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 October 7, 1995
Commission File Number 0-6966
ESCALADE, INCORPORATED
----------------------
(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
---------------------------------------------
(Address of principal executive office)
812-467-1200
------------
(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 October 25, 1995 : 4,133,811
INDEX
Page No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheet --
October 7, 1995, October 1, 1994, and
December 31, 1994 3
Consolidated Condensed Statement of Income --
Three Months and Nine Months Ended
October 7, 1995 and October 1,1994 4
Consolidated Condensed Statement of Cash Flows --
Nine Months Ended October 7, 1995 and October 1, 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) October 7, October 1, December 31,
1995 1994 1994
------------------------------------
ASSETS
Current assets:
Cash $ 264 $ 212 $ 995
Receivables, less allowances of
$776, $927 and $777 20,641 20,248 31,872
Inventories 25,408 40,469 24,437
Prepaid expense 383 555 258
Income tax refundable 199 --- 399
Deferred income tax benefit 2,333 1,856 1,644
------- ------- -------
TOTAL CURRENT ASSETS 49,228 63,340 59,605
Property, plant, and equipment 35,884 38,000 37,525
Accum. depr. and amortization (24,548) (24,068) (23,815)
------- ------- -------
11,336 13,932 13,710
Deferred income tax benefit 706 195 706
Other assets 1,856 2,195 1,862
------- ------- -------
$63,126 $79,662 $75,883
======= ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $19,000 $27,825 $29,237
Current portion of
long-term debt 2,853 2,390 1,978
Trade accounts payable 4,149 7,861 3,586
Accrued liabilities 7,378 6,904 7,967
------- ------- -------
TOTAL CURRENT LIABILITIES 33,380 44,980 42,768
Other Liabilities:
Long-term debt 6,573 9,421 9,148
Deferred compensation 1,153 1,022 1,078
------- ------- -------
7,726 10,443 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 - 4,133,811,
4,132,171, and 4,133,361
at 10-07-95, 10-01-94,
and 12-31-94
17,572 17,590 17,571
Retained earnings 4,448 6,649 5,318
------- ------- -------
22,020 24,239 22,889
------- ------- -------
$63,126 $79,662 $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 Nine Months Ended
Oct. 7, Oct. 1, Oct. 7, Oct. 1,
1995 1994 1995 1994
------------------------------------------------
Net sales $22,857 $25,395 $60,127 $58,935
Costs, expenses and other income:
Cost of products sold 18,052 19,865 47,870 47,187
Selling, administrative and
general expenses 3,224 3,905 10,845 12,229
Restructuring charge ----- 0 1,040 0
Interest 566 566 1,816 1,317
Other income (52) (53) (147) (154)
------- -------- ------- --------
21,790 24,283 61,424 60,579
INCOME (LOSS) BEFORE INCOME TAXES 1,067 1,112 (1,297) (1,644)
Provision (benefit) 478 455 (427) (594)
for income taxes ------- ------- ------- -------
NET INCOME (LOSS) $ 589 $ 657 $ (870) $ (1,050)
======= ======= ======= =======
Per share data:
NET INCOME (LOSS) $ .14 $ .16 $ (.21) $ (.25)
======= ======= ======= =======
<FN>
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
Nine Months Ended
Oct. 7, 1995 Oct. 1, 1994
-------------- -------------
Operating Activities:
Net Income (Loss) $( 870) $(1,050)
Depreciation and amortization 3,161 3,837
Adjustments necessary to reconcile
net income to net cash provided (used)
by operating activities 9,701 (11,079)
------- --------
Net cash provided (used) by
operating activities 11,992 (8,292)
------- --------
Investing Activities:
Purchase of property and equipment (787) (3,537)
------- --------
Net cash used by investing activities (787) (3,537)
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Financing Activities:
Net inc.(dec.) in notes pay.- bank (10,237) 13,262
Reduction of long-term debt (1,700) (1,829)
Proceeds from exercise of stock options 1 127
Payments on fractional shares --- (2)
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Net cash provided (used) by
financing activities (11,936) 11,558
------- --------
Decrease in cash (731) (271)
Cash, beginning of period 995 483
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Cash, end of period $ 264 $ 212
======= ======
<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 October 7, 1995, October 1, 1994, and December 31, 1994 and
the results of operations and changes in financial position for the nine months
ended October 7, 1995 and October 1, 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 nine month periods ended October 7, 1995
and October 1, 1994 are not necessarily indicative of the results to be expected
for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
10-7-95 10-1-94 12-31-94
------- ------- --------
Raw Materials $10,810 $13,284 $ 7,597
Work In Process 3,599 4,471 3,723
Finished Goods 10,999 22,714 13,117
------- ------- -------
$25,408 $40,469 $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 nine months ended October 7, 1995 and October 1, 1994 was
4,133,454 and 4,127,498.
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
THIRD QUARTER COMPARISON 1995 vs. 1994
Net sales were $22,857,000 in the third quarter of 1995 as compared to
$25,395,000 in the third quarter of 1994 a decrease of $2,538,000 or 10.0%.
Sales of sporting goods decreased $2,772,000 or 12.9% and sales of office and
graphic arts products increased $234,000 or 6.0%.
Sporting goods net sales decreased due to increased competition both
domestic and foreign. Increased retail competition has caused some credit
worthiness problems with some accounts, especially in the east, also resulting
in lower sales. Office and graphic arts net sales increased due to improvement
in graphic arts, office wholesale, and exports.
Cost of sales was $18,052,000 in the third quarter of 1995 as compared to
$19,865,000 in the third quarter of 1994, a decrease of $1,813,000 or 9.1%.
Cost of sales as a percentage of net sales was 79.0% in the third quarter
of 1995 as compared to 78.2% in the third quarter of 1994. Sporting goods cost
of sales as a percentage of net sales increased 2.4% and office and graphic arts
cost of sales as a percentage of net sales decreased 3.6%. The increase in the
sporting goods cost of sales percentage of net sales was mainly due to increased
material cost from inventory adjustments and the decrease in office and graphic
arts cost of sales percentage of net sales was due to lower factory expenses.
Selling, general, and administrative expenses were $ 3,224,000 in the
third quarter of 1995 as compared to $3,905,000 in the third quarter of 1994, a
decrease of $681,000 or 17.4%.
Selling, general and administrative expenses as a percentage of net sales
was 14.1% in the third quarter of 1995 as compared to 15.4% in the third 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 was $566,000 in both quarters.
During the third 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
NINE MONTHS COMPARISON 1995 VS. 1994
Net sales were $60,127,000 in the first nine months of 1995 as compared to
$58,935,000 in the first nine months of 1994, an increase of $1,192,000 or
2.0%. Sales of sporting goods increased $960,000 or 2.1% and sales of office
and graphic arts products increased $232,000 or 1.8%.
Escalade International accounted for 45% of the sporting goods net sales
increase with the remaining 55% being in domestic operations. The increase in
net sales for the office and graphic arts product segment was in office
products.
Cost of sales was $47,870,000 in the first nine months of 1995 as compared
to $47,187,000 in 1994, an increase of $683,000 or 1.4%.
Cost of sales as a percentage of net sales was 79.6% in the first nine
months of 1995 as compared to 80.1% in the first nine months 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 $10,845,000 in the
first nine months of 1995 as compared to $12,229,000 in the first nine months of
1994, a decrease of $1,384,000 or 11.3%.
Selling, general, and administrative expenses as a percentage of net sales
were 18.0% in 1995 as compared to 20.7% 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 $1,816,000 in the first nine months of 1995 as
compared to $1,317,000 in the first nine months of 1994, an increase of $499,000
or 37.9%. The increase was due to higher average borrowing levels and increased
interest rates in the first nine months of 1995.
The net loss in the first nine months of 1995 was $870,000 as compared to
a net loss of $1,050,000 in the first nine months of 1994. The 1995 loss
includes $1,040,000 from the restructuring charge. There was a reduction in net
loss of $180,000 in the first nine months of 1995 as compared to the first nine
months of 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was $11,992,000 in
the first nine months of 1995 as compared to $8,292,000 used in the first nine
months of 1994. Most of the cash provided by operating activities in 1995 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 nine months of 1995, the net accounts receivable balance was $20,641,000.
The Company's net cash used for investing activities was $787,000 in the first
nine months of 1995 as compared to $3,537,000 in the first nine months of 1994.
This decrease of $2,750,000 was in the purchase of property and equipment. The
Company's net cash used by financing activities was $11,936,000 in the first
nine months of 1995 as compared to $11,558,000 net cash provided by financing
in the first nine months of 1994. Most of the cash used by financing activities
in 1995 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 nine
months of 1995, notes payable - bank was $19,000,000.
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 nine months of 1995 were $25,408,000
as compared to $40,469,000 at the end of the first nine months of 1994 for a
decrease of $15,061,000. The sporting goods inventory decreased $15,553,000 and
the office and graphic arts products inventory increased $492,000.
PART II. OTHER INFORMATION
Item 1, 2, 3, 4, and 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
nine months ended October 7, 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: October 27, 1995
---------------- ROBERT E. GRIFFIN
----------------------------
Robert E. Griffin
Chairman and Chief
Executive Officer
Date: October 27, 1995
---------------- JOHN R. WILSON
----------------------------
John R. Wilson
Vice President and
Chief Financial Officer