufactured   under  the  Company's  patented
three-piece  technology.  TOP-FLITE(R) XL 2000(R)  products  provide golfers the
ability to increase distance,  accuracy, or control. All of the new TOP-FLITE(R)
XL 2000(R) products are manufactured  with tungsten in the core for softness and
feel and  titanium in the cover for  enhanced  distance.  Traditional  TOP-FLITE
XL(R)  products,  already  considered  by the Company to be the largest  selling
family of golf balls, will continue to be sold in key channels of distribution.

    The  Company's  golf  club  brands  were  aligned  under  the BEN  HOGAN(R),
TOP-FLITE(R)  and  SPALDING(R)  trademarks  to more clearly  define their target
audiences. ETONIC(R) golf shoes and gloves as well as SPALDING(R) basketball and
the other sporting  goods products also underwent a similar SKU  rationalization
and brand repositioning which will emphasize quality and image versus price.

    NET SALES.  The  Company's net sales  decreased to $56.8 million  during the
Transition  Period from $162.2 million in the 1997 Period,  a decrease of $105.4
million. The decrease of $105.4 million is primarily attributable to the loss of
Evenflo's sales which totaled $69.7 million in the 1997 Period and did not recur
in the  Transition  Period  because  Evenflo  was sold in August of 1998,  price
adjustments  of  $10.6  million  (primarily  golf  products),  accepted  returns
totaling  $11.2   million,   decline  in  sales  revenues  of  $6.3  million  in
international markets (particularly in Mexico, Italy, France, Germany, Spain and
Japan)  and  less  aggressive   sales  programs  while  the  brands  were  being
repositioned.  While the fourth  calendar  quarter  was  seasonally  the slowest
quarter, as a result of pursuing the brand repositioning, the Company's revenues
declined to $56.8 million.

    Golf sales  decreased to $29.7 million for the Transition  Period from $69.2
million for the 1997  Period,  a decrease of $39.5  million or 57.1%.  Core line
full margin product sales amounted to $36.2 million while sales of golf products
being  rationalized as part of the new brand strategy  totaled $14.0 million and
were  sold at a  margin  loss.  The  decrease  of  $39.5  million  is  primarily
attributable  to pricing  adjustments to customer  inventory for changes in golf
club and other golf products totaling $10.1 million and returns of $10.4 million
suppressed  the net  sales  of golf  products  to an even  greater  extent.  The
remaining  difference is attributable  to less aggressive  sales programs during
the  Transition  Period  resulting  from the  repositioning  of the  brands.  In
addition,  as the golf  ball  line  was  being  overhauled  for a  January  1999
introduction, sales programs were not as aggressive as in previous years.

    Sporting  goods  sales  were  $22.7  million  for the  Transition  Period in
comparison to $19.6 million for the 1997 Period,  an increase of $3.1 million or
15.8%.

    International  sales  decreased  $6.3  million to $15.1  million  during the
Transition  Period in comparison  to the 1997 Period.  The decrease is primarily
attributable  to the closing of the  Mexico,  Spain,  Italy,  France and Germany
operations  that  occurred  during  fiscal  1998 as  part  of the  restructuring
activities.  These  operations  were  closed  during  Fiscal  1998 and the sales
responsibilities  transitioned to third party distributors.  The Japan operation
was downsized  significantly  and the sales  responsibility  was transitioned to
third party distributors. These six closed operations accounted for $4.7 million
of the  decrease.  Weak  economic  conditions in Pacific Rim markets made up the
remainder of the shortfall.

    GROSS  PROFIT.  The  Company's  gross profit  decreased to a negative  $20.6
million during the Transition Period from $48.6 million for the 1997 Period or a
difference of $69.2 million. The sale of Evenflo represents $11.6 million of the
decline.  The remainder is primarily comprised of $7.6 million of lost margin on
product  discontinued  as part of the brand  rationalization,  $5.2  million  in
higher sales returns,  $10.6 million in  adjustments  to customer  inventory for
changes in golf club  prices,  and $20.6  million  in  inventory  writedowns  or
write-offs related to products discontinued as part of the new brand strategies.
Additionally,  lower sales in the Transition  Period accounted for the remainder
of the difference.

    U.S.  golf  and  sporting  goods  products  represented  95% of  the  margin
variance.  International  gross profit was lower than the  comparable  period in
1997 as a result of actions similar to those undertaken in the U.S. However, the
volume of product that was necessary to be discontinued in international markets
was a much smaller percentage of the total inventory on hand.

    SELLING,  GENERAL AND ADMINISTRATIVE  ("SG&A") EXPENSES.  The Company's SG&A
expenses decreased to $61.4 million for the Transition Period from $61.8 million
for the 1997  Period,  a decrease of $0.4 million or 0.6%.  Evenflo  represented
$15.2 million of the 1997 Period amount and zero of the Transition  Period total
as  Evenflo  was  sold in  August  1998.  Giving  effect  to the  Evenflo  sale,
Spalding's   SG&A  increased  by  $14.8  million.   The  increase  is  primarily
attributable to higher  advertising and general and  administrative  expenses in
the U.S. Advertising increased by $3.8 million due to (i) pro golf tour expenses
totaling $2.1 million,  (ii) expenses related to the NBA contract  totaling $1.2
million and (iii) other advertising  expenses totaling $0.4 million. The general
and administrative  increases relate to (i) professional and consulting services
related expenses  totaling $2.0 million,  (ii) insurance and accruals related to
Evenflo  product  recall claims  totaling $2.8 million and (iii) $1.4 million of
selling  expenses  related to changing from a commission  based  salesforce to a
salaried salesforce.

    ROYALTY  INCOME.  Royalty  income is  primarily  from  licensing  Spalding's
worldwide  trademarks.  Royalty  income  decreased  to $2.0  million  during the
Transition  Period  versus  $4.0  million  of earned  royalties  during the 1997
Period. The decrease of $2.0 million is attributable to the following:  (i) $1.3
million of the decline is attributable to the sale of Evenflo, (ii) $0.2 million
lower  clothing  royalties  in the U.S. as a result of a  reorganization  of the
product   category  and  (iii)  $0.5  million   primarily   resulting  from  the
discontinuance of licensees that no longer matched the brand strategies.

    RESTRUCTURING  COSTS. In the Transition Period, the Company had $3.0 million
of restructuring costs comprised primarily of (i) severance and related expenses
totaling  $2.3 million, (ii)  expenses  related to closing the  international
operations in France,  Spain,  Italy and Germany totaling $0.4 million and (iii)
foreign exchange losses totaling $0.3 million.

    INTEREST  EXPENSE.  Interest expense decreased $4.3 million to $13.9 million
in the Transition Period from $18.2 million for the 1997 Period. The decrease is
principally  due to the sale of Evenflo and the repayment of the $278.8  million
of debt on August 20, 1998. The Company's weighted average outstanding  balances
for the Transition Period of $518.7 million compared to $673.2 million under the
Company's  borrowing  arrangements  in the  1997  Period.  The  decrease  in the
Company's weighted average  outstanding  balances for the Transition Period were
partially  offset by higher  interest  rates  agreed to in an  amendment  to the
Company's  senior credit  facility.  The Company's  average U.S.  borrowing rate
increased to 10.2% from 9.9% in the 1997 Period.

    CURRENCY GAIN (LOSS).  For the  Transition  Period,  the Company's  currency
gain of $2.6 million was $3.5 million higher than the currency loss for the 1997
Period. See "Liquidity and Capital Resources."

    INCOME TAXES. In the Transition Period, the Company recorded a $30.2 million
tax benefit, which represents an effective income tax rate of 31% in relation to
its loss before  income  taxes.  The inability to utilize the tax benefit of the
losses from  non-U.S.  operations,  coupled  with  payments of certain  non-U.S.
withholding  taxes,  resulted in a lower than expected  statutory  effective tax
rate.

    NET  LOSS.  The  Company  recorded  a net  loss  of  $67.8  million  for the
Transition  Period compared to a $18.9 million net loss for the 1997 Period or a
variance of $48.9 million.  The primary  variances  included in the decreases to
earnings  were:  (i) $5.2 million loss on higher than normal sales  returns that
were a result of the  lower  sales  due to a change  in the  Company's  branding
strategies  and market  pressures in golf club,  (ii) $20.6 million in inventory
writedowns and write-offs  related to products  discontinued  as part of the new
brand  strategies  and (iii) $10.6  million for a one time price  adjustment  to
customer's field inventories of golf clubs to reflect market pricing  pressures.
In addition,  the Company did not  aggressively  execute its previous  marketing
strategy during the period it was developing its new brand strategy.

LIQUIDITY AND CAPITAL RESOURCES

    HISTORICAL.  Historically,  the Company's  primary sources of liquidity have
been borrowings under various credit facilities, and periodically, proceeds from
the issuance of common stock and proceeds from the issuance of preferred  stock.
Many sporting goods marketed by Spalding,  especially golf products,  experience
higher  levels of sales in the  spring and  summer  months.  Based on a calendar
year, the Company's need for cash historically has been greater in its first and
fourth  quarters when cash  generated  from  operating  activities  coupled with
drawdowns from bank lines have been invested in receivables and inventories.

    In 2000,  operating activities used $27.4 million of net cash as compared to
$0.1 million in 1999. The increase in cash used for operations was primarily due
to an  increase  in  inventory  as the  Company  launched  or prepared to launch
several  new  products in late 2000 or early 2001.  These  products  include the
STRATA(R)  TOUR  ULTIMATE(TM)  golf balls,  BEN HOGAN(R)  APEX  EDGE(TM)  irons,
TOP-FLITE(R) XL 2000(TM) irons,  the SPALDING(R)  INFUSION(TM) (a new basketball
with a built-in  pump),  and an entire  line of  SPALDING(R)  XFL  footballs  to
support Spalding's position as the official ball of the XFL football league. The
increase in cash used from operations was also a result of a decrease in accrued
expenses as a result of the payment of  restructuring  accruals  established  in
previous years and the timing of advertising expenditures.

    In 1999,  operating  activities  used $0.1  million of net cash  compared to
usage for Pro Forma 1998 of $83.3  million.  The  improvement  in cash flow from
operations  was generated  primarily  based on the decrease in the Company's net
loss from $123.4  million to $27.3  million.  Other factors  affecting cash flow
include  lower  inventory  balances  which  were  driven by  improved  inventory
management.

    In the Transition  Period,  the Company's  operating  activities  used $20.3
million of net cash,  compared to usage of $33.3 million in the 1997 Period. The
improvement is primarily  attributable  to the sale of Evenflo offset by the net
loss totaling $67.8 million.  Other factors  affecting cash flow were changes in
working capital due to (i) a $24.5 million decline in receivables on lower sales
and strong cash  collections;  (ii) lower inventory  resulting from close out of
merchandise  costing  $26.7  million at  negative  margins  partially  offset by
inventory  build of the new golf  products  and (iii)  funding  of the  reserves
established during Fiscal 1998 for restructuring and unusual items totaling $4.1
million. The Transition Period cash flows includes $3.0 million of restructuring
costs that are related primarily to severance costs and related expenses.

     Capital  expenditures  in  2000  were  $5.3  million  (including  an  asset
purchased under a capital lease). This amount was net of refunds associated with
the decision to abandon the fully integrated computer system implemented in late
1999.  Capital  expenditures  for 2000 were  primarily for golf ball  production
expansion  and the current  upgrade of the computer  systems that the Company is
presently  using.  Capital  expenditures  for 1999 totaled $16.3  million.  This
amount  was funded by  borrowings  under the  Company's  credit  facilities  and
existing cash  balances.  Capital  expenditures  for 1999 were  primarily  costs
incurred  for  the  implementation  of the  new  computer  system  for  domestic
operations  totaling $11.4 million,  as well as  expenditures  for machinery and
equipment and capital costs related to the consolidation of facilities.  Capital
expenditures for the Transition Period were $3.5 million.  Capital  expenditures
were used  primarily for golf ball plant  expansion.  Capital  expenditures  for
Fiscal  1998  were  $26.6  million  and  were  used  primarily  for new  product
introductions and new distribution facilities.  During 2001, the Company expects
to spend approximately $14.0 million in capital related  expenditures  primarily
for the expansion of golf ball production and systems upgrades.

     LIQUIDITY AND FINANCING.  The Company's principal sources of liquidity will
come from cash flow generated from  operations,  borrowings  under the Company's
$265 million  revolving  credit  facilities  and by non-U.S.  subsidiaries  (the
majority of which  non-U.S.  borrowings  are  guaranteed  by the  Company).  The
Company's  principal uses of liquidity will be to provide working capital,  meet
debt service requirements and finance the Company's strategic plans. At December
31, 2000, the Company had an available  borrowing  capacity of $1.9 million (net
of $43.0  million of  outstanding  letters of credit and  bankers'  acceptances)
under the  revolving  credit  facility.  The Company  does not have any required
amortization of Term Loans in calendar 2001.

     On August 20, 1998,  the Company  effectively  completed the  separation of
Spalding and Evenflo into two stand-alone  companies.  The Company initiated the
Reorganization  by contributing the Spalding  investments in the common stock of
the Company's Evenflo  subsidiaries to Evenflo Company,  Inc. and simultaneously
received  cumulative  preferred  stock of Evenflo  Company,  Inc.  (the "Evenflo
Preferred Stock") with an aggregate liquidation  preference of $40.0 million and
a cumulative  dividend rate of 14%. As a result of these  transactions,  Evenflo
Company,  Inc. became the parent company of the other subsidiaries and divisions
of subsidiaries  included in the Evenflo segment of the Company. The realignment
of the Company's two businesses was accounted for as a  reorganization  of these
companies under common control in a manner similar to a pooling of interests.

    To complete the Reorganization on August 20, 1998,  KKR 1996 Fund,  acquired
from the Company 51%  (5,100,000  shares) of the  outstanding  common  shares of
Evenflo  Company,  Inc.  for a purchase  price of $25.5  million and the Evenflo
Preferred  Stock (400,000  shares) for a purchase price of $40.0 million.  Great
Star  Corporation,  an affiliate of Abarco N.V.  ("Abarco"),  acquired  from the
Company  6.6%  (660,000  shares)  of the  outstanding  common  shares of Evenflo
Company,  Inc. for a purchase price of $3.3 million.  Strata  Associates LLP and
KKR Partners II, L.P., affiliates of KKR 1996 Fund, KKR 1996 Fund and Abarco are
currently  shareholders of the Company.  After these sales of common stock,  the
Company retained ownership of 42.4% (4,240,000 shares) of the outstanding shares
of common  stock of Evenflo  Company,  Inc.  Also on August 20, 1998 Evenflo (i)
issued and sold  $110.0  million  aggregate  principal  amount of 11 3/4% senior
notes due 2006 in a private  offering,  and (ii) entered  intO a $100.0  million
revolving  credit  facility  with a  syndicate  of  banks  and  other  financial
institutions  and borrowed  $10.0  million under such credit  facility.  Evenflo
Company, Inc. paid the net proceeds of these two financing transactions,  $110.0
million, to the Company as a partial payment of intercompany  indebtedness.  The
remainder  of  the  intercompany  indebtedness  due to the  Company  by  Evenflo
Company, Inc. was treated as a contribution of capital by the Company to Evenflo
Company, Inc.

     During  1999,   Spalding   sold  its   remaining   investment   in  Evenflo
(representing  42.4% of Evenflo's common stock) for $23.6 million.  Based on the
terms of the Company's credit  facility,  the net proceeds of $23.0 were used to
pay down portions of its term loans.

    On January 24, 2001,  the Company received approval of the amendments to its
senior credit  facility from a majority of the senior credit  facility  lenders.
The amendments  provide for an additional  $35.0 million of funding and modified
certain covenant compliance measurements.  The covenant changes are effective as
of December 31, 2000, and the additional  borrowing capacity became available on
January  25,  2001.  An  affiliate  of KKR  acquired  a  participation  in  such
additional committments made available under the senior credit facility.

    Since the time of the amendment,  the Company's seasonal need for  cash flow
has utilized much of the total credit  availability,  including  the  additional
availability  obtained in January. The Company has invested significant funds to
purchase  inventory  in  anticipation  of demand  during the spring and  summer.
Additionally,  significant  investments  in marketing  have been made to support
several new product launches, including:

|X|  the SPALDING(R) INFUSION(TM) basketball (featuring a built-in pump),
|X|  BEN HOGAN(R)  APEX  EDGE(TM)  golf clubs  (designed  for the  mid-to-higher
     handicap golfer),
|X|  the STRATA(R) TOUR  ULTIMATE(TM)  golf ball (with a unique  tungsten energy
     core for professional spin and distance),
|X|  TOP-FLITE(R)  XL 2000(TM) irons  (featuring  titan steel and a larger sweet
     spot), and
|X|  SPALDING(R) XFL footballs.

    As with  the  introduction  of most  new  consumer  products,   the  initial
investments  required in marketing  support and  inventory  purchases  have come
before significant revenues from the sales of such products can be realized, and
this has placed a significant drain on the Company's financial resources.

    The Company has implemented  several measures to conserve its  cash flow and
meet its payment obligations.  As a result, of these actions, the Company had an
available  borrowing  capacity  of  $22.9  million  (net  of  $48.9  million  of
outstanding  letters of credit and  bankers'  acceptances)  under the  revolving
credit  facility.  The Company  believes  that its existing  credit  facilities,
together with cash  generated  from  operations,  will be sufficient to fund the
Company's  operations  through 2001.  There can be no assurance,  however,  that
these  measures will be  successful  to the extent  necessary for the Company to
remain current on its  obligations or that the Company will remain in compliance
with the covenants in its credit facility.

     The Company's  ability to fund its operations,  capital  expenditures,  and
debt  service,  or to  refinance  its  indebtedness  will depend upon its future
financial  and  operating  performance,  which will be  affected  by  prevailing
economic conditions and financial, business and other factors, some of which are
beyond its control.  There can be no  assurance  that the  Company's  results of
operations,  cash flow and  capital  resources  will be  sufficient  to fund its
operations,  capital  expenditures,  or its  debt  service  obligations.  In the
absence of improved operating  results,  the Company may face liquidity problems
and might be required to dispose of material  assets or  operations  to fund its
operations  and  capital  expenditures  and to meet its debt  service  and other
obligations,  and there can be no  assurances  as to the timing of such sales or
the proceeds that the Company could  realize  therefrom.  Although the Company's
operating  performance  has  improved  over  the  prior  period,  the  financial
covenants  included in its amended senior credit  facility  require  significant
additional   improvements  in  operating  performance  in  order  to  remain  in
compliance  with the  covenants  throughout  2001 and  beyond.  There  can be no
assurance that the Company will achieve  improvements  in operating  performance
sufficient to satisfy these covenants.

    The Company and/or affiliates of the Company,  including entities related to
Kohlberg Kravis Roberts & Co., L.P., may from time to time,  depending on market
conditions , purchase senior subordinated notes previously issued by the Company
in the open market or by other means.

    EBITDA  represents  earnings  before  interest,   taxes,   depreciation  and
amortization,  and  excludes  extraordinary  items.  EBITDA is not  intended  to
represent cash flows from operations as defined by generally accepted accounting
principles ("GAAP") and should not be considered as an alternative to net income
as an indicator of the  Company's  operating  performance  or to cash flows as a
measure of  liquidity.  EBITDA is  included  as a basis  upon which the  Company
assesses its  financial  performance,  and certain  covenants  in the  Company's
borrowing  arrangements are tied to similar  measures.  The following sets forth
the  calculation  of the Company's  EBITDA for the years ended December 31, 2000
and 1999.

                                          DECEMBER 31,       DECEMBER 31,
                                              2000              1999
                                          -----------        ----------
                                                 (IN THOUSANDS)

               Net loss...............   $ (20,006)         $ (27,321)
               Interest expense.......      60,427             54,970
               Income tax benefit           (5,485)           (13,100)
               Depreciation...........      12,580              9,258
               Amortization...........       4,512              4,521
               Extraordinary loss.....                            260
                                        ----------          ---------
               EBITDA.................   $  52,028          $  28,588
                                        ==========          =========

    CURRENCY HEDGING.  In 2000, 1999,  the Transition Period and in Fiscal 1998,
approximately 18.8%, 18.2%, 20.4% and 17.1%, respectively,  of the total Company
net sales were generated in non-U.S.  currencies.  Fluctuations  in the value of
these currencies relative to the U.S. dollar could have a material effect on the
Company's results of operations.  The Company,  in its discretion,  uses forward
exchange  contracts  to hedge up to one year  transaction  exposures  from  U.S.
dollar purchases made by its non-U.S. operations. As of December 31, 2000, there
were no outstanding forward exchange contracts.

    INFLATION.  Inflation  has not  been  material to the  Company's  operations
within the periods presented.

NEW ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial  Accounting  Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities"  ("SFAS No. 133"). SFAS No. 133 establishes  accounting
and reporting standards for derivative instruments, including certain derivative
instruments   embedded  in  other  contracts,   (collectively   referred  to  as
derivatives)  and for hedging  activities.  It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The accounting for changes in the fair value of
a derivative  (that is,  gains and losses)  depends upon the intended use of the
derivative and resulting designation if used as a hedge. The Company is required
to and has adopted this standard,  amended by SFAS No. 138, effective January 1,
2001.  The  adoption  of this  standard  did not have a  material  effect on the
Company's results of operations or financial position.

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

DISCLOSURE ABOUT FOREIGN CURRENCY RISK

    Although the majority of the  Company's  transactions  are in U.S.  dollars,
affiliates  operate  in their  local  currency  with  certain  transactions  for
inventory and  royalties  being  denominated  in U.S.  dollars.  The Company may
purchase  short-term  forward exchange  contracts to hedge payments that require
conversion to U.S. dollars.  The purpose of entering these hedge contracts is to
minimize  the  impact  of  foreign  currency   fluctuation  on  the  results  of
operations. Certain increases or decreases in the affiliate U.S. dollar payments
are offset by gains and losses on the hedges.  The contracts have maturity dates
that do not exceed  twelve  months.  The Company  does not  purchase  short-term
forward exchange contracts for trading purposes.

    As of December 31, 2000,  the Company had no  outstanding  foreign  exchange
forward  contracts  outstanding.  As of  December  31,  1999,  the  Company  had
outstanding  the following  purchased  foreign  exchange  forward  contracts (in
thousands of U.S. dollars):

                                                        WEIGHTED
                                           CONTRACT      AVERAGE     UNREALIZED
                                            AMOUNT    CONTRACT RATE  GAIN (LOSS)
                                            ------    -------------  -----------
     Foreign Currency Forward Contracts:
       Canadian dollar................     $ 9,825        .683        $ (143)
       British pound..................         162       1.624             1
                                           -------                    ------
     Total............................     $ 9,987                    $ (142)
                                           =======                    ======


DISCLOSURE ABOUT INTEREST RATE RISK

    The Company  is subject to market risk from  exposure to changes in interest
rates based on its financing,  investing,  and cash management  activities.  The
Company  utilizes a balanced mix of debt  maturities  along with both fixed-rate
and  variable-rate  debt to manage its  exposures to changes in interest  rates.
(See Note H to the Consolidated Financial Statements appearing elsewhere in this
Form 10-K.) The  Company  does not expect  changes in  interest  rates to have a
material  effect  on  income  or cash  flows in 2001,  although  there can be no
assurances that interest rates will not  significantly  change.  A 10% change in
the interest rates on the Company's  variable-rate  debt would have increased or
decreased interest expense for the year ended December 31, 2000 by approximately
$3.4 million.

    In order to manage  the impact of  fluctuating  rates on its  variable  rate
debt, in November of 1999 the Company fixed $293.2  million of its variable rate
debt in accordance with the terms of its credit  agreements  until May 2000 at a
weighted-average  rate of 6.0%.  In January  2000 the  Company  entered  into an
interest  rate cap  agreement on $300.0  million of its variable  rate debt that
commenced  in May 2000.  The cap had a strike  rate of 6.34% and expired on July
26, 2000. In addition,  in July 2000, the Company  entered into an interest rate
cap  agreement  on $300.0  million of its variable  rate debt that  commenced in
October  2000.  The cap had a strike  rate of 6.85% and  expired on January  26,
2001.

FORWARD-LOOKING STATEMENTS

    Certain statements made in this Management's Discussion and Analysis  of the
Consolidated Financial Statements and in the Notes to the Consolidated Financial
Statements  reflect  management's  estimates and beliefs and are intended to be,
and are hereby identified as,  "forward-looking  statements" for purposes of the
safe harbor provisions of the Private Securities  Litigation Reform Act of 1995.
Such forward-looking  terminology,  includes but is not limited to words such as
"may", "intend", "will", "expect", "anticipate", "plan", "the Company believes",
"management  believes",  "estimate",  "continue",  or "position" or the negative
thereof or other variations  thereon or comparable  terminology.  In particular,
any statements,  express or implied,  concerning future operating results or the
ability  to  generate  revenues,   income  or  cash  flow  are  forward  looking
statements.

     Forward-looking  statements are  necessarily  dependent  upon  assumptions,
estimates  and data that may be  incorrect or  imprecise  and involve  known and
unknown  risks,  uncertainties,  and other  important  factors  that could cause
actual  results,  performance  or  achievements  of  the  Company  or any of its
subsidiaries  , or  industry  results,  to  differ  materially  from any  future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking statements.  Although the Company believes that the expectations
reflected in such  forward-looking  statements  are  reasonable,  it can give no
assurance that such expectations  will prove to have been correct.  Accordingly,
the Company  hereby  identifies the following  important  factors as some of the
factors that could cause the Company's  financial  results to differ  materially
from any such results that might be projected, forecasted, estimated or budgeted
by the  Company  in  forward-looking  statements:  (a)  heightened  competition,
including   specifically  the  intensification  of  price  competition  and  the
development and introduction of new products, such as new lines of golf balls by
competitors;  (b) higher selling, general and administrative expenses, including
advertising and promotion;  (c) inability to maintain  relationships with, or to
attract new,  athletes as  endorsers of  Spalding's  products;  (d)  significant
indebtedness,  which may hinder the Company's ability to implement its financial
and operating plans; (e) inability of Spalding to continue to reduce its current
cost structure;  (f) need to continue introduction of products that represent an
improvement  over  existing   products,   or  which  are  more  successful  than
competitors' innovations; (g) failure to obtain new customers or retain existing
customers or the effects of inventory reductions by key accounts;  (h) inability
to maintain  and  increase  shelf space for our  products at key  accounts;  (i)
inability  to carry out  domestic and foreign  marketing  and sales  plans;  (j)
increased  manufacturing  costs,  including inability or reduced ability to have
products  manufactured  overseas and the cost of raw materials;  (k) loss of the
services  of one or more key  personnel;  (l) changes in  operating  strategy or
development  plans; (m) any protracted labor relations  dispute;  (n) changes in
Spalding's  capital  expenditure plan; (o) general domestic and foreign economic
downturns; (p) seasonality of product lines; (q) changes in or failure to comply
with  government  regulations;  (r) increase in interest  rates,  affecting  the
Company's  variable  rate  debt and (s) an  adverse  outcome  of the  litigation
referred to in "Legal  Proceedings"  that  materially and adversely  affects the
Company's  financial  condition.  The Company assumes no obligation to update or
revise any such forward looking  statements,  which speak only as of their date,
even if  experience or future events or changes make it clear that any projected
financial or operating results implied by such  forward-looking  statements will
not be realized.

    The  foregoing  review  of  factors  pursuant  to  the  Private   Litigation
Securities  Reform Act of 1995 should not be construed as  exhaustive  or as any
admission  regarding the adequacy of disclosures  made by Spalding prior to this
filing. All subsequent written and oral forward-looking  statements attributable
to Spalding or persons  acting on its behalf are  expressly  qualified  in their
entirety by such factors.
<PAGE>



ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           PAGE
                                                                           ----

Independent Auditors' Report............................................    25

Statements of Consolidated  Operations for the years ended
December 31, 2000 and 1999, the Transition Period October 1,
1998 through December 31, 1998 and for the fiscal year ended
September 30, 1998......................................................    26

Consolidated Balance Sheets as of December 31, 2000 and 1999............    27

Statements of Consolidated  Cash Flows for the years ended
December 31, 2000 and 1999, the Transition Period October 1,
1998 through December 31, 1998 and for the fiscal year ended
September 30, 1998......................................................    28

Statements of Consolidated Shareholders' Equity (Deficiency)
for the years ended December 31, 2000 and 1999, the Transition
Period October 1, 1998 through December 31, 1998 and for the
fiscal year ended September 30, 1998 ...................................    29

Notes to the Consolidated Financial Statements..........................    30


<PAGE>



                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Spalding Holdings Corporation
Chicopee, Massachusetts

    We have audited the  accompanying  consolidated  balance  sheets of Spalding
Holdings  Corporation and  subsidiaries  (the "Company") as of December 31, 2000
and 1999, and the related consolidated statements of operations,  cash flows and
shareholders'  equity  (deficiency)  for the years ended  December  31, 2000 and
1999,  for the transition  period October 1, 1998 through  December 31, 1998 and
for the fiscal year ended September 30, 1998. 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 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  audits  provide  a
reasonable basis for our opinion.

    In our opinion,  such consolidated  financial  statements present fairly, in
all material respects,  the financial position of Spalding Holdings  Corporation
and  subsidiaries  as of December  31,  2000 and 1999,  and the results of their
operations  and their cash flows for the years ended December 31, 2000 and 1999,
for the transition  period October 1, 1998 through December 31, 1998 and for the
fiscal year ended September 30, 1998 in conformity  with  accounting  principles
generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Hartford, Connecticut
March 30, 2001


<PAGE>



                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

                      STATEMENTS OF CONSOLIDATED OPERATIONS

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999,

       THE TRANSITION PERIOD OCTOBER 1, 1998 THROUGH DECEMBER 31, 1998 AND

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>

                                                                  YEARS                OCTOBER 1,      YEAR
                                                                  ENDED                 THROUGH       ENDED
                                                               DECEMBER 31,           DECEMBER 31,  SEPTEMBER 30,
                                                            2000           1999           1998          1998
                                                       -------------  -------------  -------------  ------------
                                                                      (DOLLAR AMOUNTS IN THOUSANDS)
<S>                                                     <C>             <C>             <C>           <C>
Net sales.........................................      $  408,873      $ 431,172       $ 56,774      $ 827,692
  Cost of sales...................................         200,199        249,729         77,420        557,417
                                                        ----------      ---------       --------      ---------
Gross profit (loss)...............................         208,674        181,443        (20,646)       270,275
  Selling, general and administrative
     expenses.....................................         182,961        177,490         61,354        297,800
  Royalty income, net.............................         (12,804)       (11,373)        (2,039)       (13,509)
  Restructuring and other unusual
     costs........................................                            812          2,969         21,563
                                                       -----------      ---------       --------       ---------
Income (loss) from operations.....................          38,517         14,514        (82,930)       (35,579)
  Interest expense, net...........................          60,427         54,970         13,911         78,041
  Currency (gain) loss, net.......................           3,581           (543)        (2,595)         2,936
  Equity in net (earnings) loss of
     Evenflo Company, Inc.........................                            248          3,768         (1,476)
                                                       -----------      ---------       --------       ---------

Loss before income taxes and
  extraordinary loss..............................         (25,491)       (40,161)       (98,014)      (115,080)
  Income tax benefit..............................          (5,485)       (13,100)       (30,193)       (34,218)
                                                       -----------      ---------       --------       ---------
Loss before extraordinary
  loss............................................         (20,006)       (27,061)       (67,821)       (80,862)
  Extraordinary loss on early
     extinguishment of debt, net of
     income tax benefit of  $140 in 1999
     and $3,182 in fiscal 1998....................                            260                         5,909
                                                       -----------     ----------       ---------      ---------

Net loss..........................................     $  (20,006)     $ (27,321)       $(67,821)     $ (86,771)
                                                       ===========     ==========       =========      =========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


<PAGE>



                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2000 AND 1999

                                                      DECEMBER 31,  DECEMBER 31,
                                                         2000          1999
                                                      -----------   -----------
                                                   (DOLLAR AMOUNTS IN THOUSANDS,
                                                       EXCEPT SHARE AMOUNTS)
ASSETS

CURRENT ASSETS

Cash...................................................$  17,391      $   2,931
Receivables, less allowance of $998 and $2,050,
 respectively..........................................   85,312         95,829
Inventories............................................   64,850         49,012
Deferred income taxes..................................    8,369         12,218
Prepaid expenses.......................................    4,457          1,555
                                                       ---------      ---------
          Total current assets.........................  180,379        161,545
Property, plant and equipment, net.....................   51,404         58,734
Intangible assets, net.................................  103,623        108,135
Deferred income taxes..................................  110,114         99,877
Deferred financing costs...............................   12,556         15,721
Other..................................................      714            400
                                                       ---------      ---------


          Total assets.................................$ 458,790      $ 444,412
                                                       ==========     =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES

Non-U.S. bank loans....................................$   5,498      $   4,081
Short-term debt........................................      -            3,341
Accounts payable.......................................   75,064         74,098
Accrued expenses.......................................   46,810         60,270
Income taxes...........................................      225            315
                                                       ---------      ---------
          Total current liabilities....................  127,597        142,105
Long-term debt.........................................  558,977        510,700
Pension benefits.......................................    9,271          9,787
Postretirement benefits................................    8,104          7,940
Other..................................................      708             92
                                                       ---------      ---------
          Total liabilities............................  704,657        670,624
COMMITMENTS AND CONTINGENCIES (NOTES K, L, M AND N)
Shareholders' equity (deficiency)
Preferred stock, $.01 par value, 50,000,000
  shares authorized; 1,000,000 outstanding
  (liquidation value $139.4 million and
  $120.9 million, respectively)........................  100,000        100,000
Common stock, $.01 par value, 150,000,000
  shares authorized 98,901,747 issued in 2000;
  98,058,948 issued in 1999............................      989            981
Additional paid-in capital.............................  466,417        466,088
Accumulated deficit.................................... (808,685)      (788,679)
Treasury stock, 27,441 shares in 2000 and 1999,
 at cost...............................................     (128)          (128)
Loans for stock........................................     (521)          (644)
Deferred compensation..................................     (150)          (200)
Accumulated other comprehensive earnings
  (loss)-- currency translation adjustments............   (3,789)        (3,630)
                                                       ---------      ---------
     Total shareholders' equity (deficiency)........... (245,867)      (226,212)
                                                       ---------      ---------
     Total liabilities and shareholders' equity
       (deficiency)....................................$ 458,790      $ 444,412
                                                       =========      =========


          See accompanying Notes to Consolidated Financial Statements.


<PAGE>


                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

                      STATEMENTS OF CONSOLIDATED CASH FLOWS

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999,

      THE TRANSITION PERIOD OCTOBER 1, 1998 THROUGH DECEMBER 31, 1998, AND

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>

                                                                             YEARS               OCTOBER 1,      YEAR
                                                                             ENDED                THROUGH        ENDED
                                                                           DECEMBER 31,         DECEMBER 31,  SEPTEMBER 30
                                                                        2000          1999          1998          1998
                                                                   ------------- ------------- ------------- -------------
                                                                               (DOLLAR AMOUNTS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                 <C>           <C>           <C>           <C>
Net loss....................................................        $  (20,006)   $ (27,321)    $ (67,821)    $  (86,771)
Adjustments to reconcile net loss to net cash
  used in operating activities:
  Write-down of inventories.................................                          8,662        20,570
  Non-cash expenses and amortization of deferred
    compensation............................................               187          250
  Depreciation..............................................            12,580        9,258         2,183         20,471
  Equity in (earnings) loss of Evenflo Company, Inc.........                            248         3,768         (1,476)
  Intangibles amortization..................................             4,512        4,521         1,086          5,776
  Bad debt expense..........................................             2,814        2,669           880         12,591
  Deferred income taxes.....................................            (6,388)     (14,665)      (30,430)       (35,782)
  Deferred financing cost amortization......................             3,165        3,273           818          5,206
  Write-off of fixed assets.................................                                        1,591
  Extraordinary loss on early extinguishment of debt........                            400                        9,091
  Other.....................................................              (473)        (786)          498          3,722
Changes in assets and liabilities:
  Receivables...............................................             7,703      (12,302)       48,448         16,534
  Inventories...............................................           (15,838)      31,492         3,970        (20,960)
  Prepaids..................................................            (2,902)        (663)          834          3,467
  Current liabilities, excluding bank loans.................           (12,384)      (6,709)       (6,024)       (27,071)
  Long term liabilities.....................................              (352)       1,617          (719)        (1,042)
                                                                    ----------    ---------     ---------     ----------
    Net cash used in operating activities...................           (27,382)         (56)      (20,348)       (96,244)
                                                                    ----------    ---------     ---------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of refunds .......................            (4,521)     (16,332)       (3,543)       (26,649)
Acquisition of Hogan........................................                                                      (1,641)
Sale of Evenflo and settlement of intercompany balances:
  Sale of Evenflo Common Stock..............................                         23,600                       28,800
  Sale of Evenflo Preferred Stock...........................                                                      40,000
  Repayment of intercompany debt by Evenflo.................                                                     110,000
  Effect of cash on sale of Evenflo.........................                                                      (6,739)
                                                                    ----------    ---------     ---------     ----------
    Net cash flows provided by (used in) investing activities           (4,521)       7,268        (3,543)       143,771
                                                                    ----------    ---------     ---------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment under credit agreement............................                        (23,000)                    (228,800)
Net borrowings under revolving credit loan..................            48,277       12,521        21,445         94,800
Net borrowings (repayments) of non U.S. bank loans..........             1,417       (2,450)         (213)        (4,430)
Repayments of other debt ...................................            (3,454)
Proceeds from issuance of preferred stock and warrants......                                                     100,000
Proceeds from issuance of common stock......................                            612                        1,422
Payment of loans for stock..................................               123
Repurchase of common stock..................................                                                         (77)
Payment of deferred financing costs.........................                                                      (4,915)
                                                                    ----------    ---------     ---------     ----------
    Net cash flows provided by (used in) financing activities           46,363      (12,317)       21,232        (42,000)
                                                                    ----------    ---------     ---------     ----------
    Net increase (decrease) in cash.........................            14,460       (5,105)       (2,659)         5,527
    Cash balance, beginning of period.......................             2,931        8,036        10,695          5,168
                                                                    ----------    ---------     ---------     ----------
    Cash balance, end of period.............................        $   17,391    $   2,931     $   8,036     $   10,695
                                                                    ==========    =========     =========     ==========
SUPPLEMENTAL CASH FLOW DATA:
Interest paid...............................................        $   53,075    $  49,722     $  17,685     $   80,667
Income taxes paid...........................................               123        1,565            72            170
NON-CASH TRANSACTIONS:
Capital expenditures financed under capital leases .........               729
Purchase of treasury stock via cancellation of notes receivable                          51
Issuance of notes receivable for sale of common stock.......                            644
Non-cash preferred stock dividend acquisition...............                                                      13,025
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


<PAGE>



                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

          STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (DEFICIENCY)

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999,

      THE TRANSITION PERIOD OCTOBER 1, 1998 THROUGH DECEMBER 31, 1998, AND

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>                                                                                        ACCUMULATED
                                                                                                   OTHER
                                                           RETAINED           LOANS             COMPREHENSIVE COMPREHENSIVE
                                PREFERRED COMMON  PAID-IN  EARNINGS  TREASURY  FOR    DEFERRED    EARNINGS      EARNINGS
                                  STOCK    STOCK  CAPITAL  (DEFICIT)   STOCK  STOCK COMPENSATION   (LOSS)        (LOSS)      TOTAL
                                  -----    -----  -------  ---------   -----  ----- ------------ -----------   ----------    -----
                                                                    (DOLLAR AMOUNTS IN THOUSANDS)
<S>                             <C>        <C>   <C>      <C>        <C>      <C>     <C>         <C>           <C>       <C>
September 30, 1997.............            $947  $431,780 $(600,496)                              $(4,291)                $(172,060)
Net loss.......................                             (86,771)                                            $(86,771)   (86,771)
Currency translation adjustment                                                                     2,405          2,405      2,405
                                                                                                                --------
Comprehensive loss.............                                                                                 $(84,366)
                                                                                                                ========
Cash proceeds from issuance of
 common stock..................               2     1,420                                                                     1,422
Stock issued in Hogan
acquisition....................              20     9,980                                                                    10,000
Repurchase of treasury stock...                                      $ (77)                                                     (77)
Issuance of preferred stock and
 warrants...................... $100,000                                                                                    100,000
Sale  price of 57.6% of Evenflo
 in excess of related net book
 value.........................                     9,254                                           1,620                    10,874
Deferred tax adjustment on
 acquired Trademarks...........                              (6,270)                                                         (6,270)
                                --------   ----  -------- ---------  -----    -----   -----       -------                 ---------
September 30, 1998.............  100,000    969   452,434  (693,537)   (77)                          (266)                 (140,477)
Net loss.......................                             (67,821)                                            $(67,821)   (67,821)
Currency translation
 adjustments...................                                                                    (3,143)        (3,143)    (3,143)
                                --------   ----  -------- ---------  -----    -----   -----       -------       --------  ---------
Comprehensive loss.............                                                                                 $(70,964)
                                                                                                                =========
December 31, 1998..............  100,000    969   452,434  (761,358)   (77)                        (3,409)                 (211,441)
Net loss.......................                             (27,321)                                            $(27,321)   (27,321)
Currency translation
 adjustments...................                                                                      (786)          (786)      (786)
                                                                                                                --------
Comprehensive loss.............                                                                                 $(28,107)
                                                                                                                ========
Repurchase of common stock.....                                        (51)                                                     (51)
Issuance of common stock.......              12     1,494                     $(644)  $(250)                                    612
Amortization of deferred
 compensation..................                                                          50                                      50
Sale of Evenflo................                    12,160                                             565                    12,725
                                --------   ----  -------- ---------  -----    -----   -----       -------                 ---------
December 31, 1999..............  100,000    981   466,088  (788,679)  (128)    (644)   (200)       (3,630)                 (226,212)
Net loss ......................                             (20,006)                                            $(20,006)   (20,006)
Currency translation
 adjustment ...................                                                                      (159)          (159)      (159)
                                                                                                                --------
Comprehensive loss ............                                                                                 $(20,165)
                                                                                                                ========
Issuance of common stock ......               8       329                                                                       337
Payments on loans for stock ...                                                 123                                             123
Amortization of deferred
 compensation..................                                                          50                                      50
                                --------   ----  -------- ---------  -----    -----   -----       -------                 ---------
December 31, 2000               $100,000   $989  $466,417 $(808,685) $(128)   $(521)  $(150)      $(3,789)                $(245,867)
                                ========   ====  ======== =========  =====    =====   =====       =======                 =========

</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


<PAGE>



                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

             (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE A -- ORGANIZATION

    BUSINESS AND REORGANIZATION.  Spalding Holdings Corporation and subsidiaries
(the  "Company")  is a global  manufacturer  and  marketer  of branded  consumer
products  serving the  sporting  goods  markets  under the  primary  trade names
SPALDING(R), TOP-FLITE(R), ETONIC(R), STRATA(R), BEN HOGAN(R) and DUDLEY(R). The
primary   subsidiary  of  the  Company  is  Spalding  Sports   Worldwide,   Inc.
("Spalding").  The Company  markets and licenses a variety of  recreational  and
athletic  products  such as golf balls,  golf clubs,  golf shoes,  golf bags and
accessories,  basketballs,  volleyballs,  footballs, soccer balls, softballs and
clothing, shoes and equipment for many other sports.

    Prior to August 20, 1998,  the Company operated in a second business segment
known as Evenflo  ("Evenflo  Segment"),  which  serves  the infant and  juvenile
product  market.  The Evenflo  Segment  consisted  of Evenflo  Company,  Inc., a
Spalding  wholly-owned  subsidiary,  and  certain  other  wholly-owned  Spalding
subsidiaries  and  divisions  of  subsidiaries  that sell  infant  and  juvenile
products  in other  countries  and that hold the  Evenflo  Segment  patents  and
trademarks.  The Evenflo Segment manufactures and markets, under the EVENFLO(R),
GERRY(R)  and  SNUGLI(R)  trade names,  specialty  juvenile  products  including
reusable  and  disposable  baby bottle  feeding  systems,  breast-feeding  aids,
pacifiers  and oral  development  items,  baby bath,  health  and safety  items,
monitors and other baby care products and  accessories,  as well as juvenile car
seats,  stationary  activity  products,  strollers,  high chairs,  portable play
yards,  cribs,  dressers and changing  tables,  gates,  soft  carriers and frame
carriers, child carriers and mattresses.

    On August 20, 1998,  the Company  effectively  completed  the  separation of
these  two  businesses,   the  Spalding  and  the  Evenflo  Segments,  into  two
stand-alone  companies  (the   "Reorganization").   The  Company  initiated  the
Reorganization  on May 20, 1998 by contributing the Spalding  investments in its
other subsidiaries  included in the Evenflo Segment to Evenflo Company, Inc. and
receiving  newly issued  cumulative,  variable  rate,  preferred  stock (400,000
shares) of Evenflo  Company,  Inc. (the "Evenflo  Preferred  Stock") with a face
value of  $40,000  and an  initial  dividend  rate of 14%.  As a result of these
transactions,  Evenflo Company,  Inc. became the parent company of all the other
subsidiaries  and  divisions of  subsidiaries  formerly  included in the Evenflo
Segment.  The realignment of the Company's two businesses was accounted for as a
reorganization  of  companies  under  common  control  in a manner  similar to a
pooling of interests.

    On August  20,  1998,  KKR 1996  Fund L.P.  ("KKR  1996  Fund"),   a limited
partnership  affiliated  with  Kohlberg  Kravis  Roberts  & Co.,  L.P.  ("KKR"),
acquired  from Spalding (i) 51%  (5,100,000  shares) of the  outstanding  common
shares of Evenflo  Company,  Inc.  for a purchase  price of $25,500 and (ii) the
Evenflo Preferred Stock for a purchase price of $40,000.  Prior to such KKR 1996
Fund stock  purchases,  Great Star  Corporation,  an  affiliate  of Abarco  N.V.
("Abarco"),  acquired from Spalding  6.6%  (660,000  shares) of the  outstanding
common shares of Evenflo  Company,  Inc. for a purchase price of $3,300.  Strata
Associates LLP and KKR Partners II, L.P.,  affiliates of KKR 1996 Fund, KKR 1996
Fund and Abarco are currently  shareholders of the Company. After these sales of
common stock,  Spalding  retained  ownership of 42.4% (4,240,000  shares) of the
outstanding  common  stock of Evenflo  Company,  Inc.  Also on August  20,  1998
Evenflo Company, Inc. (i) issued and sold $110,000 aggregate principal amount of
senior notes in a private offering,  and (ii) entered into a $100,000  revolving
credit facility with a syndicate of banks and other financial  institutions  and
borrowed $10,000 under the credit facility.  Evenflo Company,  Inc. paid the net
proceeds  of these two  borrowing  transactions,  $110,000,  to the Company as a
partial payment of intercompany indebtedness.  The remainder of the intercompany
indebtedness of Evenflo  Company,  Inc. was treated as a contribution of capital
by the  Company to Evenflo  Company,  Inc.  The Company has no guaranty or other
obligations  with  respect to the debt of Evenflo  Company,  Inc.,  and  Evenflo
Company, Inc. has no such obligations with respect to the Company's debt.

    Also on August 20, 1998,  KKR 1996 Fund invested  $100,000 in the Company to
acquire cumulative,  variable rate, preferred stock of the Company together with
44,100,000  warrants to purchase  common  stock of the Company (see Note K). The
Company used the proceeds  from the issuance of its  preferred  stock,  from the
Evenflo  Company,  Inc.  stock sales,  and from the  repayment  of  intercompany
indebtedness by Evenflo Company,  Inc. to repay $278,800 of the Company's senior
credit facilities and Revolver (see Note H).

    Effective  December  23,  1999,   KKR 1996  Fund  purchased  the  Spalding's
remaining 42.4% common stock  ownership  interest in Evenflo  Company,  Inc. for
$23,600  (Note Q). The net  proceeds  were used to repay  term  loans  under the
Company's senior credit facilities (Note H).

    The accompanying  financial  statements  reflect net losses  for the periods
presented,  and a  stockholders'  deficit as of December 31, 2000. On January 24
the Company amended its senior credit facility with its bank group, obtaining an
additional  $35,000  of  credit  availability  and  modifying  certain  covenant
measures effective December 31, 2000.

    Since the time of the amendment,  the Company's seasonal need for  cash flow
has utilized much of the total credit  availability,  including  the  additional
availability  obtained in January. The Company has invested significant funds to
purchase  inventory  in  anticipation  of demand  during the spring and  summer.
Additionally,  significant  investments  in marketing  have been made to support
several new product launches, including:

|X|  the SPALDING(R) INFUSION(TM) basketball (featuring a built-in pump),
|X|  BEN HOGAN(R)  APEX  EDGE(TM)  golf clubs  (designed  for the  mid-to-higher
     handicap golfer),
|X|  the STRATA(R) TOUR  ULTIMATE(TM)  golf ball (with a unique  tungsten energy
     core for professional spin and distance),
|X|  TOP-FLITE(R) XL 2000 (TM) irons  (featuring  titan steel and a larger sweet
     spot), and
|X|  SPALDING(R) XFL footballs.

    As with  the  introduction  of most  new  consumer  products,   the  initial
investments  required in marketing  support and  inventory  purchases  have come
before significant revenues from the sales of such products can be realized, and
this has placed a significant drain on the Company's financial resources.

    The Company has implemented  several measures to conserve  its cash flow and
meet  its  payment  obligations  (including  deferral  of  non-critical  capital
projects and reducing inventory purchases where possible).  As a result of these
actions, the Company believes that its existing credit facilities, together with
cash  generated  from  operations,  will be  sufficient  to fund  the  Company's
operations through 2001. There can be no assurance, however, that these measures
will be successful to the extent  necessary for the Company to remain current on
its obligations or that the Company will remain in compliance with the covenants
in its credit facility.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION.  The consolidated  financial statements include
the  accounts of Spalding  Holdings  Corporation  and its  subsidiaries,  all of
which,  including Evenflo Company,  Inc. and subsidiaries until August 20, 1998,
are  wholly-owned.   All  intercompany   accounts  and  transactions  have  been
eliminated in consolidation.

     INVESTMENT IN AFFILIATED COMPANY. Subsequent to the August 20, 1998 sale (a
42.4%  common  stock  ownership  interest),  Spalding's  investment  in  Evenflo
Company, Inc., (a 42.4% common stock ownership interest) was accounted for using
the equity  method of  accounting.  On  December  23,  1999,  Spalding  sold its
remaining  investment in Evenflo to a related party.  Refer to Note A and Note Q
for further details.

    YEAR-END.  Following fiscal 1998, the Company elected to change its year-end
from  September  30 to December 31.  Included  herein are  consolidated  balance
sheets  as of  December  31,  2000 and 1999 and the  statements  of  operations,
statements  of   consolidated   cash  flows  and   statements  of   consolidated
shareholders'  equity  (deficiency)  for the years ended  December  31, 2000 and
1999,  the period  October 1, 1998 through  December  31, 1998 (the  "Transition
Period") and for the fiscal year ended September 30, 1998.

    REVENUE RECOGNITION.  The Company records revenue when goods are shipped.

    FAIR VALUE OF FINANCIAL  INSTRUMENTS.  The  estimated  fair value of amounts
reported in the consolidated  financial  statements has been determined by using
available  market  information  and  appropriate  valuation  methodologies.  The
carrying value of all current assets and current  liabilities  approximates fair
value because of their short-term nature.

    INVENTORIES are stated at the First-in, First-out method of costing.

    PROPERTY,  PLANT AND  EQUIPMENT.  These  assets  are  stated at cost and are
depreciated  principally  using the  straight-line  method over estimated useful
lives which range from 3 to 20 years.  Certain assets are depreciated for income
tax purposes using accelerated methods.

    INTANGIBLE  ASSETS.   All material  intangible  assets are  amortized on the
straight-line basis using a 40 year life.

    IMPAIRMENT OF LONG-LIVED ASSETS. The Company evaluates its long-lived assets
for impairment annually or whenever events or changes in circumstances  indicate
that the  carrying  value  may not be  recoverable.  The  Company  compares  the
carrying value of its long-lived  assets to an estimate of their expected future
cash  flows   (undiscounted  and  without  interest  charges)  to  evaluate  the
reasonableness of the carrying value and remaining  depreciation or amortization
period.  If the sum of the expected  future cash flows is less than the carrying
amount of the asset, an impairment is recognized.

    DEFERRED FINANCING COSTS. The costs incurred to obtain financing  agreements
have been  capitalized and are amortized using the interest method over the term
of the related debt.

    INCOME TAXES. Income tax expense is based on reported earnings before income
taxes. Deferred income taxes reflect the impact of temporary differences between
the  amounts  of assets  and  liabilities  recognized  for  financial  reporting
purposes  and such amounts  recognized  for tax  purposes.  In  accordance  with
Statement of Financial Accounting  Standards No. 109 ("SFAS 109"),  deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years the temporary  differences  are expected to reverse.
The effect on deferred taxes of a change in tax rates is recognized in income in
the period that the change in rate is enacted.

    RETIREMENT  PLANS AND  POSTRETIREMENT  BENEFITS.  Current  service  costs of
retirement plans and post-retirement  healthcare and life insurance benefits are
accrued annually. Prior service costs resulting from amendments to the plans are
amortized over the average  remaining  service  period of employees  expected to
receive benefits.

    EMPLOYEE STOCK OWNERSHIP PLANS.  Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), encourages, but
does not require companies to record compensation cost for stock-based  employee
compensation  plans at fair value. The Company has chosen to continue to account
for  stock-based  compensation  using the intrinsic  value method  prescribed in
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees"   ("APB  No.   25"),   and  related   interpretations.   Accordingly,
compensation  cost for the stock options included under the Company's 1996 Stock
Purchase and Option Plan for Key Employees of Spalding Holdings  Corporation and
Subsidiaries  (the "1996  Employee  Stock  Ownership  Plan") is  measured as the
excess,  if any,  of the fair  value of the  Company's  stock at the date of the
grant over the amount an employee must pay to acquire the stock.

    ADVERTISING. Advertising costs (other than production media) are expensed as
incurred.  Costs associated with production media  (television  commercials) are
expensed in the year when the  advertising  first takes place.  Advertising  and
promotion  expenses amounted to $75,334,  $60,271,  $20,142 and $99,013 in 2000,
1999, the Transition Period, and fiscal 1998, respectively.

    CURRENCY TRANSLATION. Non-U.S.  currency-denominated  assets and liabilities
are translated  into U.S.  dollars at the exchange rates existing at the balance
sheet dates.  Income and expense items are  translated  at the average  exchange
rates during the  respective  periods.  Translation  adjustments  resulting from
fluctuations  in the  exchange  rates are  recorded as a separate  component  of
shareholders'  equity  (deficiency) as accumulated  other  comprehensive  income
(loss).
    CURRENCY EXCHANGE  CONTRACTS.  Open forward currency exchange  contracts are
marked-to-market  using the spot rates at each balance sheet date and the change
in market value is recorded by the Company as a currency gain or loss.

    USE OF ESTIMATES. The preparation of the accompanying consolidated financial
statements in conformity with accounting  principles generally accepted
in the United States of America require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosures of contingent  assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
sales and expenses during the reported period.  Actual results could differ from
these estimates.

    CASH FLOWS.  For purposes of the statements of consolidated  cash flows, the
Company considers all highly liquid debt instruments  purchased with an original
maturity of three months or less to be cash equivalents.

    NEW  ACCOUNTING  PRONOUNCEMENTS.  In June  1998,  the  Financial  Accounting
Standards  Board issued  Statement of Financial  Accounting  Standards  No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS No. 133  establishes  accounting  and reporting  standards  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts, (collectively referred to as derivatives) and for hedging activities.
It  requires  that an entity  recognize  all  derivatives  as  either  assets or
liabilities  in the balance sheet and measure those  instruments  at fair value.
The accounting for changes in the fair value of a derivative (that is, gains and
losses)   depends  upon  the  intended  use  of  the  derivative  and  resulting
designation if used as a hedge.  The Company is required to and has adopted this
standard,  amended by SFAS No. 138,  effective  January 1, 2001. The adoption of
this  standard  did not have a  material  effect  on the  Company's  results  of
operations, financial position or cash flows.

     RECLASSIFICATIONS.  Certain  reclassifications have been made to prior year
amounts to conform with current year presentations.



NOTE C -- INVENTORIES

                                                  DECEMBER 31,      DECEMBER 31,
                                                      2000              1999
                                                  ------------     -------------
         Finished goods........................    $ 45,496           $ 34,729
         Work in process.......................       3,392              2,798
         Raw materials.........................      15,962             11,485
                                                   --------            -------
         Total inventories.....................    $ 64,850           $ 49,012
                                                   ========           ========

NOTE D -- PROPERTY, PLANT AND EQUIPMENT, NET

                                                  DECEMBER 31,      DECEMBER 31,
                                                      2000              1999
                                                  ------------      ------------
         Land..................................    $  2,539           $  2,619
         Buildings and building improvements...      36,899             36,712
         Machinery and equipment...............      62,913             62,116
         Construction in progress..............      12,610              9,229
                                                   --------          ---------
                                                    114,961            110,676
         Accumulated depreciation..............     (63,557)           (51,942)
                                                   --------           --------
           Property, plant and equipment, net..    $ 51,404           $ 58,734
                                                   ========           ========

NOTE E -- INTANGIBLE ASSETS, NET

                                                  DECEMBER 31,      DECEMBER 31,
                                                      2000             1999
                                                  ------------      ------------
         United States trademarks..............    $ 71,703           $ 71,703
         Non-U.S. trademarks...................      13,378             13,378
         Goodwill..............................      75,817             75,817
                                                   --------           --------
                                                    160,898            160,898
         Accumulated amortization..............     (57,275)           (52,763)
                                                   --------           --------


           Intangible assets, net..............    $103,623           $108,135
                                                   ========           ========

NOTE F -- ACCRUED EXPENSES

                                                  DECEMBER 31,      DECEMBER 31,
                                                      2000             1999
                                                  ------------      ------------
         Compensation and other employee
         benefits.............................     $  6,428           $ 12,486
         Liability for restructuring costs....        1,281              3,960
         Interest.............................       12,014              8,968
         Advertising and promotion............        8,903             13,409
         Other, principally operating expenses       18,184             21,447
                                                   --------           --------
              Total accrued expenses..........     $ 46,810           $ 60,270
                                                   ========           ========

SPALDING RESTRUCTURING AND OTHER UNUSUAL COSTS.

    In 1997, the Company implemented a plan to restructure the Spalding domestic
and  international  operations  to focus on core  line golf and  sporting  goods
products.  In 1998 the plan was expanded to reduce the infrastructure  needed to
support the international operations,  close the Mexico operations,  consolidate
European operations with the closure of locations in France,  Germany, Italy and
Spain,  and to  significantly  downsize the Japanese  operation.  These facility
closures   resulted  in  the  elimination  of  approximately  116  international
positions at various levels.  As a result,  sales activities in Mexico,  and the
closed European operations are handled through distributors.  Additionally,  the
U.S.  operations  recognized certain management  severance costs associated with
the  elimination  of  approximately  100  domestic   positions  and  closed  the
headquarters in Tampa,  Florida. In 1999,  additional costs included the further
consolidation  of  manufacturing  and  warehousing  operations.   These  actions
included  the  closure of the  Company's  golf shoe  manufacturing  facility  in
Richmond,  Maine and the consolidation of the golf club manufacturing activities
in Gloversville, New York to Chicopee, Massachusetts.  These actions resulted in
the elimination of approximately 244 positions.  Additional U.S. severance costs
include the Company's elimination of approximately 30 positions at its corporate
office.

    As of December 31, 2000, the restructuring  activities are complete.  As the
restructuring  activities were finalized in 1999, some of the Company's  initial
estimates of the ultimate costs of various restructuring components proved to be
different than the actual costs incurred.  As a result, the original charges for
international severance and related costs were under estimated,  while costs for
the closure of the former  corporate  headquarters in Tampa were over estimated,
principally  due to the  subsequent  subleasing of that  facility  relieving the
Company of such lease payments.  As a result, the Company's  restructuring costs
are as follows:

                                        YEAR        OCTOBER 1,
                                       ENDED          THROUGH     YEAR ENDED
                                    DECEMBER 31,   DECEMBER 31,   SEPTEMBER 30,
                                         1999          1998           1998
                                    ------------- -------------  ------------
Tampa headquarters closing costs       $(1,491)      $            $  5,347
International severance costs and
  related expense...............           733           596         3,010
U.S. severance costs and related
  expense.......................           849         1,717         5,118
Facilities closings.............           705
Write-off of accumulated
  translation adjustment........                         342         2,761
Lease terminations..............                                       409
Termination of service contracts                                     1,237
Evenflo                                                              1,443
Other costs.....................            16           314         2,238
                                       -------       -------      --------
     Total......................       $   812       $ 2,969      $ 21,563
                                       =======       =======      ========

    The Company has paid $2,679 of these  restructuring costs in 2000, $6,525 in
1999, $4,061 in the Transition  Period and $7,080 in fiscal 1998,  respectively.
The Company has also charged $1,696 in 1999, $1,441 in the Transition Period and
$2,761  in  fiscal  1998,  respectively,  of  non-cash  write-offs  against  the
restructuring  accruals.  The remaining  restructuring  accruals at December 31,
2000 totaling $1,281 are primarily ongoing severance payments that continue into
2001.

NOTE G -- SEGMENT INFORMATION

    The Company manages the operations  of the business based on three operating
segments:  U.S. Golf Products,  U.S.  Sporting Goods Products and  International
Operations.  The following  table is presented in accordance  with  Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information"  and summarizes key information used by the
Company in evaluating the performance of each segment.

<TABLE>
<CAPTION>
                                                             U.S.
                                                           SPORTING
                                                U.S.GOLF    GOODS    INTERNATIONAL   EVENFLO    ALL OTHER      TOTAL
                                                --------    -----    -------------   -------    ---------      -----

               AS OF AND FOR THE YEAR ENDED
                 DECEMBER 31, 2000
                    <S>                        <C>        <C>          <C>          <C>         <C>         <C>
                    Net sales                  $ 252,939  $  51,977    $ 103,957    $    --     $   --      $ 408,873
                    Depreciation and
                      amortization                14,593      1,260        1,239         --         --         17,092
                    Operating income (loss)       17,502     (3,426)      12,166         --       12,275       38,517
                    Total assets                  81,446     17,645       71,484         --      288,215      458,790

               AS OF AND FOR THE YEAR ENDED
                 DECEMBER 31, 1999
                    Net sales                  $ 249,462  $  80,530    $ 101,180    $    --     $   --      $ 431,172
                    Depreciation and
                      amortization                11,915        481        1,383         --         --         13,779
                    Operating income (loss)        3,642     (7,983)       7,826         --       11,029       14,514
                    Total assets                  61,882     19,501       72,923         --      290,106      444,412

               AS OF AND FOR THE YEAR ENDED
                 SEPTEMBER 30, 1998
                    Net sales                  $ 311,053  $  98,405    $ 127,444    $ 290,790   $   --      $ 827,692
                    Depreciation and
                      amortization                11,599        261        1,251       13,136       --         26,247
                    Operating income (loss)       (8,003)    (8,996)     (23,829)      (5,626)    10,875      (35,579)
                    Total assets                 104,928     40,726       88,656       14,606    283,720      532,636
</TABLE>

    Net sales for the  Transition  Period by segment were as follows:  U.S. Golf
$18.9  million;  U.S.  Sporting  Goods $22.8 million;  and  International  $15.1
million.  Other segment  information for the Transition Period is not available.
U.S. Golf Products represent  Spalding's largest operating segment. The products
included  in this  segment  are golf  balls,  golf  clubs,  golf  shoes and golf
accessories (bags, hats, club covers, towels and sports luggage).

    Spalding  currently  markets its golf  products  under the  following  brand
names:

                  GOLF BALLS      GOLF CLUBS        GOLF SHOES AND ACCESSORIES
                  ----------      ----------        --------------------------
                  Strata(R)       Ben Hogan(R)      Etonic(R)
                  Top-Flite(R)    Top-Flite(R)      Ben Hogan(R)
                  Molitor(R)      SPALDING(R)       Top-Flite(R)
                                                    Spalding(R)

    U.S. Sporting Goods includes  basketballs,  softballs,  volleyballs,  soccer
balls and other sports  products.  These  products are primarily  sold under the
SPALDING(R)  trademark.  Softball products are also marketed under the DUDLEY(R)
trademark.

    The  International  segment  conducts  operations  outside  of the U.S.  and
consists of both subsidiary and third party distributors.  Subsidiary operations
are  maintained  in key  golf and  sporting  goods  markets  outside  the  U.S.,
including operations in Canada,  Australia,  New Zealand, United Kingdom, Sweden
and Japan. In addition to the subsidiary operations,  Spalding conducts business
with over 100 third-party distributors in other markets throughout the world. In
both the subsidiary and distributor territories, Spalding markets a line of golf
and sporting goods products similar to those in the U.S.  segments.  In 2000, no
country (other than U.S.  domestic  operations)  accounted for net sales
representing more than 10% of total consolidated net sales.

    The "All Other" category  includes  worldwide  licensing and other items not
allocable to one of the  segments.  Worldwide  licensing is a result of Spalding
granting licensees the exclusive right to use specified Spalding  trademarks for
specific product categories, in specific markets. The SPALDING(R), TOP-FLITE(R),
ETONIC(R)  and BEN  HOGAN(R)  names are  licensed  in a broad  range of  product
categories,  including shoe and apparel lines.  In exchange for these  exclusive
licenses,  Spalding  receives royalty fees. The majority of royalty revenues are
generated in the U.S. and Japanese markets.

NOTE H -- DEBT

    The Company's U.S. operations have long-term bank financing  arrangements to
support  working  capital needs and other general  corporate  requirements.  The
operations  utilized  these  arrangements   primarily  by  use  of  direct  bank
borrowings,   acceptances  and  letters  of  credit.   The  Company's   non-U.S.
subsidiaries   have   short-term   bank   financing   arrangements   to  support
international  working  capital  requirements.  The  subsidiaries  utilize these
arrangements  by use of direct  bank  borrowings  and  letters  of  credit.  The
Company's borrowing activities are as follows:

                                                    DECEMBER 31,   DECEMBER 31,
                                                        2000          1999
                                                   -------------   ------------
  Available lines of credit and outstanding debt:
    United States...............................      $ 603,877     $ 607,541
    International...............................          6,875         7,886
                                                      ---------     ---------
       Total....................................      $ 610,752     $ 615,427
                                                      =========     =========
  Amount outstanding
  Direct borrowings
    United States...............................      $ 558,977     $ 514,041
    International...............................          5,498         4,081
                                                      ---------     ---------
       Total direct borrowings..................        564,475       518,122
    Bankers  acceptances (included  in  accounts
      payable)..................................         29,336        30,832
       Total borrowings.........................      $ 593,811     $ 548,954
                                                      =========     =========
    Letters of credit not yet funded............      $  13,687     $  13,972
                                                      =========     =========

  United States direct  borrowings  consist of:
    Secured credit facility:
       Revolving credit loans...................      $ 205,100     $ 156,500
       Term loans...............................        147,877       148,200
    Senior subordinated notes...................        200,000       200,000
    Other indebtedness..........................          6,000         9,341
                                                      ---------     ---------
       Total United States debt.................        558,977       514,041
    Current maturities of debt..................           -            3,341
                                                      ---------     ---------
       Long-term debt...........................      $ 558,977     $ 510,700
                                                      =========     =========
    Maximum direct borrowings...................      $ 558,977     $ 556,474
                                                      =========     =========
    Weighted average outstanding balances.......      $ 543,300     $ 541,996
                                                      =========     =========
    Weighted average interest rates.............          10.46%         9.68%
                                                      =========     =========

    SECURED CREDIT  FACILITY.  On September 30, 1996, the Company entered into a
secured credit  facility (the "Credit  Facility")  with a syndicate of banks and
other  financial  institutions.  The  Credit  Facility  provided  for a $650,000
maximum  credit  commitment  (however,  see  below  for  a  description  of  the
reductions  of this  commitment  on August  20,  1998 and  December  23,  1999),
consisting of a seven year $250,000  revolving  credit loan  ("Revolving  Credit
Loan") and  $400,000 in term loans  ("Term  Loans").  Term Loans  consist of (i)
$175,000  seven  year Term Loan A, (ii)  $87,500  eight  year Term Loan B, (iii)
$87,500  nine year Term Loan C and (iv) $50,000 nine and one half year Term Loan
D.  Revolving  Credit  Loans  may be used for  working  capital  needs,  special
facility  obligations  (letters of credit and  acceptances),  general  corporate
purposes and for  borrowings on same-day  notice  ("Swingline  Loans").  Special
facility  obligations  are limited to a maximum of $180,000 and Swingline  Loans
are  limited to a maximum of  $30,000.  Each of the Term Loans  required  annual
amortization  beginning  September  30, 1998 and each  subsequent  September  30
thereafter  until  maturity  as well as  certain  mandatory  prepayments,  among
others, with the proceeds of certain asset sales.

    In  conjunction  with the  receipt  of the  $278,800  in  proceeds  from the
Reorganization in 1998, the net receipt of $23,000 for the Company's sale of its
42.4% ownership in Evenflo on December 23, 1999 (see Note A), and the receipt of
$323 for other  asset  disposals  in 2000 the  Company  was  required  to prepay
portions of its Term Loans as follows:

                         BALANCE PRIOR                 BALANCE AFTER
                        TO PREPAYMENTS   PREPAYMENTS    PREPAYMENTS
                       ---------------   -----------  ---------------
      Term Loan A..       $ 175,000       $159,531      $  15,469
      Term Loan B..          87,500         36,094         51,406
      Term Loan C..          87,500         36,094         51,406
      Term Loan D..          50,000         20,404         29,596
                          ---------       --------      ---------
           Total...       $ 400,000       $252,123      $ 147,877
                          =========       ========      =========


      On January 24, 2001 the Company  amended its Secured Credit  Facility upon
approval by a majority vote of the participating  lenders.  The amendment allows
for an  additional  $35.0  million of funding,  $20.0 million of which is in the
form of a Term Note  ("Term  Note E"),  with the  remaining  $15.0  million as a
Revolver ("Liquidity Facility"), both maturing on September 30, 2003. Both loans
will bear interest,  at the Company's option, at either: (A) a "base rate" equal
to the  higher of (i) the  federal  funds  rate plus 0.50% per annum or (ii) the
administrative  agent's prime rate, plus a debt to EBITDA-dependent rate ranging
from  0.50%  to  2.00%  per  annum  of (B) a  "eurodollar  rate"  plus a debt to
EBITDA-dependent rate ranging from 1.125% to 3.00% per annum.

    The amendment also eased certain covenant compliance  measurements beginning
at December 31, 2000 and increased the Company's borrowing rate on the Revolving
Credit Loan,  Term Loans,  commitment  fee and letter of credit fee by 50 basis
points.

     All Term Loans and Revolving Credit Loan incurred  interest during 2000, at
the Company's  option,  at either:  (A) a "base rate" equal to the higher of (i)
the federal funds rate plus 0.50% per annum or (ii) the  administrative  agent's
prime rate, plus (a) in the case of Term Loan A, a debt to EBITDA-dependent rate
ranging from 0.00% to 1.50% per annum,  (b) in the case of Term Loan B, 1.75% to
2.00% per annum,  (c) in the case of Term Loan C, 2.25% to 2.50% per annum,  (d)
in the  case of Term  Loan D,  2.75% to 3.00%  per  annum,  (e) in the case of a
Revolving  Credit Loan and  Swingline  Loans,  a debt to  EBITDA-dependent  rate
ranging from 0.00% to 1.50% per annum or (B) a "eurodollar rate" plus (i) in the
case of Term Loan A, a debt to  EBITDA-dependent  rate  ranging  from  0.625% to
2.50%  per  annum,  (ii) in the case of Term Loan B,  2.75% to 3.00% per  annum,
(iii) in the case of Term Loan C, 3.25% to 3.50% per annum,  (iv) in the case of
Term Loan D,  3.75% to 4.00% per  annum or (v) in the case of  Revolving  Credit
Loan,  a debt to  EBITDA-dependent  rate ranging from 0.625% to 2.50% per annum.
Swingline  Loans may only be "base  rate"  loans.  On  December  31,  2000,  the
estimated  fair value of the credit  facility was  favorable 22% based on dealer
quotes. In addition, the Company had an outstanding available borrowing capacity
as of December  31, 2000 of $1.9 million  (net of $43.0  million of  outstanding
letters of credit and bankers' acceptances).

    The  Company  paid a  commitment  fee  calculated  during  2000 at a debt to
EBITDA-dependent  rate  ranging  from 0.20% to 0.50% per annum of the  available
unused  commitment  under the Revolving  Credit Loan in effect on each day. Such
fee is payable quarterly in arrears and upon termination of the Revolving Credit
Loan. In addition,  the Company pays a fee to the  administrative  agent of $100
per annum, payable quarterly in arrears.

    The Company incurred a letter of credit fee calculated during 2000 at a debt
to  EBITDA-dependent  rate  ranging  from  0.50% to 2.375% per annum of the face
amount of each letter of credit and a fronting fee calculated at a rate equal to
0.125% per annum of the face amount of each letter of credit.  Such fees, except
fronting fee, are payable  quarterly in arrears and upon the  termination of the
Revolving  Credit Loan.  In addition,  the Company  pays  customary  transaction
charges in connection with any letters of credit.

    The Term Loans are subject to mandatory prepayments (i) with the proceeds of
certain  asset  sales  and  certain  debt   offerings   (excluding   the  Senior
Subordinated Notes) and (ii) on an annual basis with 50% of the Company's excess
cash flow (as  defined in the Credit  Facility)  for so long as the ratio of the
Company's  total debt (as defined in the Credit  Facility) to EBITDA (as defined
in the Credit Facility) is greater than 4.0 to 1.0.

    The Credit  Facility  prohibits  the Company  from  repurchasing  any senior
subordinated  notes subject to limited  exceptions.  The  Company's  obligations
under the Credit Facility are secured by a pledge of the stock of certain of its
subsidiaries  and a security  interest in  substantially  all other tangible and
intangible  assets,  including  accounts  receivable,  inventory,  equipment and
contracts.

     The Credit Facility  contains  customary  covenants and restrictions on the
Company's ability to engage in certain  activities  including (i) limitations on
liens, (ii) limitations on  consolidations  and mergers of the Company and sales
of the assets of the Company, (iii) restrictions on the purchase,  redemption or
acquisition of any capital stock,  equity  interest or any other  obligations or
other securities and restrictions on the advances, loans, extension of credit or
capital  contributions to, or investments in, other entities,  (iv) restrictions
on additional  indebtedness to be incurred by the Company,  (v)  restrictions on
payments of dividends or other  distribution of assets, and (vi) compliance with
certain financial covenants relating to certain interest coverage,  fixed charge
ratios, and a leverage ratio. In addition, the Company reached an agreement with
its bank  syndicate  to amend its Credit  Facility to remove  certain  financial
ratio  requirements  until December 31, 1999 and to amend other  covenants.  The
Credit Facility includes customary events of default.

    Scheduled maturities of the Revolving Credit Loan and Term Loans are as
follows at December 31, 2000:

                     REVOLVING
                       CREDIT     TERM      TERM      TERM       TERM
                        LOAN     LOAN A    LOAN B    LOAN C     LOAN D    TOTALS
                     ---------  --------  --------  --------     ------   ------

2003................. $205,100   $15,469  $    623  $    623  $    309  $222,124
2004.................                       50,783       623       312    51,718
2005.................                                 50,160       312    50,472
2006 (March 31, 2006)                                           28,663    28,663
                      --------  --------  --------  --------  --------  --------
     Total........... $205,100   $15,469  $ 51,406  $ 51,406  $ 29,596  $352,977
                      ========  ========  ========  ========  ========  ========

    SENIOR  SUBORDINATED  NOTES.  On September 30, 1996, the Company issued $200
million  aggregate  principal  amount of 10 3/8% Senior  Subordinated  Notes. In
January 1997, the Company completed a public debt offering which resulted in the
Company exchanging its 10 3/8% Senior  Subordinated Notes for new 10 3/8% Series
B Senior  Subordinated  Notes  (the  "Senior  Subordinated  Notes").  The Senior
Subordinated  Notes  will  mature on October  1, 2006 and are  unsecured  senior
subordinated  obligations  of the Company.  Interest on the Senior  Subordinated
Notes is payable semiannually April 1 and October 1 of each year.

    The  Senior  Subordinated  Notes  will be  redeemable  at the  option of the
Company,  in whole or in part,  at any time on or  after  October  1,  2001.  At
December 31, 2000, the estimated fair value of the Senior Subordinated Notes was
favorable 64% based on dealer quotes.

    The Company will not be required to make  mandatory  redemptions  or sinking
fund  payments  prior to maturity of the Senior  Subordinated  Notes,  except if
holders request that the Company repurchase the Senior Subordinated Notes in the
event of a change of control (as defined in the indenture relating to the Senior
Subordinated  Notes) or upon the  Company's  receipt of the  proceeds of certain
asset sales that are not reinvested or applied to reduce  indebtedness  within a
certain time period.

    The Senior  Subordinated Notes contain customary  covenants and restrictions
on the  Company's  ability to engage in certain  activities,  which  include (i)
limitations  on  restricted   payments  for  the  payment  of  dividends,   (ii)
limitations   on  incurrence  of   additional   indebtedness   and  issuance  of
disqualified stock, (iii) restrictions on the merger, consolidation,  or sale of
substantially  all assets of the Company,  (iv) limitations on transactions with
affiliates  relating to the sale,  lease,  transfer or disposition of any of its
properties or assets in excess of certain amounts, (v) limitations on guarantees
of  indebtedness  by the  Company,  (vi)  limitations  on  incurrence  of  other
subordinated   indebtedness   by  the  Company  and  (vii)   certain   reporting
requirements in accordance with Securities and Exchange  Commission  rules.  The
Senior Subordinated Notes include customary events of default.

    OTHER INDEBTEDNESS.   At December 31, 2000 other indebtedness  consists of a
7.57% note in the  amount of $6,000,  incurred  in 1998 in  connection  with the
construction  of a new  warehouse  located  in  Chicopee,  MA.,  due in  monthly
installments  through  February  2018. The interest rate on the $6,000 loan will
convert  after five years to 300 basis  points over the one-year  U.S.  Treasury
rate.  There are no  amortization  requirements  for the first five years of the
loan followed by principal payments of $33 per month until maturity.  The Lender
has been granted a security interest in the warehouse.  During 2000, the Company
paid $3,341  upon the  maturity of the note  related to the  acquisition  of the
assets of the Ben Hogan Company in 1997.

NOTE I -- INCOME TAXES

    Earnings  (loss)  before income taxes and  extraordinary  loss in the United
States and outside the United  States,  along with the  components of the income
tax provision (benefit), are as follows:
<TABLE>
<CAPTION>

                                        YEAR          YEAR       OCTOBER 1,         YEAR
                                        ENDED         ENDED        THROUGH         ENDED
                                     DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  SEPTEMBER 30,
                                         2000          1999          1998          1998
                                    ------------- ------------- -------------  -------------
 Earnings (loss) before income
   taxes and extraordinary loss:
<S>                                    <C>         <C>           <C>            <C>
   United States................       $ (20,149)  $ (37,735)    $ (90,539)     $(104,277)
   Other nations................          (5,342)     (2,426)       (7,475)       (10,803)
                                       ---------   ---------     ---------      ---------
           Total................       $ (25,491)  $ (40,161)    $ (98,014)     $(115,080)
                                       =========   =========     =========      =========

 Income tax provision (benefit):
   Current taxes:
      Federal taxes.............       $           $             $              $     129
      State taxes...............              82         819           237            489
      Other nations' taxes......             766         746                          946
                                       ---------   ---------     ---------      ---------
           Total................       $     848   $   1,565     $     237      $   1,564
                                       ---------   ---------     ---------      ---------
   Deferred taxes:
      Federal taxes.............       $  (6,333)  $ (14,683)    $ (30,428)     $ (35,819)
      Other nations' taxes......                          18            (2)            37
                                       ---------   ---------     ---------      ---------
           Total................          (6,333)    (14,665)      (30,430)       (35,782)
                                       ---------   ---------     ---------      ---------
           Total income tax
             benefit  ..........       $  (5,485)  $ (13,100)    $ (30,193)     $ (34,218)
                                       =========   =========     =========      =========
</TABLE>


    The  differences  between  the  effective  income  tax  rate  and  the  U.S.
statutory rate are as follows:


<TABLE>
<CAPTION>


                                                                                         OCTOBER 1,       YEAR
                                                                FOR THE YEARS ENDED       THROUGH         ENDED
                                                                    DECEMBER 31,         DECEMBER 31,  SEPTEMBER 30,
                                                                2000           1999          1998         1998
                                                           -------------  ------------- -------------  -------------
<S>                                                               <C>          <C>           <C>          <C>
                    U.S. statutory rate (benefit).......          (35)%        (35)%         (35)%        (35)%
                    State  income  taxes,  net of federal
                    benefit.............................                         1
                    Non-U.S.  losses  for  which no taxes
                    were recorded.......................             8           4             3            4

                    Other...............................             5          (2)            1            1
                                                                  ----         ---           ---          ---
                      Effective tax rate................          (22)%        (32)%         (31)%        (30)%
                                                                  ===          ===           ===          ===
</TABLE>

    Under the asset and liability method prescribed by SFAS 109, deferred income
taxes, net of appropriate valuation  allowances,  are provided for the temporary
differences  between  the  financial  reporting  and tax  basis  of  assets  and
liabilities  using enacted tax rates  expected to apply to taxable income in the
years the  temporary  differences  are  expected to reverse.  The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and liabilities at December 31, 2000 and 1999 are as follows:

                                              2000            1999
                                         -------------   ---------

         Deferred tax assets:
           Net operating loss
            carryforwards...........       $123,346        $112,908
           Acquired non-U.S.
            trademarks..............         26,717          29,906
           Accrued liabilities......          6,729           7,106
           Postretirement benefits..          2,874           2,886
           Pension..................          2,746           3,310
           Depreciation.............          1,350           1,311
           Capital loss carryforward                          8,179
           Other....................          5,440           5,084
                                           --------        --------
              Gross deferred tax assets    $169,202        $170,690
                                           --------        --------
         Deferred tax liabilities:
           Intangibles amortization.       $(18,191)       $(20,082)
           Other....................           (248)
                                           --------        --------
              Gross deferred tax
               liabilities..........       $(18,439)       $(20,082)
                                           --------        --------

         Net deferred tax asset before
           valuation allowance             $150,763        $150,608
         Valuation allowance                (32,280)        (38,513)
                                           --------        --------

         Net deferred tax asset after
           valuation allowance             $118,483        $112,095
                                           ========        ========

    On December 31, 2000,  the Company had net operating loss  carryforwards  of
$293,587  consisting of $260,189 from U.S.  operations  which begin to expire in
2011,  and  $33,398 in  non-U.S.  subsidiaries,  which  begin to expire in 2001.
Deferred tax benefits of $123,346  have been  established  on these losses and a
2000  valuation  allowance  in the amount of $32,280  has been  provided  on the
entire state and non-U.S. portions of the deferred tax benefits. The Company had
capital loss  carryforwards  of $20,972 for which a 1999 valuation  allowance in
the amount of $8,179 had been provided.  Such carryforwards  expired in 2000 and
accordingly the related valuation allowance was reversed.

    As  part of the  Recapitalization  Agreement,  Abarco  has  indemnified  the
Company for any potential income tax obligations through September 30, 1996. The
Company's  federal  income tax  returns  through  September  30,  1995 have been
examined by, and settled with, the Internal Revenue Service.

    On  December  31,  2000  undistributed  earnings  of  non-U.S.  subsidiaries
included in consolidated retained earnings amounted to $826. The Company intends
to  continue  to  indefinitely  reinvest  these  earnings,  which  reflect  full
provision for non-U.S.  income  taxes,  to expand its  continuing  international
operations.  Accordingly,  no provision has been made for U.S. income taxes that
might be payable upon repatriation of such earnings.

NOTE J -- PENSION PLANS AND POSTRETIREMENT BENEFITS

    The Company's United States operations have noncontributory, defined benefit
pension  plans  covering  substantially  all  employees.   These  plans  provide
employees with pension benefits that either are based on age and compensation or
are based on stated  amounts for each year of  service.  The  Company's  funding
policy is to contribute  annually the minimum amounts  permitted by the Internal
Revenue  Code.  Plan  assets are  invested  in a broadly  diversified  portfolio
consisting primarily of common stock and fixed income securities.

    The  Company  also  provides  certain  postretirement  health  care and life
insurance  benefits for its domestic  retired  employees  and their  dependents.
Substantially  all of the Company's  United States employees may become eligible
for those  benefits if they reach normal  retirement  age while  working for the
Company.  Most  international  employees  are  covered by  government  sponsored
programs  and the cost to the Company is not  significant.  The Company does not
fund retiree  health care  benefits in advance and has the right to modify these
plans in the future.

     Prior to August 20, 1998, the Company maintained certain pension plans that
covered employees in both the Spalding and Evenflo Segments. Consistent with the
Reorganization,  pension  plans  attributable  to Evenflo  Company,  Inc. are no
longer a liability to the Company.  The  reorganization of the pension plans has
been treated as a separation  of funds.  The net impact of this decision is that
Evenflo Company, Inc. retains the  (accrued)/prepaid  balance at August 20, 1998
and  amortizes  any deferrals  (gains/losses,  prior  service  cost,  transition
obligation,  etc.) associated with the plans rather than immediately recognizing
them. Pension plan expenses  attributable to Evenflo Company,  Inc. are included
in the Company's consolidated financial statements through August 20, 1998.

    Consistent with the Reorganization,  postretirement benefits attributable to
Evenflo  Company,   Inc.  are  no  longer  a  liability  to  the  Company.   The
reorganization of the post-retirement benefits has been treated as a "Separation
of Plans" rather than a combined  curtailment  and settlement as described under
SFAS No. 88. The net  impact of this  decision  is that  Evenflo  Company,  Inc.
retains  the  (accrued)/prepaid  balance at August 20,  1998 and  amortizes  any
deferrals  (gains/losses,  prior  service  cost,  transition  obligation,  etc.)
associated   with  the  plans   rather  than   immediately   recognizing   them.
Postretirement  benefit  expenses  attributable  to Evenflo  Company,  Inc.  are
included in the Company's  consolidated  financial statements through August 20,
1998.

    The December 31, 2000 and 1999 funded status of the Company's  United States
defined benefit pension and post retirement plans consists of the following:
<TABLE>
<CAPTION>

                                                                PENSION BENEFITS         POSTRETIREMENT BENEFITS
                                                                ----------------         -----------------------
                                                           DECEMBER 31,   DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                                               2000           1999          2000          1999
                                                          -------------  ------------- ------------- ---------
                 CHANGES IN BENEFIT OBLIGATION
<S>                                                         <C>            <C>            <C>           <C>
                 Benefit   obligation  at  beginning  of
                 period................................     $ (45,357)     $ (50,248)     $(7,322)      $(7,797)
                 Service cost..........................        (2,077)        (2,492)        (190)         (238)
                 Interest cost.........................        (3,156)        (3,092)        (504)         (526)
                 Plan amendments.......................                       (1,064)
                 Actuarial gain........................         2,367          3,613          578           875
                 Benefits paid.........................         5,653          7,879          431           364
                 Administrative expenses paid..........                           47
                                                            ---------      ---------       -------      -------
                 Benefit obligation at end of period...       (42,570)       (45,357)      (7,007)       (7,322)

                 CHANGE IN PLAN ASSETS
                 Market  value of  assets  at  beginning
                 of  period............................     $  53,637      $  53,405
                 Actual return on assets...............        (3,568)         8,028
                 Employer contributions received during
                   period..............................           160            130
                 Benefits paid during period...........        (5,653)        (7,879)
                 Administrative   expenses  paid  during
                   period..............................                          (47)
                                                            ---------      ---------      -------       -------
                 Market value of assets as end of period       44,576         53,637
                                                            ---------      ---------      -------       -------
                 Funded status.........................         2,006          8,280       (7,007)       (7,322)
                 Unrecognized net transition
                   (asset)/obligation..................          (145)          (275)           0             0
                 Unrecognized prior service cost.......          (162)          (132)         110           124
                 Unrecognized net (gain)/loss..........       (10,970)       (17,660)      (1,207)         (742)
                                                            ---------      ---------      -------       -------
                 Accrued benefit costs.................     $  (9,271)     $  (9,787)     $(8,104)      $(7,940)
                                                            =========      =========      =======       =======

</TABLE>





    Assumptions  used in accounting  for United States defined  benefit  pension
plans as of December 31, 2000, 1999 and 1998 and September 30, 1998 were:

                  WEIGHTED-AVERAGE ASSUMPTIONS AT END OF PERIOD
<TABLE>
<CAPTION>

                                                DECEMBER 31,  DECEMBER 31,   DECEMBER 31,    SEPTEMBER 30,
                                                    2000          1999           1998           1998
                                               ------------- -------------  -------------   -------------
<S>                                                   <C>         <C>            <C>             <C>
                Discount rate..............           7.50%       7.50%          6.75%          6.25%
                Expected   return   on   plan         8.50%       8.50%          8.50%          8.50%
                assets.....................
                Rate of compensation increase         4.50%       4.50%          4.50%          4.50%
</TABLE>

<TABLE>
<CAPTION>

                                                                   PENSION  BENEFITS
                                                                 FOR THE PERIODS ENDED
                                                 ----------------------------------------
                                               DECEMBER 31,   DECEMBER 31,  DECEMBER 31,  SEPTEMBER 30,
                                                    2000          1999          1998         1998
                                               ------------- ------------- -------------  -------------
                COMPONENTS OF NET PERIODIC
                  BENEFIT COSTS
<S>                                               <C>         <C>           <C>           <C>
                Service costs..............       $ 2,077     $ 2,492       $  712        $     3,124
                Interest costs.............         3,156       3,092          814              3,963
                Expected return on assets..        (4,635)     (4,150)      (1,000)            (5,286)
                Amortization on unrecognized
                  transition (asset)/obligation      (127)       (127)         (32)              (139)
                Amortization of unrecognized
                  prior service costs......            30          30            7               (193)
                Amortization of unrecognized
                  net (gain)/ loss.........          (948)       (474)           7               (530)
                Cost of early retirement SFAS
                  No. 88...................            92         694
                                                  -------     -------       ------        -----------
                Net periodic (benefit) costs      $  (355)    $ 1,557       $  508            $   939
                                                  =======     =======       ======        ===========

</TABLE>
<TABLE>
<CAPTION>

                                                                POST-RETIREMENT BENEFITS
                                                                 FOR THE PERIODS ENDED
                                                 -------------------------------------------------------
                                               DECEMBER 31,  DECEMBER 31,   DECEMBER 31,  SEPTEMBER 30,
                                                  2000          1999           1998          1998
                                               ----------    ----------     ----------    -----------
                COMPONENTS OF NET PERIODIC
                  BENEFIT COSTS

<S>                                              <C>           <C>             <C>           <C>
                Service costs..............      $  190        $  238          $  60         $ 230
                Interest costs.............         504           526            127           599
                Amortization  on unrecognized
                transition obligation .....                                                     16
                Amortization of unrecognized
                  prior service costs......          14            14              4
                Amortization of unrecognized
                  net (gain)/ loss.........        (114)          (24)             2           (85)
                                                 ------         -----           ----          ----
                Net periodic costs.........      $  594        $  754          $ 193         $ 760
                                                 ======        ======          =====         =====
</TABLE>


    Assumed  health  care cost  trend  rates  have a  significant  effect on the
amounts  reported for the health care plans.  A  one-percentage-point  change in
assumed health care cost trend rates would have the following effects:

                                                   1-PERCENTAGE    1-PERCENTAGE

                                                  POINT INCREASE  POINT DECREASE

Effect  on  total of  service  and  interest  cost    $  65          $  (59)
components.....................................
Effect on postretirement benefit obligation....       $ 553          $ (497)

    The Company's United States  operations and most non-U.S.  subsidiaries have
separate defined  contribution plans. The purpose of these defined  contribution
plans is generally to provide additional financial security during retirement by
providing  employees  with  an  incentive  to  make  regular  savings.   Company
contributions to the plans are based on employee  contributions or compensation.
The non-U.S.  plans are integrated with the benefits required by the laws of the
various countries.  The Company's defined  contribution  plans' expenses totaled
$945 in 2000,  $870 in 1999,  $581 in the  Transition  Period and $600 in fiscal
1998.

NOTE K -- SHAREHOLDERS' EQUITY

    PREFERRED  STOCK.  On  September  27,  1996  the  Company's  certificate  of
incorporation  was  amended to  establish  and  authorize  50,000,000  shares of
preferred  stock,  $.01 par value,  with other  preferences and attributes to be
determined  by the Board of Directors at the time of each  issuance of preferred
stock.

    On August 20, 1998, the Company and KKR 1996 Fund entered into an investment
agreement  whereby the Company agreed to sell to KKR 1996 Fund 1,000,000  shares
of nonvoting,  cumulative,  variable rate preferred  stock with a face value and
liquidation  value of $100 a share (the "Cumulative  Preferred  Stock") together
with  detachable  stock purchase  warrants (the  "Warrants")  for $100,000.  The
Warrants will allow KKR 1996 Fund to purchase 44,100,000 shares of the Company's
common stock,  par value $0.01 at an exercise price of $2.00 per share. The term
of the Warrants is eight years and the  expiration  date is August 20, 2006. The
separate fair value of the Warrants is not significant. If KKR 1996 Fund decides
to purchase common shares by exercising the Warrants,  KKR 1996 Fund could elect
to pay for those  shares by  exchanging  a portion of the  Cumulative  Preferred
Stock.

    The holder of the Cumulative  Preferred Stock is entitled to receive,  when,
as and if  declared by the Board of  Directors,  dividends  on each  outstanding
share  of the  Cumulative  Preferred  Stock,  at a  variable  rate  based on the
ten-year treasury rate, based on the then effective  liquidation  preference per
share of Cumulative Preferred Stock. Dividends on the Cumulative Preferred Stock
are payable quarterly in arrears on March 31, June 30, September 30 and December
31 of each year.  The  initial  dividend  rate with  respect  to the  Cumulative
Preferred Stock is 14% per annum. As of December 31, 2000, the dividend rate was
14%. The right to dividends on the Cumulative  Preferred Stock is cumulative and
dividends accrue (whether or not declared),  without interest,  from the date of
issuance of the Cumulative Preferred Stock. Since the Board of Directors has not
declared any  preferred  dividends  as of December  31, 2000,  the amount of the
Cumulative Preferred Stock dividends in arrears as of that date was $39,391.

    The Company at its option may, but shall not be required to, redeem,  at any
time,  for cash,  in whole or in part,  any or all of the  shares of  Cumulative
Preferred Stock at a redemption price equal to 100% of the aggregate liquidation
preference of such shares, together with all accumulated and unpaid dividends to
the redemption date.

    Upon any voluntary or involuntary liquidation,  dissolution or winding-up of
the Company, the holder of the Cumulative Preferred Stock will be entitled to be
paid out of the assets of the Company available for distribution $100 per share,
plus an amount in cash equal to all accumulated and unpaid dividends  thereon to
the date fixed for liquidation, dissolution or winding-up of the Company.

    COMMON  STOCK.  The  1996  Employee  Stock  Ownership  Plan  consists  of an
aggregate of 16,300,000 shares of common stock,  which may be sold or granted as
options to key employees of the Company. The share issuance price and the option
price must be at least 50% of the fair market value of the common  shares on the
date of the sale or grant and an option's maximum term is ten years. The options
vest  ratably  over a five-year  period.  Any  outstanding  options  will become
immediately  exercisable upon a change in control of the Company. If an employee
retires,  any shares owned may be put to the Company or the Company can call the
shares based on a fair market value  formula,  as defined.  If an employee dies,
becomes permanently disabled or terminates employment,  the Company can call the
shares based on a fair market value formula, as defined.

    Transactions involving common share options are as follows:

                                                                       WEIGHTED
                                                                       AVERAGE
                                                            NUMBER     EXERCISE
                                                           OF SHARES     PRICE
                                                           ---------     -----
OPTION SHARES

Outstanding   September  30,  1997  (none   exercisable)
 (1,023,729 became exercisable October 1, 1997).......     6,670,793    $ 5.00
Granted in 1998.......................................       295,559    $ 5.00
Cancelled in 1998.....................................      (988,103)   $ 5.00
Exercised in 1998.....................................                     N/A
                                                          ----------     -----
Outstanding  September 30, 1998  (1,023,729  exercisable
 and 3,252,558 became exercisable October 1, 1998)....     5,978,249    $ 5.00
Granted October 1, 1998 through December 31, 1998.....                  $ 5.00
Cancelled October 1, 1998 through December 31, 1998...    (2,346,099)   $ 5.00
Exercised October 1, 1998 through December 31, 1998...                     N/A
                                                          ----------     -----
Outstanding December 31, 1998 (1,955,238 exercisable).     3,632,150    $ 5.00
Granted in 1999.......................................     7,685,015    $ 2.00
Cancelled in 1999.....................................    (1,279,777)   $ 5.00
Exercised in 1999.....................................                     N/A
                                                          ----------     -----
Outstanding December 31, 1999 (2,343,448 exercisable).    10,037,388      2.69
Granted in 2000 ......................................       930,000      2.00
Cancelled in 2000 ....................................      (934,197)     2.33
Exercised in 2000 ....................................                     N/A
                                                          ----------     -----
Outstanding December 31, 2000 (3,644,001 exerciseable).   10,033,191      2.75
                                                          ==========     =====

Aggregate unissued shares and options December 31, 2000   2,027,343       N/A


    The following  table  summarizes  information  for options  outstanding  and
exercisable at December 31, 2000:

                                 OPTIONS OUTSTANDING      OPTIONS EXERCISABLE
                              -----------------------  ----------------------
                                WTD. AVG.    WTD. AVG.               WTD. AVG.
    RANGE OF                    REMAINING    EXERCISE                EXERCISE
     PRICES          NUMBER       LIFE         PRICE      NUMBER       PRICE
 --------------    ---------- -----------  ----------- ----------- ---------
      $2.00        7,885,015      8.8         $ 2.00     1,262,959    $ 2.00
       5.00        2,148,176      6.0           5.00     2,381,042      5.00
                   ---------      ---         ------     ---------    ------
   $2.00 & 5.00    10,033,191     7.8         $ 2.72     3,644,001    $ 3.95
                   ==========     ===         ======     =========    ======


    During 2000,  the Company  granted  250,000  options  to purchase  shares of
Common Stock pursuant to agreements with  consultants.  As of December 31, 2000,
none of these options were  exercisable.  In 2000,  the Company  issued  842,799
shares of common stock, primarily in settlement of a liability for past services
of a former  executive  officer.  In 1999, the Company sold 1,124,985  shares to
certain members of senior  management for total  consideration of $1,506. Of the
$1,506,  $612,  was  received  in the  form of  cash,  $644,  represented  notes
receivable  to the  Company  (bearing  interest at 9.25% per annum) and $250 was
recorded as deferred compensation for future services. The deferred compensation
was a result of the grant of  restricted  shares  that  vest  ratably  over five
years.  The value of such  compensation  was recorded based on the fair value of
the shares (net of  consideration  paid).  In addition to the  employee  options
granted under the 1996 Employee  Stock  Ownership  Plan, in 1999 the Company has
also granted  250,000  options to purchase shares of Common Stock pursuant to an
agreement with a consultant. As of December 31, 1999, none of these options were
exercisable.

    In 1998,  the Company sold 278,885 shares for proceeds of $1,422.

    DISCLOSURES UNDER SFAS NO. 123.  The Company has elected the disclosure-only
basis  provisions of SFAS No. 123.  Accordingly,  no compensation  cost has been
recognized for the employee options. Had compensation cost been determined based
on the fair market value at the grant date  consistent  with the method provided
by SFAS No. 123, the  Company's  pro forma net  earnings  (loss) would have been
$20,963 for 2000,  $(28,278) for 1999,  $(67,892) for the Transition  Period and
$(87,728)  for fiscal  1998 as compared to the  reported  amounts of  $(20,006),
$(27,321), $(67,821) and $(86,771), respectively.

    The   estimated   fair  value  was   determined   using  the   Black-Scholes
option-pricing  model with the following  weighted-average  assumptions used for
grants in 2000, 1999 and the fiscal year ended September 30, 1998 (there were no
new grants in the Transition Period):

                                      DECEMBER 31,   DECEMBER 31,  SEPTEMBER 30,
                                          2000           1999          1998
                                    -------------  ------------- ---------------
  Dividend yield....................       0%             0%            0%
  Expected volatility...............       0%             0%            0%
  Risk-free interest rate...........    6.86%          5.25%         5.62%
  Weighted average expected life....  5 years        5 years       5 years
  Weighted average fair value of
  options granted...................  $  0.00        $  0.00       $  1.19


NOTE L -- LEASE COMMITMENTS

    The Company leases certain manufacturing, warehousing and office facilities,
and equipment under various operating lease arrangements  expiring  periodically
through 2014.

    The Company  also leases  equipment  under a capital  lease  agreement  that
expires in 2005. The short-term  capital lease obligation of $117 is included in
accounts  payable  and  the  long-term  portion  of $551 is  included  in  other
liabilities in the consolidated  balance sheet as of December 31, 2000. In 2000,
machinery and equipment includes $729 and accumulated  depreciation includes $73
relating to the capital lease agreement.

    The  following  is a  schedule  by year of  future  minimum  lease  payments
required  under  operating  and capital  leases that have  initial or  remaining
noncancelable lease terms in excess of one year at December 31, 2000:

                                                      OPERATING      CAPITAL
                                                       LEASES         LEASES
                                                      ---------      -------
                      2001........................    $  1,139      $   196
                      2002........................         964          196
                      2003........................         785          196
                      2004........................         550          196
                      2005........................         351          100
                      Thereafter..................       1,346
                                                      ---------      -------
                      Total minimum lease payments    $  5,135          884
                                                      ========
                      Amounts representing interest                    (216)
                                                                     -------
                                                                       $668
                                                                     =======

    Rental expense under  operating  leases was $1,526 in 2000,  $1,156 in 1999,
$326 in the Transition Period and $5,756 in 1998.

NOTE M -- CONCENTRATION OF CREDIT RISK

    The  Company  sells a broad range of  consumer  products  in North  America,
Europe and the Pacific Rim.  Concentrations of credit risk with respect to trade
receivables  are limited due to the large  number of  customers  comprising  the
Company's  customer  base.  Ongoing credit  evaluations of customers'  financial
condition are performed  and,  generally no collateral is required.  The Company
maintains  reserves  for  potential  credit  losses  and  such  losses,  in  the
aggregate, have not exceeded management's  expectations.  During 2000, 1999, the
Transition  Period,  and fiscal 1998 the  Company's  sales to one U.S.  customer
amounted to 12%,  13%, 24%, 13%  respectively  of net sales.  No other  customer
exceeded  10% in 2000,  1999,  the  Transition  Period and the fiscal year ended
September 30, 1998.

NOTE N -- CONTINGENCIES

    The  Company  is  both  a  plaintiff  and  defendant  in  numerous  lawsuits
incidental  to its  current and former  operations,  some  alleging  substantial
claims. In addition, the Company's operations are subject to federal, state, and
local  environmental  laws  and  regulations.   The  Company  has  entered  into
settlement  agreements with the U.S.  Environmental  Protection Agency and other
parties  on  several  sites,  and is  still  negotiating  on  other  sites.  The
settlement  amount and estimated  liabilities are not considered  significant by
the Company based on present facts.

    Management is of the opinion  that,  after taking into account the merits of
defenses,  insurance coverage and established reserves,  the ultimate resolution
of these  matters  will not have a  material  adverse  effect  on the  Company's
consolidated financial statements.

     During October 1999, the Company substantially completed the implementation
of  a  fully  integrated  computer  system  for  its  domestic  operations.  The
implementation  included  significant changes to customer service,  warehousing,
distribution  and financial  processes.  The Company  encountered  some start-up
difficulties   that   primarily   affected  the   efficiency  of  warehouse  and
distribution  operations.  While the  Company  was able to process  and  fulfill
orders,  it was not able to do so at an adequate rate,  thus risking the loss of
future  business  if  immediate  action  was not taken to  fulfill  all  orders.
Accordingly,  the Company  returned to certain  components of its prior computer
system to deliver a level of distribution  activity that met the ongoing demands
for its  products.  The  financial  modules  of the  new  computer  system  were
successfully implemented in October 1999 and were in use throughout 2000. During
2000,  the Company  concluded  that those  aspects of the system  which had been
deactivated  during the fourth quarter of 1999 would not be  reactivated.  While
the Company's current computer systems environment adequately supports its basic
business needs, selected system upgrades are planned during 2001. As of December
31,  2000,  $0.3  million is  capitalized  relating  to costs for the  financial
modules  that  are  in  use  and  no  amounts  are  capitalized  related  to the
deactivated modules. In January 2001, Spalding implemented the financial modules
of a new computer system and in March 2001,  deactivated  the financial  modules
related to the 1999 implementation.

NOTE O -- RELATED PARTY TRANSACTIONS

    On December  23, 1999,  Spalding  sold its 42.4%  common stock  ownership
interest in Evenflo Company, Inc. to the KKR 1996 Fund.

    Effective with the Reorganization  on August 20, 1998,  Spalding and Evenflo
Company,  Inc.  entered  into an  Indemnity  Agreement  whereby the Spalding and
Evenflo  Company,  Inc.  indemnified  the other against  liability or obligation
related to their  respective  operations or business whether arising prior to or
after the Reorganization. Additionally, the Company indemnified Evenflo Company,
Inc.  against damages,  as defined in the agreement,  incurred or sustained as a
result of any  recall  (voluntary  or  involuntary),  safety  advisory  or other
corrective action relating to any products manufactured by Evenflo Company, Inc.
prior to the close of business on August 20, 1998.

    Effective  with the  Reorganization  on August 20,  1998,  the  Company  and
Evenflo entered into a Transition  Services Agreement whereby the Company agreed
to  provide  insurance,  tax  and  other  related  financial  systems/accounting
services to Evenflo  Company,  Inc.  through  February 20, 1999, or as otherwise
agreed upon. During the Transition  Period,  Spalding billed Evenflo for $303 in
expenses  related to bills paid or  expenses  incurred  on their  behalf.  These
amounts  were  offset  against  expenses  incurred  under  the   Indemnification
Agreement.

    See Note K for a description of the Company's 1996 Employee Stock  Ownership
Plan.

    Effective October 1, 1996, the Company and KKR, an affiliate of the Company,
entered into a management  agreement  providing  for the  performance  by KKR of
certain management  services for the Company.  The Company expensed $700 in 2000
and 1999, $392 in the Transition Period and $966 in fiscal 1998 pursuant to such
management agreement with KKR.

NOTE P -- EXTRAORDINARY LOSS

    The extraordinary loss on early  extinguishment of debt in 1999 relates to a
$400  write-off  of the  deferred  financing  costs  related  to  the  mandatory
prepayment of $23,000 against the Term Loans under the Credit Facility (see Note
H). The tax effect of this loss totaled $140,  resulting in a net  extraordinary
loss of $260.

    The extraordinary loss on early  extinguishment of debt in 1998 relates to a
$9,091  write-off of the deferred  financing  costs made in  conjunction  with a
mandatory  prepayment  of  $228,800  against  the Term  Loans  under the  Credit
Facility (see Note H). The tax effect of this loss totaled $3,132 resulting in a
net extraordinary loss in 1998 of $5,909.

NOTE Q -- INVESTMENT IN AFFILIATE

     On August 20, 1998, the Company effectively completed the separation of the
Spalding and the Evenflo  segments,  into two stand-alone  companies.  Evenflo's
financial  statements prior to August 20, 1998 had been  consolidated with those
of the Company.  Subsequent to this separation,  Spalding continued to own 42.4%
of Evenflo and accounted for its results using the equity method of  accounting.
During the fourth  quarter of 1999,  Spalding sold its  remaining  investment in
Evenflo  (refer to Notes A and B).  The  financial  statements  for the  periods
subsequent to the August 20, 1998 sale through the third quarter of 1999 include
the portion of Evenflo's  results  attributable  to  Spalding's  ownership on an
equity accounting basis.

    Summarized  financial  information  of  Evenflo  for the nine  months  ended
September 30, 1999 and the Transition  Period  October 1, 1998 through  December
31, 1998 is set forth below:

                     CONDENSED INCOME STATEMENT INFORMATION

                                                              OCTOBER 1, 1998
                                         NINE MONTHS ENDED        THROUGH
                                        SEPTEMBER 30, 1999   DECEMBER 31, 1998

 Net Sales..........................         $ 258,595           $ 72,552
                                             =========           ========
 Gross Profit.......................         $  62,440           $  5,741
                                             =========           ========
 Loss before income tax and
   extraordinary items..............         $  (2,054)          $(14,299)
                                             =========           ========
 Net loss...........................         $    (583)          $ (8,886)
                                             =========           ========
 Company's Proportionate share (42.4%)       $    (248)          $ (3,768)
                                             =========           ========
<PAGE>



ITEM  9:  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

    None.

                                    PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

    Set forth  below are  names,  ages and  positions  with the  Company  of the
persons who will serve as  directors  and  executive  officers  of the  Company,
together  with  certain  other key  personnel.  The terms of the  directors  and
executive  officers  of the  Company  expire  annually  upon  the  election  and
qualification of successors at the annual meetings of shareholders.

 NAME                    AGE                 POSITION

 Edwin L. Artzt......     70  Chairman of the Board of Directors
 James R. Craigie....     47  President and Chief Executive Officer
 Daniel S. Frey......     36  Chief Financial Officer, Treasurer
 Peter A. Arturi.....     47  Vice  President,  Secretary and General Counsel
 Edward R. Binder....     40  Executive Vice President Marketing
 Michael W. Esch.....     44  Executive Vice President Operations
 Louis H. Tursi......     39  Executive Vice President Sales
 Henry R. Kravis.....     56  Director
 George R. Roberts...     57  Director
 Michael T. Tokarz...     51  Director
 Brian F. Carroll....     29  Director
 Gustavo A. Cisneros.     55  Director
 David W. Checketts..     45  Director

    Edwin L. Artzt  has been a director of the Company since  September 1997 and
Chairman of the Board of Directors  since  August 1998.  Mr. Artzt is the former
Chairman and Chief  Executive  Officer of The Procter & Gamble Company. In
addition,  Mr. Artzt is a director of American Express Company, GTE Corporation,
Delta Airlines and the Evenflo Company.

    James R. Craigie joined the Company as President and Chief Executive Officer
on December  7, 1998.  Prior to that he had been  employed  since 1983 by Kraft,
Inc., now a subsidiary of Phillip  Morris  Companies,  Inc. He became  Executive
Vice President of Kraft,  Inc. in 1994. From 1997 to 1998 he served as President
of its Beverage and Desserts Division.  From 1994 to 1997 he was General Manager
of the Beverage  Division  after  serving as General  Manager of the Dinners and
Enhancers Division earlier in 1994.

    Daniel S. Frey has been the Chief  Financial  Officer since  September  1999
when he joined the Company.  From July 1994 through  August 1999,  Mr. Frey held
various financial positions leading to Director,  Shared Services Center in 1998
for Duracell International Inc. Prior to Duracell, Mr. Frey was an audit manager
at Deloitte & Touche LLP.

    Peter A. Arturi  has been senior legal  counsel  since he joined the Company
in October of 1998.  Previously  Mr. Arturi was a partner in Baker Law Firm P.C.
from September  1996 to October 1998 and also was a partner with Baker,  Moots &
Pellegrini from 1990 to 1996.

    Edward R. Binder has been the Executive  Vice  President of Marketing  since
April 1999 when he joined the Company. From January 1995 through March 1999, Mr.
Binder was the Vice President of Marketing for Dunkin' Donuts.  Prior to that he
was Senior Vice President,  Director Client Services for the advertising  agency
of Leonard, Monahan, Lubars & Kelly from October 1992 through November 1994.

    Michael W. Esch joined the Company in June 1999 as Vice President Operations
and was promoted to Executive  Vice President  Operations in October 1999.  From
1981  through  May of 1999 Kraft  Foods,  Inc.  employed  Mr. Esch where he held
various  positions  including  Operations  Business  Manager for multiple  Kraft
manufacturing sites.

    Louis H. Tursi  joined  Spalding in 1999  as Director of Sales  Planning and
was promoted to Vice  President of Sales in July and to Executive Vice President
Sales & Customer Service on December 31, 1999. Prior to Spalding,  Mr. Tursi was
Vice President Sales for Vlasic Foods  International  in 1998. From 1983 to 1998
he held a series of  positions  for Kraft Foods Inc.  ending as  Regional  Sales
Manager.

    Henry R.  Kravis  is a  managing  member  of  KKR & Co.  L.L.C.,  a  limited
liability  company  which  serves as the  general  partner of KKR.  He is also a
director of Amphenol  Corporation,  Borden,  Inc., The Boyds  Collection,  Ltd.,
Evenflo  Company,  Inc.,  The Gillette  Company,  IDEX  Corporation,  KinderCare
Learning  Centers,  Inc., KSL Recreation  Group,  Inc.,  PRIMEDIA,  Inc.,  Regal
Cinemas, Inc. and Sotheby's Holdings Inc.

    George G.  Roberts  is a  managing  member of  KKR & Co.  L.L.C.,  a limited
liability  company  which  serves as the  general  partner of KKR.  He is also a
director of Accuride Corporation,  Amphenol Corporation, Borden, Inc., The Boyds
Collection,  Ltd., Evenflo Company, Inc., IDEX Corporation,  KinderCare Learning
Centers, Inc., KSL Recreation Group, Inc., Owens-Illinois,  Inc., Owens-Illinois
Group, Inc., PRIMEDIA, Inc., Dayton Power & Light and Safeway Inc.

    Michael  T.  Tokarz  is a member of KKR & Co.  L.L.C.,  a limited  liability
company  which  serves as the  general  partner of KKR. He is also a director of
Evenflo Company,  Inc., IDEX Corporation,  KSL Recreation  Corporation,  Nexstar
Financial Corporation, PRIMEDIA Inc., KAMAZ, Inc. and United Fixtures Company.

     Brian F. Carroll has been a director of the Company since April 2000 and an
Executive of Kohlberg  Kravis Roberts & Co. since July 1999. From September 1997
to June 1999 he attended the Stanford  University  Graduate  School of Business.
From March 1995 to August 1997 he was an Executive of Kohlberg  Kravis Roberts &
Co. Prior thereto, he was an investment banker with Donaldson, Lufkin & Jenrette
Securities  Corporation.  He is also a Director of Evenflo Company, Inc. and WKI
Holding Company, Inc.

    Gustavo A.  Cisneros  has been a director of the Company  since 1984.  Since
1990 he has been a direct or  indirect  investor  in and a  director  of certain
companies forming part of diverse commercial enterprises. Mr. Cisneros is also a
director of Pueblo Xtra  International,  Inc., Pan American  Beverages  Company,
Inc. and America Online Latin America, Inc.

    David W. Checketts has been a Director of the Company since  September 1998.
He has been the President and Chief  Executive  Officer of Madison Square Garden
since 1994. He was President of the New York Knicks Basketball Club from 1991 to
1994. From September 1990 through March 1991 he was Vice President,  Development
of the National Basketball Association. From 1984 until 1990 he was President of
the Utah Jazz Basketball  Club.  Prior to that, he was with Bain and Company,  a
management  consulting  firm.  In addition,  he served as a board member for the
Multiple Sclerosis Society from March 1996 to December 1999 and was also a board
member for the Children's  Blood  Foundation from January 1996 to December 1999.
Mr.  Checketts  is  currently  on the board of  directors  of Jet Blue  Airways,
Chairman of the Cheering for Children  Foundation  and Director of  Professional
Team Physicians, Inc.

    Messrs. Kravis and Roberts are first cousins.

    The business address of  Messrs.  Kravis,  Tokarz and Carroll is 9 West 57th
Street,  New York,  New York  10019 and of Mr.  Roberts  is 2800 Sand Hill Road,
Suite 200, Menlo Park, California 94025. The business address of Mr. Cisneros is
Final Av. La Salle,  EdF.  Venevision  5to.  Piso,  Colina Los Caobos,  Caracas,
Venezuela.  The  business  address  of Mr.  Artzt is 1 Procter  & Gamble  Plaza,
Cincinnati, Ohio 45202.

COMPENSATION OF DIRECTORS

    All directors are reimbursed for their usual and customary expenses incurred
in  attending  all board and  committee  meetings.  Each  director who is not an
employee of the Company receives an aggregate annual fee of $25,000,  payable in
quarterly installments.  Directors who are also employees of the Company receive
no compensation for serving as directors.

ITEM 11:  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

    The following table sets forth the compensation  paid, accrued or awarded by
the Company for the account of each of the chief executive officer at the end of
2000 and the most highly compensated  executive officers receiving  compensation
on an annualized basis from the Company in excess of $100,000  compensation (the
"Named Executive  Officers") for their services in all capacities to the Company
during 1999, the Transition Period and the fiscal year ended September 30, 1998.
<TABLE>
<CAPTION>



                                                                                             STOCK
                                                                                             AWARDS
                                                                                             ------
                                               ANNUAL COMPENSATION
                                   ----------------------------------------                SECURITIES
 NAME AND PRINCIPAL                                          OTHER ANNUAL     RESTRICTED   UNDERLYING     ALL OTHER
      POSITION           YEAR        SALARY    BONUSES(1)   COMPENSATION(2)    STOCK(3)     OPTIONS #     COMPENSATION(4)
-------------------- ------------  --------- ------------   ---------------   ----------   ----------     ---------------
<S>                       <C>           <C>         <C>            <C>              <C>         <C>             <C>
James R. Craigie         2000      $500,000   $      0       $  10,317        $      0            0       $   5,200
 President and Chief     1999       375,000     562,500          2,899         250,000    2,500,000           5,000
 Executive Officer    Transition     31,250     215,000              0               0            0               0
                        Period
                         1998             0           0              0               0            0               0

Edward R. Binder         2000       330,100           0         12,240               0            0           5,250
 Executive Vice          1999       243,750     221,875         66,444               0      388,890           5,000
 President Marketing  Transition          0           0              0               0            0               0
                        Period
                         1998             0           0              0               0            0               0

Michael W. Esch           2000      255,850           0         12,240               0            0               0
 Executive Vice           1999      125,417     104,870         68,300               0      205,560               0
 President Operations  Transition         0           0              0               0            0               0
                         Period
                          1998            0           0              0               0            0               0

Louis Tursi              2000       250,000           0         12,216               0            0               0
 Executive Vice          1999       113,638     105,739         79,453               0      205,560               0
 President Sales      Transition          0           0              0               0            0               0
 and Customer           Perion
 Service                 1998             0           0              0               0            0               0

Edward G. Several...     2000       230,630           0         12,216               0            0           3,434
 Vice President          1999       181,442     179,381         96,674               0      388,890           2,250
 Marketing Services   Transition          0           0              0               0            0               0
                        Period
                         1998             0           0              0               0            0               0
</TABLE>

---------
(1) 1999 bonus amounts for Mr. Binder and Mr. Several  include hiring bonuses of
    $100,000 each. 1999 bonus amounts for Mr. Esch and Mr. Tursi  include hiring
    bonuses of $50,000 each. Mr. Craigie's bonus for the Transition  Period  was
    a hiring bonus.

(2) Other annual  compensation  was received in the form of club  allowances and
    dues,  automobile  allowances,  contributions  to the  Company's  SERP Plan,
    relocation costs and taxes reimbursed by the Company for taxable  relocation
    costs.

(3) 500,000 restricted shares of common stock were granted to Mr. Craigie during
    1999 at a value (out of consideration  paid) of $250,000.  These shares vest
    over 5 years (100,000 shares per year). At December 31, 2000, 200,000 shares
    of  restricted  stock were vested.  In addition,  at December 31, 2000,  the
    500,000  shares  of  restricted  stock  held by Mr.  Craigie  had a value of
    $200,000.

(4) Company matching contributions to the Savings Plus Plan.


    STOCK OPTION GRANTS IN 2000, 1999, THE TRANSITION PERIOD AND IN FISCAL 1998.

    No stock options were granted to the Named  Executive  Officers in 2000, the
Transition Period or in fiscal 1998.

    The  following  table sets forth certain  information  with respect to stock
options granted to the Named  executive  Officers during the year ended December
31, 1999.
<TABLE>
<CAPTION>

                             # OF SECURITIES    AS A % OF TOTAL
                           UNDERLYING OPTIONS  OPTIONS GRANTED TO  EXERCISE PRICE
     NAME                        GRANTED       EMPLOYEES IN 1999     ($/SHARE)      EXPIRATION DATE
     ----                  ------------------ -------------------  --------------  ------------------
<S>                            <C>                   <C>              <C>          <C>
     James R. Craigie          2,500,000             32.5             $ 2.00       Various dates in 2009
     Edward R. Binder            388,890              5.1               2.00                   July 2009
     Edward G. Several           388,890              5.1               2.00                   July 2009
     Michael W. Esch             205,560              2.7               2.00                   July 2009
     Louis H. Tursi              205,560              2.7               2.00                   July 2009

</TABLE>

AGGREGATE  OPTIONS  EXERCISED IN 2000, 1999, THE TRANSITION PERIOD AND IN FISCAL
1998 AND DECEMBER 31, 2000 OPTION VALUES.

    No stock options were exercised in 2000,  1999,  the  Transition  Period and
fiscal 1998 and no value can be presently  ascribed to previous  grants of stock
options.

MANAGEMENT INCENTIVE BONUS PLAN

    The Company  maintains a Management  Incentive  Bonus Plan  ("MIBP") for all
salaried employees, including department managers and executives senior thereto,
including the Named Executive Officers, pursuant to which eligible employees are
awarded bonuses based on the Company's annual operating profit (as determined in
accordance with generally accepted  accounting  principles),  as compared with a
target  established  prior to the  beginning of the year.  Awards under the MIBP
range within a guideline of 5% to 100% of annual salary payments, depending upon
a participant's position and commensurate responsibility related to consolidated
operations. If the annual results do not meet the pre-established objectives, no
bonus is earned. If annual results exceed the  pre-established  objectives,  the
bonus paid is increased  proportionally,  up to an  additional  bonus of no more
than 100% of the employee's guideline bonus percentage.

1996 EMPLOYEE STOCK OWNERSHIP PLAN

    The 1996  Stock  Purchase  and Option  Plan for Key  Employees  of  Spalding
Holdings Corporation and Subsidiaries (the "1996 Employee Stock Ownership Plan")
provides for the  issuance of shares of  authorized  but unissued or  reacquired
shares of common stock,  subject to adjustment to reflect certain events such as
stock dividends, stock splits, recapitalizations,  mergers or reorganizations of
or by the Company.  The 1996 Employee Stock Ownership Plan is intended to assist
the Company in attracting and retaining  employees of outstanding ability and to
promote the  identification of their interests with those of the stockholders of
the Company.  The 1996  Employee  Stock  Ownership  Plan permits the issuance of
common stock (the "Purchase Stock") and the grant of non-qualified stock options
and incentive  stock options (the  "Options") to purchase shares of common stock
and other  stock-based  awards (the issuance of Purchase  Stock and the grant of
Options  and  other  stock-based  awards  pursuant  to the 1996  Employee  Stock
Ownership Plan being a "Grant"). Unless sooner terminated by the Company's Board
of Directors, the 1996 Employee Stock Ownership Plan will expire ten years after
its  inception.  Such  termination  will not  affect the  validity  of any Grant
outstanding on the date of termination.

    The  Compensation  Committee of the Board of Directors  administers the 1996
Employee Stock Ownership Plan, including,  without limitation, the determination
of the  employees  to whom Grants  will be made,  the number of shares of common
stock  subject  to each  Grant,  and the  various  terms  of  such  Grants.  The
Compensation Committee of the Board of Directors may from time to time amend the
terms of any Grant, but, except for adjustments made upon a change in the common
stock of the Company by reason of a stock split, spin-off, stock dividend, stock
combination    or    reclassification,     recapitalization,     reorganization,
consolidation,  change of  control,  or similar  event,  such  action  shall not
adversely  affect the rights of any  participant  under the 1996 Employee  Stock
Ownership Plan with respect to the Purchase  Stock and the Options  without such
participant's  consent.  The  Board of  Directors  retains  the  right to amend,
suspend or terminate the 1996 Employee Stock Ownership Plan.

RETIREMENT PLANS

    SPALDING EMPLOYEES  RETIREMENT  ACCOUNT PLAN ("SERA").  The Company sponsors
SERA, a cash balance defined benefit pension plan qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), for substantially
all U.S. salaried  employees.  SERA covers all eligible full-time  employees who
are over age 20 and have at least one year of service.  Annually, an addition is
made to each  participant's  account based on a percentage of the  participant's
salary for that year up to a maximum salary of $160,000.  The percentage  ranges
from 2% of pay for  employees  under  age 25 to 9% of pay for  employees  60 and
over.  The accounts are credited  with  interest at a rate  determined  annually
based on an average of thirty-year United States Treasury Bonds.

    SUPPLEMENTAL  RETIREMENT  PLAN ("SRP").   As a supplement  to the SERA,  the
Company sponsors the non-qualified SRP which covers highly compensated employees
whose benefits are limited by  compensation  and benefit  limitations  under the
Code. For employees with a salary in excess of $160,000,  an addition is made to
each participant's account based on a percentage of the participant's salary for
that year. The percentage ranges from 2% of pay for employees under age 25 to 9%
of pay for  employees 60 and over.  The accounts are credited with interest at a
rate  determined  annually  based on an average  of  thirty-year  United  States
Treasury Bonds.

    The estimated  annual benefits payable under SERA and SRP upon retirement at
normal retirement age for each of the Named Executive Officers is as follows:

                                                    ESTIMATED
                                                     ANNUAL
                                                BENEFIT IF RETIRES
                                                    AT NORMAL
                                  YEAR ATTAINS     RETIREMENT
                                     AGE 65          AGE(1)
                                     ------          ------
             James R. Craigie         2018          $110,755
             Edward R. Binder         2025            93,415
             Michael W. Esch          2021            56,204
             Edward G. Several        2026            67,373
             Louis H. Tursi           2026            72,183

----------
(1) Under SERA and SRP the normal retirement age is 65. The plans allow benefits
    to be paid as a lump sum payment.  The estimated annual benefits shown above
    are in the form of a single  life  annuity  which is the  equivalent  of the
    individual's  projected cash balance account.  Benefits have been determined
    assuming  no  increase in 2000  compensation  levels and an annual  interest
    credit of 5.8% which is the 2001 rate for the interest credit.  Benefits are
    computed  without  reference to limitations on compensation  and benefits to
    which the SERA is subject  under the Code because any benefits for the Named
    Executive  Officers that are affected by such  limitations are made up under
    the Company's SRP.

    SAVINGS PLUS PLAN. The Company sponsors defined contribution plans qualified
under the Code,  commonly  referred to as a 401(k) plan, for  substantially  all
U.S.  salaried  employees  and  the  non-union  Gloversville,  New  York  hourly
employees (the "Savings Plus Plan"). Participants may make pre-tax contributions
up to 15% of their aggregate annual  salaries.  The Company makes a 50% matching
contribution on the first 6% of participant contributions.  The Company does not
match  participant  contributions  in  excess of 6%. In  addition,  the  Company
maintains  a defined  contribution  plan for its union  employees  in  Chicopee,
Massachusetts.  The Company  does not match  participant  contributions  to this
plan.

CHANGE IN CONTROL SEVERANCE AGREEMENTS

    The Company maintains Change In Control Severance Agreements (the "Severance
Contracts")  for  certain  executives  of the  Company  pursuant  to which these
employees  could be  compensated  and could  receive  severance  payments when a
change in control or  potential  change in control of the  Company  occurs.  The
September 30, 1996 Recapitalization was a change in control under the provisions
of the Severance Contracts.

    The Severance  Contracts  generally  permit an eligible  employee to receive
severance  payments for a period of 12, 24 or 35 months,  as the case may be, or
until the employee reaches the age of 65 whichever comes first consisting of (a)
monthly  payments of a combination of 1/12 of such person's  highest annual base
salary  and bonus,  and (b)  continued  life,  disability,  accident  and health
insurance benefits offset by such person's COBRA benefits. In addition, selected
senior and top management will receive an additional lump-sum payment of 50% and
100%,  respectively,  of the amount by which the employee's  benefit under the
tax-qualified  retirement  plans  maintained  by  the  Company  or  one  of  its
subsidiaries would have been increased if contributions  and/or benefit accruals
under such plans had continued during the period of continued  benefits.  During
fiscal 1998, Messrs. Dickerman,  Senecal and Doleva from Spalding (the "Spalding
Severance  Contracts")  and Messrs.  Paul Whiting,  Chairman and Chief Executive
Officer, Mr. Kipphut,  Vice President and Treasurer,  and on September 30, 1998,
Mr. Stephen Dryer, Vice President and Controller from the Tampa corporate office
(the  "Tampa  Severance  Contracts"),  exercised  their  rights  to  resign.  At
September 30, 1998, all remaining  Severance  Contracts were either exercised or
expired.

    The compensation under the terms of the Spalding Severance Contracts that is
expected to be paid subsequent to December 31, 2000 is $0.5 million in 2001. The
compensation  under the terms of the Tampa Severance  Contracts that is expected
to be  paid  subsequent  to  December  31,  2000 is $0.4  million in  2001.

    As  of  December  31,  2000,  several  members  of  senior  management  have
employment  agreements  that would provide  benefits for twelve  months,  namely
salary  continuation,  in  the  event  their  employment  with  the  Company  is
involuntarily terminated.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    The  Compensation  Committee  of the board of directors  (the  "Committee")
consists  entirely of  non-employee  directors.  The Committee  establishes  and
regularly reviews  executive  compensation  levels and policies,  and authorizes
short- and long-term awards in the form of cash or stock.

    Compensation  for  executives is based on the principles  that  compensation
must (a) be competitive  with other quality  companies in order to help attract,
motivate and retain the talent needed to lead and grow the  Company's  business,
(b) provide a strong  incentive for key managers to achieve the Company's goals,
and (c) make prudent use of the Company's resources.

    No person who  served  during  fiscal  2000 as an  executive  officer of the
Company  serves or has  served on the  Committee  or as a  director  of  another
company, one of whose executive officers serves as a director of the Company.


<PAGE>



ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The following  table, as of March 20, 2001,  sets forth certain  information
regarding the beneficial owners of the Company's Common Stock by (i) all persons
known to the Company to own beneficially  more than 5% of the Common Stock, (ii)
each director,  (iii) each of the Named Executive Officers (as defined) and (iv)
all directors and Named Executive Officers as a group.

                                                       NUMBER OF
NAME                                                SHARES OWNED(1   PERCENTAGE
----                                                 -------------   -----------
Strata L.L.C.(1).................................     77,034,840          75.1
  c/o Kohlberg Kravis Roberts & Co. L.P.
  9 West 57th Street
  New York, NY 10019
KKR 1996 GP LLC(2)...............................      9,120,000           8.9
  c/o Kohlberg Kravis Roberts & Co. L.P.
  9 West 57th Street
  New York, NY 10019
Sierra Investments LLC...........................      6,480,000           6.3
L.F.  Loree,   III  and  Norwood  H.  Davis,   Jr.,
Trustees (for various trusts)....................      2,000,000           2.0
Henry R. Kravis(1)(2)............................             --             *
George R. Roberts(1)(2)..........................             --             *
Michael T. Tokarz(1)(2)..........................             --             *
Brian F. Carroll(1)(2)...........................             --             *
Gustavo A. Cisneros(3)...........................             --             *
Edwin L. Artzt...................................        542,799             *
James Craigie(4).................................      1,250,000           1.2
Edward R. Binder(4)..............................        188,888             *
Edward G. Several(4).............................        188,888             *
Michael W. Esch (4)..............................         88,552             *
Louis H. Tursi (4)...............................         88,552             *
David W. Checketts...............................             --             *
All named officers and directors as a group......      2,347,679           2.3
----------
    *  Beneficial  ownership  does not exceed  1.0% of the  respective  class of
securities.

(1)  Shares of Common Stock shown as  beneficially  owned by Strata  L.L.C.  are
     held by Strata Associates L.P. Strata L.L.C. is the sole general partner of
     KKR Associates (Strata). KKR Associates (Strata), L.P., is the sole general
     partner of Strata  Associates L.P. and possesses sole voting and investment
     power with respect to such shares.  Strata  L.L.C.  is a limited  liability
     company,  the  members  of which are  Messrs.  Henry R.  Kravis,  George R.
     Roberts,  Robert I.  MacDonnell,  Paul E.  Raether,  Michael W.  Michelson,
     Michael T. Tokarz,  James H. Greene,  Jr.,  Perry Golkin,  Scott M. Stuart,
     Edward A. Gilhuly,  Alexander Navab and Johannes Hurth. Messrs.  Kravis and
     Roberts are members of the  Executive  Committee of Strata  L.L.C.  Messrs.
     Kravis,  Roberts and Tokarz are also directors of the Company. Mr. Brian F.
     Carroll is a director of the Company and an executive of KKR.  Each of such
     individuals may be deemed to share beneficial ownership of the shares shown
     as beneficially  owned by Strata L.L.C.  Each of such individuals  disclaim
     beneficial ownership of such shares.

(2)  Shares of Common Stock shown as  beneficially  owned by KKR 1996 GP LLC are
     held by KKR 1996 Fund L.P. KKR 1996 GP LLC is the sole  general  partner of
     KKR Associates 1996 L.P., a Delaware  limited  partnership.  KKR Associates
     1996 L.P. is the sole general partner of KKR 1996 Fund L.P. KKR 1996 GP LLC
     is a Delaware limited liability company,  the managing members of which are
     Messrs.  Henry R.  Kravis and George R.  Roberts  and the other  members of
     which are  Messrs.  Robert  I.  MacDonnell,  Paul E.  Raether,  Michael  W.
     Michelson,  Michael T. Tokarz, James H. Greene, Jr., Perry Golkin, Scott M.
     Stuart,  Edward A. Gilhuly,  Alexander  Navab and Johannes  Hurth,  Messrs.
     Kravis,  Roberts and Tokarz are  directors of the Company.  Each of Messrs.
     Kravis, Roberts,  MacDonnell,  Raether, Michelson,  Tokarz, Greene, Golkin,
     Stuart,  Gilhuly,  Navab  and  Hurth  may be  deemed  to  share  beneficial
     ownership  of the shares  shown as  beneficially  owned by KKR 1996 GP LLC.
     Each of such individuals disclaims beneficial ownership of such shares. Mr.
     Brian F.  Carroll is a director of the Company and is also an  executive of
     KKR and a limited partner of KKR Associates 1996 L.P. Mr. Carroll disclaims
     that he is the  beneficial  owner of any shares  beneficially  owned by KKR
     Associates 1996.

(3)  A trust for the benefit of relatives of Gustavo A. Cisneros and a trust for
     the benefit of Ricardo J.  Cisneros and  relatives  of Ricardo J.  Cisneros
     each owns a 50%  indirect  beneficial  ownership  interest in the equity of
     Abarco. On December 28, 2000, Abarco  transferred all of its rights,  title
     and  ownership  in  Spalding  to Sierra  Investments  LLC,  a newly  formed
     Delaware  limited  liability  company,  all of the equity of which is owned
     indirectly by Mr.  Gustavos  Cisneros (or one or more of his trusts for his
     beneift or the benefit of his family) and Ricardo  Cisneros (or one or more
     of his trusts for his beneift or the benefit of his family). Mr. Gustavo A.
     Cisneros is also a director of the Company.  Mr. Gustavo A. Cisneros may be
     deemed to have beneficial ownership of the shares beneficially owned by the
     trusts  created  by him.  Mr.  Gustavo  A.  Cisneros  disclaims  beneficial
     ownership of such shares.

(4)  Pursuant to Rule 13d-3,  stock  options that are presently  exercisable  or
     exercisable within 60 days after December 15, 2000, which are owned by each
     individual  are deemed to be  outstanding  for  purposes of  computing  the
     percentage of shares owned by that individual.  Therefore,  each percentage
     is computed based on the sum of (i) the shares  actually  outstanding as of
     December 15, 2000 and (ii) the number of stock options  exercisable  within
     60 days of December  15,  2000,  owned by that  individual  or entity whose
     percentage of share ownership is being computed,  but not taking account of
     the exercise of stock options by any other person or entity.

    In  addition,  KKR 1996 Fund  acquired,  on the date of the  Reorganization,
1,000,000  shares of preferred stock, par value $0.01 per share, and warrants to
purchase  44,100,000 shares of Common Stock (exercise price of $2 per share) for
a cash purchase price of $100 million.
<PAGE>



ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    See Note K of the Notes to the Consolidated  Financial  Statements appearing
elsewhere on this Form 10-K for a  description  of the  Company's  1996 Employee
Stock Ownership.

    See  Notes A and O of the  Notes to the  Consolidated  Financial  Statements
appearing  elsewhere on this Form 10-K for a description  of the sale of Evenflo
and the related indemnity agreement.

    Effective October 1, 1996, the Company and KKR, an affiliate of the Company,
entered into a management  agreement  providing  for the  performance  by KKR of
certain management services for the Company.  The Company expensed $700 thousand
in 2000 and 1999, $392 thousand  during the Transition  Period and $976 thousand
in fiscal 1998 pursuant to such management agreement with KKR.

     On August 20, 1998 (the  "Closing  Date"),  KKR 1996 Fund,  entered  into a
stock purchase agreement pursuant to which KKR 1996 Fund acquired from Spalding,
through Lisco, Inc., then a wholly-owned  subsidiary of Spalding ("Lisco"),  (i)
51%  (5,100,000  shares) of the  outstanding  shares of common stock,  par value
$1.00 per share, of Evenflo (the "Evenflo  Common Stock"),  for a purchase price
of $25.5 million and (ii) 400,000 shares of variable rate  cumulative  preferred
stock  with a  liquidation  preference  of $100.00  per share  (the  "Cumulative
Preferred  Stock") for a purchase price of $40.0 million,  representing  100% of
the outstanding shares of Cumulative Preferred Stock.  Spalding,  through Lisco,
received the 400,000 shares of newly-authorized  Cumulative Preferred Stock as a
distribution  from Evenflo (the "Preferred Stock  Distribution").  KKR 1996 Fund
also entered into an  agreement  on August 18,  1998,  with the Company  through
which KKR 1996 Fund purchased  1,000,000 shares of preferred stock, par value of
$0.01 per share, and acquired  warrants to purchase  44,100,000 shares of common
stock,  par value  $0.01 per  share,  for a  purchase  price of $100.0  million,
payable in cash.  In  addition,  on the  Closing  Date,  Great Star  Corporation
("Great  Star"),  an  affiliate of Abarco  N.V.,  entered into a stock  purchase
agreement  pursuant to which,  prior to the  acquisition  of Common Stock by KKR
1996 Fund, Great Star acquired 6.6% (660,000  shares) of the outstanding  shares
of Common Stock from Lisco for a purchase price of $3.3 million.

    On the Closing Date,   Evenflo,  KKR 1996 Fund and Spalding,  through Lisco,
entered  into a  stockholders  agreement  (the  "KKR  Stockholders  Agreement").
Pursuant to the KKR  Stockholders  Agreement,  Spalding,  through Lisco, had the
right to participate  pro rata in certain sales of Common Stock by KKR 1996 Fund
and  affiliates  (a "Tag  Along"),  and KKR 1996 Fund had the  right to  require
Spalding,  through  Lisco,  to  participate  pro rata in certain sales of Common
Stock by KKR 1996 Fund and  affiliates (a "Drag  Along").  The KKR  Stockholders
Agreement provided Spalding, through Lisco, with "piggyback" registration rights
and two demand  registrations  rights and provided for certain  restrictions and
rights  regarding the transfer of Common Stock by Spalding,  through Lisco.  The
KKR  Stockholders  Agreement also granted  Spalding,  through Lisco the right to
appoint  one member of  Evenflo's  board of  directors,  subject to  maintaining
specified ownership thresholds.

    On the Closing Date,  Spalding and Evenflo  entered into an  indemnification
agreement (the "Indemnification Agreement") pursuant to which Spalding agreed to
indemnify  Evenflo for all losses and  liabilities  of any kind  relating to any
non-Evenflo  related matters,  and Evenflo agreed to indemnify  Spalding for all
losses  and  liabilities  of any  kind  relating  to the  Evenflo  business.  In
addition,  Spalding  agreed to  indemnify  Evenflo  for the  expense  of product
recalls and  corrective  actions  relating to products  manufactured  by Evenflo
prior to the Closing Date.

    Spalding  and Evenflo  entered  into an Employee  Matters  Agreement,  dated
August 20,  1998,  to allocate  assets and  liabilities  with  respect to labor,
employment and employee benefit matters. The Employee Matters Agreement provides
that Evenflo will retain all  employment-related  responsibility  no matter when
incurred for current and former employees of Evenflo.  Evenflo will provide, for
at least one year following the Closing Date, employee benefits that are, in the
aggregate,  no less  favorable than those  maintained for the Evenflo  employees
immediately  prior to the closing of the  Reorganization.  Furthermore,  Evenflo
will  establish  plans that are  substantially  similar  to the SERA  Plan,  the
Spalding & Evenflo  Savings  Plus  Plan,  the  Spalding  & Evenflo  Supplemental
Retirement  Plan  and  Spalding's   postretirement  health  and  life  insurance
benefits,  and assets for the Evenflo  employees  will be  transferred  from the
Spalding plans, except in the case of postretirement benefits for which Spalding
will  cause to be  accrued  on the books of  Evenflo a  pro-rata  portion of the
funding  contribution  due in 1998.  Evenflo will also  establish a stock option
plan to provide for the issuance of stock-based awards. Evenflo will continue to
honor its  obligations  under and maintain  certain  deferred  compensation  and
change in control  agreements  with  individual  executives,  retirement  plans,
welfare plans and collective bargaining agreements.

    Prior to the Closing Date, Evenflo and its subsidiaries filed a consolidated
United  States  federal  income tax return  together with Spalding and its other
subsidiaries (collectively,  the Spalding Consolidated Group). As of the Closing
Date,  Evenflo and its  subsidiaries  (collectively,  the Evenflo Group) will no
longer be  eligible  to file  United  States  federal  income  tax  returns on a
consolidated basis with Spalding and its subsidiaries (other than members of the
Evenflo Group) (collectively,  the Spalding Group). Consequently, on the Closing
Date, Spalding and Evenflo entered into a tax allocation and indemnity agreement
(the "Tax Allocation Agreement").

    Pursuant to the Tax  Allocation  Agreement,  (i) the tax  attributes  of the
Spalding  Consolidated Group (e.g., net operating losses, net capital losses and
tax credits) will be allocated and apportioned  among the members of the Evenflo
Group and the members of the Spalding  Group in accordance  with the  applicable
Treasury  regulations,  (ii) Spalding will be responsible  for (x) preparing and
filing all consolidated  United States federal income tax returns (including any
amended returns) for the taxable years during which Evenflo and its subsidiaries
were members of the Spalding  consolidated  group and (y) paying all taxes shown
as due and owing on such consolidated  returns, and (iii) Spalding will have the
sole right to represent  Evenflo's and its subsidiaries'  interests in any audit
or other  administrative  or judicial  proceeding  related to such  consolidated
returns.

    Under  the  Tax  Allocation  Agreement,  Evenflo  and its  subsidiaries  are
required to pay to Spalding  the amount of United  States  federal  income taxes
that  are  attributable  to  Evenflo  and its  subsidiaries  (as  determined  in
accordance with the provisions of the Consolidated  Federal Income Tax Liability
Allocation Agreement among Spalding and its Subsidiaries,  dated as of September
30, 1993 (the "Old Tax Sharing  Agreement"))  for all taxable years during which
Evenflo and its  subsidiaries  were members of the Spalding  Consolidated  Group
(including,  without limitation,  any such taxes that are imposed as a result of
an audit or other adjustment).  Evenflo and its subsidiaries will be entitled to
any  refunds of such taxes and  Spalding  is  required  to pay  Evenflo  and its
subsidiaries  the  amount of any tax refund  attributable  to such  parties.  In
addition,  under the Tax Allocation Agreement,  the members of the Evenflo Group
will be required to reimburse the Spalding  Group for any tax  attributes of the
Spalding Group that are utilized by the Evenflo Group (or any member thereof) to
reduce its tax  liability  and  Spalding  and the other  members of the Spalding
Group will have similar  obligation  to reimburse  the Evenflo Group for any tax
attributes of the Evenflo Group that are utilized by the Spalding  Group (or any
member thereof).

    Spalding  and the other  members  of the  Spalding  Group will  jointly  and
severally indemnify and hold harmless Evenflo and its subsidiaries for any taxes
imposed on Spalding or other members of the Spalding Group other than taxes that
are attributable to Evenflo and its subsidiaries.

    Pursuant  to the  terms  of the Tax  Allocation  Agreement,  the  principles
described herein also will govern the filing of any state,  local or foreign tax
returns  required to be filed by Spalding or other members of the Spalding Group
on a  consolidated,  combined  or unitary  basis with the  Company or any of its
subsidiaries  and the  allocation  of the  liability  for any taxes with respect
thereto.

    On December 23, 1999,  Spalding  sold its  remaining  42.4%  common stock
ownership  interest in Evenflo Company,  Inc. to KKR 1996 Fund. The net proceeds
from the $23.0  million  sale were used to repay term loans under the Company's
senior credit facilities.
<PAGE>



                                     PART IV

ITEM 14:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) 1. FINANCIAL STATEMENTS

                                                                  PAGE
                                                                  ----

         Independent Auditors' Report.........................     25
         Statements of Consolidated Operations for the years
           ended  December  31,  2000  and  1999,  the
           Transition  Period  October 1, 1998 through
           December 31, 1998 and for the fiscal year  ended
           September 30, 1998.................................     26
         Consolidated Balance Sheets as of December 31, 2000
           and 1999...........................................     27
         Statements of Consolidated Cash Flows for the years
           ended December 31, 2000 and 1999,  the Transition
           Period October 1, 1998 through December 31, 1998
           and for the fiscal year ended September 30, 1998...     28
         Statements of Consolidated Shareholders' Equity
           (Deficiency) for the years ended  December 31, 2000
           and 1999, the Transition Period October 1, 1998
           through December 31, 1998 and for  the fiscal year
           ended September 30, 1998...........................     29
         Notes to the Consolidated Financial Statements.......     30

2. FINANCIAL STATEMENT SCHEDULE

               SCHEDULE                                           PAGE
               --------                                           ----
               Independent Auditors' Report on  Schedule......     61
               II -- Valuation and Qualifying Accounts........     62

    SCHEDULES OTHER THAN THE ABOVE HAVE BEEN OMITTED BECAUSE THEY ARE EITHER NOT
APPLICABLE OR THE REQUIRED  INFORMATION  HAS BEEN DISCLOSED IN THE  CONSOLIDATED
FINANCIAL STATEMENTS OR NOTES THERETO.

3. EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K)

     EXHIBIT                          DESCRIPTION
     -------                          -----------

       2.1      Recapitalization  and Stock  Purchase  Agreement,  dated
                August 15, 1996, by and among Strata  Holdings L.P., E&S
                Holdings Corporation and Abarco N.V.  (incorporated  by
                reference from Exhibit 2.1 to Registration Statement No.
                333-14569 filed by the Company on January 9, 1997).
       2.2      Amendment  No.  1  to  the  Recapitalization  and  Stock
                Purchase Agreement, dated September 30, 1996, by and
                among Strata Holdings L.P., E&S Holdings Corporation and
                Abarco N.V. (incorporated by reference from Exhibit  3.2
                to Registration  Statement No.  333-14569 filed by the
                Company on January 9, 1997
       3.1      Restated Certificate of Incorporation of Evenflo &
                Spalding Holdings Corporation (incorporated  by
                reference from Exhibit 3.1 October 2, 1999  to  the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended April 3, 1999, filed by the Company on November
                15, 1999).
       3.2      Bylaws of E&S Holdings Corporation (incorporated by
                reference from Exhibit 3.2 to Registration Statement No.
                333-14569 filed by the Company on January 9, 1997).
       4.1      Indenture    between   E&S   Holdings Corporation  and
                Marine Midland Bank, as Trustee (incorporated by
                reference from  Exhibit  4.1  to   Registration
                Statement No. 333-14569 filed by the Company on
                January 9, 1997).
       4.2      Form of 10 3/8% Series B Senior  Subordinated  Notes
                due 2006 (incorporated by reference from Exhibit 4.3
                to Registration Statement No. 333-14569 filed by the
                Company on January 9, 1997).
       4.3      Form of Amended and  Restricted  1996 Employee Stock
                Purchase  Option Plan for key employees of Spalding
                Holdings Corporation and Subsidiaries (incorporated
                by reference from Exhibit 4.9 to Registration
                Statement No. 333-31154 filed by the Company on
                February 25, 2000).
       4.4      Stock Purchase Warrants, dated August 20, 1998, by and
                among  Evenflo & Spalding Holdings Corporation and KKR
                1996 Fund L.P., relating to the purchase of 44,100,000
                shares of Common Stock of the Company granted to KKR
                1996 Fund L.P.(incorporated by reference from Exhibit
                4.4 to the  Company's  Annual Report 10-K for the
                Transition Period ended December 31, 1998, filed by
                the Company on March 29, 1999.)
       4.5      Stockholders' Agreement dated August 20, 1998, by and
                among Evenflo Company, Inc. KKR 1996 Fund L.P. and
                Lisco, Inc.(incorporated by reference from Exhibit
                4.5 to the Company's Annual Report 10-K for the
                Transition  Period  ended December 31, 1998, filed by
                the Company on March 29, 1999.)
       4.6      Certificate of Designations of Variable Rate
                Cumulative Preferred Stock of Evenflo & Spalding
                Holdings Corporation,  dated  August 19, 1998.
                (incorporated by reference from Exhibit 4.6 to the
                Company's Annual Report 10-K for the Transition
                Period ended December 31, 1998, filed by the Company
                on March 29, 1999.)
      10.1      $650,000,000 Credit Agreement dated as of September 30,
                1996, among E&S Holdings  Corporation,  as the Borrower,
                Bank of America National Trust and Savings  Association,
                as Swing Line Lender, as Fronting Lender and as
                Administrative Agent, Merrill Lynch Capital Corporation,
                as  Documentation Agent, NationsBank, N.A.(South), as
                Syndication  Agent, and lenders (incorporated  by
                reference   from  Exhibit  10.1  to Registration
                Statement No.333-14569 filed by the Company on January
                9, 1997).
      10.2      Guaranty  dated  as  of  September  30,  1996,  made  by
                Spalding & Evenflo Companies, Inc., Evenflo Company,
                Inc., Etonic Worldwide  Corporation,  S&E Finance Co.,
                Inc., Lisco, Inc., Lisco Sports, Inc., Lisco Feeding,
                Inc., Lisco Furniture, Inc., and EWW Lisco, Inc. in
                favor of Bank of America National Trust and Savings
                Association (incorporated by reference from Exhibit 10.2
                to  Registration  Statement No. 333-14569 filed by the
                Company on January 9, 1997).
      10.3      Pledge  Agreement  dated as of September 30, 1996,  made
                by E&S Holdings Corporation in favor of Bank of America
                National Trust and Savings Association (incorporated by
                reference from Exhibit 10.3  to Registration Statement
                No. 333-14569 filed by the Company on January 9, 1997).
      10.4      Credit  Agreement  Amendment  No. 1, dated  December 11,
                1996, by and among Evenflo & Spalding Holdings
                Corporation (the "Borrower") and the financial
                institutions that are or may become parties to the
                Credit  Agreement  dated  as of September 30, 1996.
      10.5      Credit Agreement  Amendment No. 2, dated March 31, 1998,
                by and Among Evenflo & Spalding Holdings Corporation
                (the "Borrower") and the financial institutions that are
                or may become parties to the Credit Agreement dated as
                of September 30, 1996.
      10.6      Credit  Agreement  Amendment No. 3, dated July 30, 1998,
                by and Among Evenflo & Spalding Holdings Corporation
                (the "Borrower") and the financial institutions that are
                or may become parties to the Credit Agreement dated as
                of September 30, 1996.
      10.7      Registration  Rights Agreement dated as of September 30,
                1996 by and among E&S Holdings  Corporation,  Strata
                Associates, L.P., and KKR Partners II, L.P.(incorporated
                by reference from Exhibit 10.4 to Registration Statement
                No. 333-14569 filed by the Company on January 9, 1997).
      10.8      Form of Change of Control Agreement (Senior Managers)
                (incorporated   by   reference  from  Exhibit  10.8  to
                Registration Statement No. 333-14569 filed by the
                Company on January 9, 1997).
      10.9      Form of Change of Control Agreement (Top Managers)
                (incorporated   by   reference   from  Exhibit  10.9  to
                Registration Statement No. 333-14569 filed by the
                Company on January 9, 1997).
     10.10      Form of Change of Control Agreement (Other Managers)
                (incorporated by reference from Exhibit 10.10 to
                Registration   Statement  No.  333-14569  filed  by  the
                Company on January 9, 1997).
     10.11      Form of Letter of  Agreement  between  the  Company  and
                Kohlberg Kravis  Roberts & Co., L.P.(incorporated by
                reference from Exhibit 10.11 to Registration  Statement
                No. 333-14569 filed by the Company on January 9, 1997).
     10.12      Agreement  dated as of February 3, 1997,  by and between
                NBA Properties, Inc. and Spalding & Evenflo Companies,
                Inc.(incorporated by reference from Exhibit 10 to the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended December 31, 1996, filed by the Company on
                February 14, 1997).
     10.13      Asset Purchase  Agreement  dated as of March 7, 1997, by
                and among Gerry Baby Products Company, Gerry Wood
                Products Company, Huffy Corporation,  as sellers and
                Evenflo Company,  Inc. as purchaser  (incorporated by
                reference from  Exhibit 10.1 to the Company's Quarterly
                Report 10-Q for the fiscal quarter ended June 30, 1997,
                filed by the Company on August 7, 1997).
     10.14      Asset  Purchase  Agreement  among  Ben  Hogan  Co.,  the
                Trusts for the Benefit of William Goodwin's Children,
                and Evenflo & Spalding  Holdings  Corporation dated as
                of November 26, 1997.
     10.15      Tax  Allocation  and  Indemnification  Agreement,  dated
                August 20, 1998 by and among Evenflo & Spalding Holdings
                Corporation and Evenflo Company, Inc.
     10.16      Employee  Matters  Agreement,  dated August 20, 1998, by
                and among  Evenflo & Spalding Holdings Corporation  and
                Evenflo Company, Inc.
     10.17      Transition  Services  Agreement,  dated August 20, 1998,
                by and among Evenflo & Spalding Holdings Corporation and
                Evenflo Company, Inc.
     10.18      Evenflo & Spalding Holdings Corporation Management
                Incentive Bonus Plan  dated January 15, 1997
                (incorporated by reference from Exhibit 99 to the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended December 31, 1996, filed by the Company on
                February 14, 1997).
     10.19      Employment agreement between Spalding Holdings
                Corporation and James R. Craigie, President and Chief
                Executive Officer of Spalding Holdings Corporation
                (incorporated by reference form Exhibit 10.19 to the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended  April 3, 1999, filed by the Company on May 15,
                1999.
     10.20      Restricted stock award agreement between Spalding
                Holdings Corporation and James R. Craigie
                (incorporated by reference for Exhibit 10.20 to the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended  April 3, 1999, filed by the Company on May 15,
                1999).
      10.21     Stockholder's Agreement between Spalding Holdings
                Corporation and Edwin L. Artzt dated March 8, 2000
                (incorporated by reference Exhibit 10-21 to the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended April 1, 2000, filed by the company on May 16,
                2000).
      10.22     Sales Participation Agreement between Spalding Holdings
                Corporation  and Edwin L.  Artzt  dated  March 8, 2000
                (incorporated by reference for Exhibit 10.22 to the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended April 1, 2000, filed by the Company on May 16,
                2000.
      10.23     Restricted   Stock  Award  Agreement   between  Spalding
                Holding Corporation and G. Wade Lewis dated June 21,
                2000 (incorporated by  reference for Exhibit 10.23 to
                the Company's Quarterly Report 10-Q for the fiscal
                quarter ended July 1, 2000, filed by the Company on
                August 2, 2001).
      10.24     Sales Participation Agreement between Spalding Holdings
                Corporation  and G.  Wade  Lewis  dated  June  21,  2000
                (incorporated by reference for Exhibit 10.24 to the
                Company's Quarterly Report 10-Q for the fiscal quarter
                ended July 1, 2000, filed by the Company on August 2,
                2000.
       10.25    Credit Agreement  Amendment No. 4 dated January 24, 2001
                by and Among Spalding Holdings Corporation, the Lenders
                and Bank of America N.A.
                (incorporated by reference From Exhibit  99.2 to the
                Company's current Report on Form 8-K, filed by the
                Company on February 14, 2001.
          12    Computation of Ratio of Earnings to Fixed Charges.
          18    Preferability  letter  relating  to  the  charge  in
                accounting principle  (incorporated by reference for
                Exhibit 18 to  the Company's Quarterly Report 10-Q for
                the fiscal quarter ended April 3, 1999, filed by
                the Company on May 15, 1999).
        21      List of Subsidiaries.
        23      Consent of Deloitte & Touche LLP, independent auditors.

(B) REPORTS ON FORM 8-K

    The  Company  filed a  current  report on Form 8-K with the  Securities  and
Exchange  Commission  dated  February 14, 2001 to announce the  amendment to its
Secured Credit Facility.

     The  Company  filed a current  report on Form 8-K with the  Securities  and
Exchange  Commission dated November 9, 2000 to report its financial  results for
the three and nine fiscal months ended September 30, 2000.

    The  Company  filed a  current  report on Form 8-K with the  Securities  and
Exchange  Commission  dated  November 7, 2000 to file  cautionary  statements in
connection  with  the  "safe  harbor"   provisions  of  the  Private  Securities
Litigation Reform Act of 1995.


<PAGE>



                           INDEPENDENT AUDITORS' REPORT

The Board of Directors
Spalding Holdings Corporation
Chicopee, Massachusetts

    We have audited the consolidated  financial statements of  Spalding Holdings
Corporation and  subsidiaries  (the "Company") as of December 31, 2000 and 1999,
and for each of the two years then ended, the transition  period October 1, 1998
through  December 31, 1998 and for the fiscal year ended September 30, 1998, and
have issued our report  thereon  dated March 30,  2001;  such report is included
elsewhere in this Form 10-K.  Our audits also included the  financial  statement
schedule of Spalding  Holdings  Corporation,  listed in Item 14. This  financial
statement  schedule  is the  responsibility  of the  Company's  management.  Our
responsibility  is to express an opinion  based on our audits.  In our  opinion,
such  financial  statement  schedule,  when  considered in relation to the basic
consolidated  financial  statements  taken as a whole,  presents  fairly  in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Hartford, Connecticut
March 30, 2001

<PAGE>



                                   SCHEDULE II

                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999,

         THE TRANSITION PERIOD OCTOBER 1, 1998 THROUGH DECEMBER 31, 1998

                AND FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
                                                  BALANCE AT   CHARGED TO     CHARGED
                                                 BEGINNING OF   COST AND      TO OTHER                     BALANCE AT
    DESCRIPTION                                     PERIOD      EXPENSES     ACCOUNTS(A)   DEDUCTIONS(A)  END OF PERIOD
    -----------                                     ------      --------     -----------   -------------  -------------
                                                                       (DOLLARS IN THOUSANDS)

<S>                                                <C>          <C>           <C>            <C>            <C>
    2000 Allowance for doubtful  accounts          $ 2,050      $ 2,814       $              $(3,866)       $   998
    1999 Allowances for doubtful accounts            3,491        2,669            89         (4,199)         2,050
    Transition Period Allowance for doubtful
    accounts                                        10,539        1,761            --         (8,809)         3,491
    Fiscal 1998-Allowance for doubtful
    accounts                                         3,941       12,591            --         (5,993)        10,539
</TABLE>

NOTES:

(A)  Uncollectible  accounts  written off. In 1998,  amount  includes  $1,594 of
Evenflo balance sold in the Reorganization transaction.







                                                                      EXHIBIT 12

                 SPALDING HOLDINGS CORPORATION AND SUBSIDIARIES

                       RATIO OF EARNINGS TO FIXED CHARGES

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999,

                  THE TRANSITION PERIOD OCTOBER 1, 1998 THROUGH

                DECEMBER 31, 1998 AND FOR THE FISCAL YEARS ENDED

                        SEPTEMBER 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>

                                            DECEMBER 31,                          SEPTEMBER 30,
                                 2000           1999          1998         1998       1997        1996
                            -------------  ------------- -------------  ----------  ---------  ----------


     EARNINGS:
     Earnings (loss)
       before income taxes
       and extraordinary
<S>                          <C>             <C>           <C>          <C>         <C>        <C>
       item..............    $ (20,006)      $ (40,161)    $ (98,014)   $ (115,080) $ (38,543) $ (12,648)
     Interest expense....       60,427          54,970        13,911        78,041     71,326     37,718
     Rent expense........        1,526           2,630           108         1,918      2,912      1,994
                                ------       ---------     ---------    ----------  ---------  ---------
                             $  41,947       $  17,439     $ (83,995)   $  (35,121) $  35,695  $  27,064
                             =========       =========     =========    ==========  =========  =========
     FIXED CHARGES:

     Interest expense....    $  60,427       $  54,970     $  13,911    $   78,041  $  71,326  $  37,718
     Rent expense........        1,526           2,630           108         1,918      2,912      1,994
                                ------       ---------     ---------    ----------  ---------  ---------
                             $  61,953       $  57,600     $  14,019    $   79,959  $  74,238  $  39,712
                             =========       =========     =========    ==========  =========  =========
     Ratio of earnings to
       fixed charges.....    $      --       $      --     $      --    $       --  $      --  $      --
                             =========       =========     =========    ==========  =========  =========
     Deficiency of
       earnings to fixed
       charges...........    $  20,006       $  40,161     $  98,014    $  115,080  $  38,543  $  12,648
                             =========       =========     =========    ==========  =========  =========

</TABLE>










                                   SIGNATURES

    Pursuant  to the  requirements  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.

                               SPALDING HOLDINGS CORPORATION

                               By: /S/ DANIEL S. FREY
                                   ---------------------------------------------
                                    Daniel S. Frey
                                    Chief Financial Officer

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
Report  on Form  10-K has been  duly  signed  by the  following  persons  in the
capacities and on the dates indicated.

               SIGNATURE                        TITLE                  DATE
               ---------                        -----                  ----

                /S/ EDWIN L. ARTZT      Chairman of Board of       April 2, 2001
-------------------------------------    Directors
            Edwin L. Artzt


               /S/ JAMES R. CRAIGIE     President and Chief        April 2, 2001
-------------------------------------    Executive Officer
           James R. Craigie


                /S/ DANIEL S. FREY      Chief Financial Officer    April 2, 2001
-------------------------------------    (Principal Financial
            Daniel S. Frey               Officer)


                /S/ PETER A. ARTURI     Vice President, Secretary  April 2, 2001
-------------------------------------    and General Counsel
            Peter A. Arturi


                /S/ HENRY R. KRAVIS     Director                   April 2, 2001
-------------------------------------
            Henry R. Kravis


               /S/ GEORGE R. ROBERTS    Director                   April 2, 2001
-------------------------------------
           George R. Roberts


               /S/ MICHAEL T. TOKARZ    Director                   April 2, 2001
-------------------------------------
           Michael T. Tokarz


               /S/ BRIAN F. CARROLL     Director                   April 2, 2001
-------------------------------------
           Brian F. Carroll


              /S/ GUSTAVO A. CISNEROS   Director                   April 2, 2001
-------------------------------------
          Gustavo A. Cisneros


              /S/ DAVID W. CHECKETTS    Director                   April 2, 2001
-------------------------------------
          David W. Checketts