SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 15, 1995
Commission File Number 0-6966
ESCALADE, INCORPORATED
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(Exact name of registrant as specified in its charter)
Indiana 13-2739290
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(State of incorporation) (I.R.S. EIN)
817 Maxwell Avenue, Evansville, Indiana 47717
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(Address of principal executive office)
812-467-1200
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(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act
NONE
Securities registered pursuant to section 12(g) of the Act
Common Stock, No Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of Registrant's common stock (no par value)
outstanding as of August 2, 1995 : 4,133,361
INDEX
Page No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheet --
July 15, 1995, July 9, 1994, and
December 31, 1994 3
Consolidated Condensed Statement of Income --
Three Months and Six Months Ended
July 15, 1995 and July 9,1994 4
Consolidated Condensed Statement of Cash Flows --
Six Months Ended July 15, 1995 and July 9, 1994 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations: 7-9
Part II. Other Information 9
Signatures 9
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
(Dollars in Thousands) July 15, July 9, December 31,
1995 1994 1994
ASSETS ---------------------------------
- ---
Current assets:
Cash $ 351 $ 196 $ 995
Receivables, less allowances
of $690, $780 and $777 13,501 12,190 31,872
Inventories 27,141 33,985 24,437
Prepaid expense 310 204 258
Income tax refundable 199 --- 399
Deferred income tax benefit 2,750 2,149 1,644
------- ------- -------
TOTAL CURRENT ASSETS 44,252 48,724 59,605
Property, plant, and equipment 38,185 36,007 37,525
Accum. depr. and amortization (25,906) (22,898) (23,815)
------- ------- -------
12,279 13,109 13,710
Deferred income tax benefit 706 195 706
Other assets 1,847 1,811 1,862
------- ------- -------
$59,084 $63,839 $75,883
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $17,600 $15,500 $29,237
Current portion of long-term debt 2,727 2,327 1,978
Trade accounts payable 2,670 5,576 3,586
Accrued liabilities 6,328 5,935 7,967
------- ------- -------
TOTAL CURRENT LIABILITIES 29,325 29,338 42,768
Other Liabilities:
Long-term debt 7,198 9,925 9,148
Deferred compensation 1,131 1,001 1,078
------- ------- -------
8,329 10,926 10,226
Stockholders' equity:
Preferred stock:
Authorized 1,000,000 shares;
no par value, none issued
Common stock:
Authorized 10,000,000 shares;
no par value,Issued and
outstanding - 4,133,361,
4,130,241, and 4,133,361
at 7-15-95, 7-9-94,
and 12-31-94
17,571 17,583 17,571
Retained earnings 3,859 5,992 5,318
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21,430 23,575 22,889
------- ------- -------
$59,084 $63,839 $75,883
======= ======= =======
<FN>
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands, except per share amounts)
Three Months Ended Six Months Ended
July 15, July 9, July 15, July 9,
1995 1994 1995 1994
-------------------------------------------
Net sales $19,160 $19,340 $37,270 $33,540
Costs, expenses and other income:
Cost of products sold 15,701 15,734 29,818 27,322
Selling, administrative and
general expenses 4,100 4,880 7,621 8,324
Restructuring charge 1,040 0 1,040 0
Interest 679 466 1,250 751
Other Income (42) (64) (95) (101)
------- ------- ------- -------
21,478 21,016 39,634 36,296
INCOME (LOSS) BEFORE INCOME TAXES (2,318) (1,676) (2,364) (2,756)
Provision (benefit) (900) (646) (905) (1,049)
for income taxes ------- ------- ------- -------
NET INCOME (LOSS) $(1,418) $(1,030) $(1,459) $(1,707)
======= ======= ======= =======
Per share data:
NET INCOME (LOSS) $ (.34) $ (.25) $ (.35) $ (.41)
======= ======= ======= =======
<FN>
See notes to Consolidated Condensed Financial Statements
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
Six Months Ended
July 15, 1995 July 9, 1994
Operating Activities: ---------------------------
Net Income (Loss) $(1,459) $(1,707)
Depreciation and amortization 2,091 2,667
Adjustments necessary to reconcile
net income to net cash provided by
operating activities 12,222 629
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Net cash provided by operating
activities 12,854 1,589
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Investing Activities:
Purchase of property and equipment (660) (1,544)
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Net cash used by investing activities (660) (1,544)
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Financing Activities:
Net inc.(dec.) in notes pay.- bank (11,637) 937
Reduction of long-term debt (1,201) (1,388)
Proceeds from exercise of stock
options --- 121
Payments on fractional shares --- (2)
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Net cash used by financing
activities (12,838) (332)
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Decrease in cash (644) (287)
Cash, beginning of period 995 483
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Cash, end of period $ 351 $ 196
======= =======
<FN>
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
- ------------------------------
In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position of the company as of July 15, 1995, July 9, 1994,
and December 31, 1994 and the results of operations and changes in
financial position for the six months ended July 15, 1995 and July 9, 1994.
The balance sheet at December 31, 1994 was derived from the audited balance
sheet included in the 1994 annual report to shareholders.
Note B - Seasonal Aspects
- -------------------------
The results of operations for the six month periods ended July 15,
1995 and July 9, 1994 are not necessarily indicative of the results to be
expected for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
7-15-95 7-9-94 12-31-94
------- ------- --------
Raw Materials $10,433 $10,949 $ 7,597
Work In Process 3,540 4,401 3,723
Finished Goods 13,168 18,635 13,117
------- ------- -------
$27,141 $33,985 $24,437
======= ======= =======
Note D - Earnings Per Share
- ---------------------------
Earnings (loss) per common and common equivalent shares are based on
average shares outstanding. Dilutive effects of stock options on net
income (loss) are not material. The number of shares used to calculate
earnings (loss) per share for the six months ended July 15, 1995 and July
9, 1994 was 4,133,361 and 4,125,917.
Note E - Income Taxes
- ---------------------
The provision (benefit) for income taxes was computed based on
financial statement income (loss).
Note F - Restructuring Charge
- -----------------------------
During the second quarter of 1995, the Company entered into sales
commitments to sell certain products which had been written down in the
fourth quarter of 1994, as part of the 1994 restructuring charge. The
sales will take place in the third and fourth quarters of 1995. The sales
commitments call for the inventory to be sold at amounts less than the
remaining book value, and therefore the Company recorded a change in its
estimate of the 1994 restructuring charge. The change in estimate and
charge to earnings amounted to $1,040,000 before tax. No other significant
adjustments to the estimate made in the fourth quarter of 1994 have been
made or are anticipated.
ESCALADE, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings during the
periods included in the accompanying consolidated condensed statements of
income.
RESULTS OF OPERATIONS
SECOND QUARTER COMPARISON 1995 vs. 1994
Net sales were $19,160,000 in the second quarter of 1995 as compared
to
$19,340,000 in the second quarter of 1994 a decrease of $180,000 or 0.9%.
Sales of sporting goods decreased $55,000 or 0.4% and sales of office and
graphic arts products decreased $125,000 or 2.4%.
There was not much change in the sales volume for either segment in
the second quarter of 1995 as compared to the second quarter of 1994.
Cost of sales was $15,701,000 in the second quarter of 1995 as
compared to $15,734,000 in the second quarter of 1994, a decrease of
$33,000 or 0.2%.
Cost of sales as a percentage of net sales was 82.0% in the second
quarter of 1995 as compared to 81.4% in the second quarter of 1994.
Sporting goods cost of sales as a percentage of net sales increased 0.9%
and office and graphic arts cost of sales as a percentage of net sales
decreased 1.0%. The increase in the sporting goods cost of sales percentage
of net sales was due to increased material cost and the decrease in office
and graphic arts cost of sales percentage of net sales was due to lower
factory expense absorption.
Selling, general, and administrative expenses were $4,100,000 in the
second quarter of 1995 as compared to $4,880,000 in the second quarter of
1994, a decrease of $780,000 or 16.0%.
Selling, general and administrative expenses as a percentage of net
sales was 21.4% in the second quarter of 1995 as compared to 25.2% in the
second quarter of 1994. This decrease as a percentage of net sales was
mainly due to reduced expenses in salaries, allowances, marketing and
advertising.
Interest expense increased $213,000 to $679,000 in 1995 from $466,000
in 1994, an increase of 45.7% due to increased borrowing levels and higher
interest rates.
During the second quarter of 1995, the Company entered into sales
commitments to sell certain products which had been written down in the
fourth quarter of 1994, as part of the 1994 restructuring charge. The
sales will take place in the third and fourth quarters of 1995. The sales
commitments call for the inventory to be sold at amounts less than the
remaining book value, and therefore the Company recorded a change in its
estimate of the 1994 restructuring charge. The change in estimate and
charge to earnings amounted to $1,040,000 before tax. No other significant
adjustments to the estimate made in the fourth quarter of 1994 have been
made or are anticipated.
RESULTS OF OPERATIONS CONTINUED
FIRST HALF COMPARISON 1995 VS. 1994
Net sales were $37,270,000 in the first half of 1995 as compared to
$33,540,000 in the first half of 1994, an increase of $3,730,000 or 11.1%.
Sales of sporting goods increased $3,733,000 or 15.1% and sales of office
and graphic arts products increased $3,000 or 0.03%.
The increase in sporting goods was mainly due to increased volume in
the table tennis and the dartboard cabinet product lines. In the office
and grahic arts products segment, the volume was the same in the first half
of 1995 as in the first half of 1994.
Cost of sales was $29,818,000 in the first half of 1995 as compared
to $27,322,000 in 1994, an increase of $2,496,000 or 9.1%.
Cost of sales as a percentage of net sales was 80.0% in the first
half of 1995 as compared ot 81.5% in the first half of 1994. This decrease
is due to lower factory expenses mainly in payroll and payroll related
expenses, depreciation, and supplies.
Selling, general, and administrative expenses were $7,621,000 in the
first half of 1995 as compared to $8,324,000 in the first half of 1994, a
decrease of $703,000 or 8.4%.
Selling, general, and administrative expenses as a percentage of net
sales were 20.4% in 1995 as compared to 24.8% in 1994. The decrease in
these expenses as a percentage of net sales was mainly due to a reduction
in salaries, marketing development, customer allowances and advertising
expenses.
Interest expense was $1,250,000 in the first half of 1995 as compared
to $751,000 in the first half of 1994, an increase of $499,000 or 66.4%.
The increase was due to higher average borrowing levels and increased
interest rates in the first half of 1995.
The net loss in the first half of 1995 was $1,459,000 as compared to
a net loss of $1,707,000 in the first half of 1994. The 1995 loss includes
$624,000 from the restructuring charge. Eliminating the effect of the
restructuring charge, there was a reduction in net loss of $872,000 in the
first half of 1995 as compared to the first half of 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was
$12,854,000 in the first half of 1995 as compared to $1,589,000 in the
first half of 1994. Most of the cash provided by operating activities was
from collection of the year end accounts receivable. The net accounts
receivable balance at the end of the year in 1994 was $31,872,000 and at
the end of the first half of 1995, the net accounts receivable balance was
$13,501,000. The Company's net cash used for investing activities was
$660,000 in the first half of 1995 as compared to $1,544,000 in the first
half of 1994. This decrease of $884,000 was in the purchase of property
and equipment. The Company's net cash used by financing activities was
$12,838,000 in the first half of 1995 as compared to $332,000 in the first
half of 1994. Most of the cash used by financing activities was for the
pay down of notes payable - bank. At the end of the year in 1994, the
notes payable - bank was $29,237,000 and at the end of the first half of
1995, notes payable - bank was $17,600,000.
LIQUIDITY AND CAPITAL RESOURCES CONTINUED
The Company's working capital requirements are currently funded by
cash flow from operations, a domestic line of credit in the amount of
$28,000,000, and a letter of credit facility in the amount of $4,000,000.
The outstanding loans under the domestic line of credit bear interest at
either of the following rates, as selected by the Company from time to
time; the bank's prime lending rate plus .50% or the London Inter-Bank
Offered Rate plus 2.00%. The Company's domestic line of credit agreement
expires on May 31, 1996.
Inventories at the end of the first half of 1995 were $27,141,000 as
compared to $33,985,000 in the first half of 1994 for a decrease of
$6,844,000. The sporting goods inventory decreased $7,823,000 and the
office graphic arts products inventory increased $979,000.
PART II. OTHER INFORMATION
Item 1, 2, and 3. Not Required.
Item 4. Submission of Matters to a Vote of Securities Holders.
The annual meeting of the Registrant was held at Indianapolis, Indiana on
April 28, 1995. Proxy materials had been circulated on March 24, 1995,
proposing the reelection of the seven members of the Board of Directors to
a one year term and the appointment of Geo. S. Olive & Co.LLC, to serve as
independent auditors of the Company for the year 1995.
The stockholders approved the reelection of Yale A. Blanc, Gerald J. Fox,
Robert E. Griffin, Blaine E. Matthews, Jr., Robert D. Orr, A. Graves
Williams, Jr., and Keith P. Williams to the Board of Directors and the
appointment of Geo. S. Olive & Co.LLC as the Company's independent
auditors.
Item 5. Not Required.
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the
six months ended July 15, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESCALADE, INCORPORATED
Date: August 4, 1995 ROBERT E. GRIFFIN
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Robert E. Griffin
Chairman and Chief
Executive Officer
Date: August 4, 1995 JOHN R. WILSON
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John R. Wilson
Vice President and
Chief Financial Officer