1
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 March 24, 2001
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
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(Address of principal executive offices)
812-467-1200
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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 April 6, 2001 : 2,166,951
2
INDEX
Page No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheet (Unaudited)
March 24, 2001, March 18, 2000, and
December 30, 2000 3
Consolidated Condensed Statement of Income (Unaudited)
Three Months Ended March 24, 2001 and March 18,2000 4
Consolidated Statement of Comprehensive Income (Unaudited)
Three Months Ended March 24, 2001 and March 18, 2000 4
Consolidated Condensed Statement of Cash Flows (Unaudited)
Three Months Ended March 24, 2001 and March 18, 2000 5
Notes to Consolidated Condensed Financial Statements 6-8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations: 9-10
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 10
Part II. Other Information 10
Signatures 10
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
(Dollars in Thousands) March 24, March 18, December 30,
2001 2000 2000
ASSETS -----------------------------------------------
Current assets:
Cash $ 348 $ 7 $ 1,147
Receivables, less allowances of
$686, $811 and $611 13,600 13,609 26,406
Inventories 16,899 13,926 15,589
Prepaid expense 75 59 137
Deferred income tax benefit 824 1,248 824
------- ------- -------
TOTAL CURRENT ASSETS 31,746 28,849 44,103
Property, plant, and equipment 34,715 34,785 34,133
Accum. depr. and amortization (25,662) (24,716) (25,077)
------- ------- -------
9,053 10,069 9,056
Other assets 6,178 5,274 5,418
Goodwill 10,672 11,537 10,899
------- ------- -------
$57,649 $55,729 $69,476
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 3,500 $ 1,000 $13,267
Current portion of long-term debt 167 2,000 ---
Trade accounts payable 3,030 3,742 2,093
Accrued liabilities 9,628 9,081 14,282
Federal income tax payable 552 544 1,976
------- ------- -------
TOTAL CURRENT LIABILITIES 16,877 16,367 31,618
Other Liabilities:
Long-term debt 14,967 7,700 12,700
Deferred compensation 1,220 1,304 1,198
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16,187 9,004 13,898
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 - 2,166,951,
2,918,178, and 2,165,862 at
3-24-01, 3-18-00, and 12-30-00 2,167 2,918 2,166
Retained earnings 22,246 27,238 21,597
Accumulated other comprehensive
income 172 202 197
------- ------- -------
24,585 30,358 23,960
------- ------- -------
$57,649 $55,729 $69,476
======= ======= =======
See notes to Consolidated Condensed Financial Statements.
4
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands, except per share amounts)
Three Months Ended
March 24, 2001 March 18, 2000
-------------- --------------
Net sales $18,496 $17,575
Costs, expenses and other income:
Cost of products sold 12,710 11,578
Selling, administrative and
general expenses 4,060 3,858
Interest 317 234
Amortization of goodwill 227 192
Other (income) expense 167 118
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17,481 15,980
INCOME BEFORE INCOME TAXES 1,015 1,595
Provision for income taxes 381 676
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NET INCOME $ 634 $ 919
======= =======
Per share data:
Basic earnings per share $ .29 $ .31
Diluted earnings per share $ .29 $ .31
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
NET INCOME $ 634 $ 919
UNREALIZED GAIN (LOSS)ON SECURITIES,
NET OF TAX (25) 1
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COMPREHENSIVE INCOME $ 609 $ 920
======= =======
See notes to Consolidated Condensed Financial Statements.
5
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
Three Months Ended
March 24, 2001 March 18, 2000
Operating Activities: ----------------------------------------
Net Income $ 634 $ 919
Depreciation and amortization 821 782
Adjustments necessary to reconcile
net income to net cash provided by
operating activities 7,370 9,389
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Net cash provided by operating
activities 8,825 11,090
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Investing Activities:
Purchase of property and equipment (341) (169)
Purchase of certain assets of
Lifetime Products, Inc. --- (1,100)
Purchase of certain assets of
Accudart (1,966) ---
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Net cash used by investing activities (2,307) (1,269)
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Financing Activities:
Net decrease in notes payable- bank (9,767) (11,570)
Net increase in long term debt 2,434 ---
Proceeds from exercise of stock options 16 ---
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Net cash used by financing activities (7,317) (11,570)
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Decrease in cash (799) (1,749)
Cash, beginning of period 1,147 1,756
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Cash, end of period $ 348 $ 7
======= =======
See notes to Consolidated Condensed Financial Statements.
6
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note A - Basis of Presentation
- ------------------------------
The significant accounting policies followed by the Company and its
wholly owned subsidiaries for interim financial reporting are consistent with
the accounting policies followed for annual financial reporting. All adjustments
which are of a normal recurring nature and are in the opinion of management
necessary for a fair statement of the results for the periods reported have been
included in the accompanying consolidated condensed financial statements.
Note B - Seasonal Aspects
- -------------------------
The results of operations for the three month periods ended March 24,
2001 and March 18, 2000 are not necessarily indicative of the results to be
expected for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
3-24-01 3-18-00 12-30-00
------- ------- --------
Raw Materials $ 4,855 $ 4,311 $ 4,871
Work In Process 3,672 2,906 3,748
Finished Goods 8,372 6,709 6,970
------- ------- -------
$16,899 $13,926 $15,589
======= ======= =======
Note D - Income Taxes
- ---------------------
The provision for income taxes was computed based on financial
statement income.
7
Note E - Earnings Per Share
- -----------------------------
Earnings per share were computed as follows:
Three Months Ended
March 24, 2001
-----------------------------------------------------------
Weighted
Average Per Share
Income Shares Amount
------- --------- ----------
Net Income $634
-------
Basic Earnings per Share
Income available to common
stockholders 634 2,166 $.29
=======
Effect of Dilutive Securities
Stock options 16
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Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $634 2,182 $.29
======= ======= =======
Three Months Ended
March 18, 2000
-----------------------------------------------------------
Weighted
Average Per Share
Income Shares Amount
------- --------- ----------
Net Income $ 919
-------
Basic Earnings per Share
Income available to common
stockholders 919 2,918 $.31
=======
Effect of Dilutive Securities
Stock options 5
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Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $ 919 2,923 $.31
======= ======= =======
8
Note F - Segment Information
- -----------------------------
As of and for the Three Months Ended
March 24, 2001
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Office and
Sporting Graphic
Goods Arts Corporate Total
-------- ---------- --------- ---------
Revenues from external customers $10,734 $ 7,762 $ --- $ 18,496
Net income (loss) (197) 973 (142) 634
Assets $31,166 $22,347 $ 4,136 $ 57,649
As of and for the Three Months Ended
March 18, 2000
-------------------------------------------------------------
Office and
Sporting Graphic
Goods Arts Corporate Total
-------- ---------- --------- ---------
Revenues from external customers $ 9,023 $ 8,552 $ --- $ 17,575
Net income (loss) (31) 1,015 (65) 919
Assets $28,301 $23,239 $4,189 $ 55,729
9
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
FIRST QUARTER COMPARISON 2001 vs. 2000
Net sales were $18,496,000 in the first quarter of 2001 as compared to
$17,575,000 in the first quarter of 2000 an increase of $921,000 or 5.2%. Net
sales of sporting goods increased $1,711,000 or 19.0% and net sales of office
and graphic arts decreased $790,000 or 9.2%.
Of the increase in sporting goods net sales 65% was in game parlor
products and the remaining 35% was spread over archery, basketball and darts.
The increase in game parlor products was in imported game tables and the
increases in basketball and darts was in product from recent acquisitions. The
decrease in office and graphic arts net sales is believed to be mainly due to
the slowing economy causing a decrease in the incoming order rate.
Cost of sales was $12,710,000 in the first quarter of 2001 as compared
to $11,578,000 in the first quarter of 2000, an increase of $1,132,000 or 9.8%.
Cost of sales as a percentage of net sales was 68.7% in the first
quarter of 2001 as compared to 65.9% in the first quarter of 2000. Sporting
goods cost of sales as a percentage of net sales increased 2.0% and office and
graphic arts cost of sales as a percentage of net sales decreased .7%. Sporting
goods cost of sales increase was mainly due to a shift in sales to less
profitable product lines (import game tables). Office and graphic arts cost of
sales decrease was mainly due to a reduction in factory expenses.
Selling, general, and administrative expenses were $4,060,000 in the
first quarter of 2001 as compared to $3,858,000 in the first quarter of 2000, an
increase of $202,000 or 5.2%.
Selling, general and administrative expenses as a percentage of net
sales was 21.9% in the first quarter of 2001 and 2000.
Interest expense increased $83,000 to $317,000 in 2001 from $234,000
in 2000, an increase of 35.5% due to higher average borrowing levels.
The effective income tax rate for the first quarter of 2001 was 37.5%
as compared to 42.4% in 2000.
10
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was $8,825,000
in the first quarter of 2001 as compared to $11,090,000 in the first quarter of
2000. Most of the cash provided by operating activities was from collection of
the year end accounts receivable during the first quarter. The net accounts
receivable balance at the end of the year was $26,406,000 and at the end of the
first quarter the net accounts receivable balance was $13,600,000. The Company's
net cash used for investing activities was $2,307,000 in the first quarter of
2001 as compared to $1,269,000 in the first quarter of 2000. $1,966,000 of the
cash used in 2001 was for the purchase of certain assets of Accudart. The
Company's net cash used by financing activities was $7,317,000 in the first
quarter of 2001 as compared to $11,570,000 in the first quarter of 2000. The
cash used by financing activities was for the pay down of bank debt. At the end
of the year, the bank debt was $25,967,000 and at the end of the first quarter
the bank debt was $18,634,000.
The Company's working capital requirements are currently funded by
cash flow from operations and a revolving line of credit in the amount of
$30,000,000. There was $3,500,000 borrowed under this revolving line of credit
at the end of the first quarter.
This report contains forward-looking statements relating to present or
future trends or factors that are subject to risks and uncertainties. Escalade's
future financial performance could differ materially from the expectations of
management contained herein. Escalade undertakes no obligation to release
revisions to these forward-looking statements after the date of this report.
PART II. OTHER INFORMATION
There were no reports on Form 8-K filed for the three months ended
March 24, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
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: April 12, 2001 C. W. (Bill) Reed
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C. W. (Bill) Reed
President and Chief Executive Officer
Date: April 12, 2001 John R. Wilson
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John R. Wilson
Vice President and
Chief Financial Officer