EXHIBIT 99.2
MESSAGE TO SHAREHOLDERS
Compared to 2002, net sales for the second quarter increased 55% to
$49.8 million putting year to date net sales at $78.9 million, a 59% gain. Net
income for the quarter was 35 cents, a decline of 5 cents due primarily to the
one time gain of a building sale in the second quarter of 2002.
Sporting goods sales increased 13% to $26.4 million due mainly to the
inclusion of one month's sales of the recently acquired North American Archery
Group (now known as Bear Archery) and a full quarter of Murrey billiard sales.
High year-end retail inventories resulted in lower purchases of some product
categories, almost totally masking gains in the fitness and basketball product
lines. Operating income, helped by Bear Archery, increased slightly, but was
more than offset by increased interest and amortization expense. Now that the
excess retail inventories are depleted, we believe that improved product
placement will result in increased sales and income at Escalade Sports for our
upcoming peak selling season and will minimize the effect of costs such as
amortization and interest expense, even excluding the additional sales and
income we expect from Bear.
Sales of office and graphic art products increased 164% to $23.4
million due entirely to the inclusion of Schleicher International AG's net
sales, which were helped by favorable exchange rates and solid market share
gains. After excluding the building sale in 2002, Martin Yale's net income
declined 10% due to the inclusion of a slight loss at Schleicher (which is a
substantial improvement over 2002), softer domestic sales, and higher interest
expense due to the Schleicher acquisition. During the quarter, Martin Yale
completed its tender offer for Schleicher, acquiring just over 97% of all
shares, and has now started a process that should result in ownership of 100% of
the shares by the end of August 2003. Once wholly owned, we will convert
Schleicher to a private company and we can then explore synergistic
opportunities. The two companies have begun a sales co-operation that has
already resulted in increased sales abroad and will result in increased domestic
sales later this year.
During the quarter, we discontinued the exploration of the new Hardwood
Creek photo frame and gift line. The net result was a $47,000 gain for the
quarter after selling the trademark and adjusting for inventory writeoffs and
expenses.
Escalade, Inc. increased its ownership in Sweden Table Tennis AB to 50%
during the quarter. Including Escalade International, we now have two sporting
goods joint ventures in Europe that have turned around and are in their second
year of profitability. These two companies contributed 3 cents per share to our
earnings this quarter.
During the quarter, we acquired an additional 121,080 shares of our
stock bringing year to date purchases to 126,080 shares at an average cost of
$14.59 per share, leaving $1,161,000 of the $3,000,000 previously authorized
capital available for repurchase of our shares through the open market or
negotiated transactions as a means of continued enhancement of shareholder
value.
Respectfully,
CW Reed
President & CEO
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited, In Thousands, Except Per Share Data)
TWELVE MONTHS
THREE MONTHS ENDED SIX MONTHS ENDED ENDED
July 12, July 13, July 12, July 13, July 12, July 13,
2003 2002 2003 2002 2003 2002
--------- --------- --------- --------- --------- ---------
NET SALES $ 49,837 $ 32,202 $ 78,940 $ 49,707 $ 184,688 $ 152,305
COSTS AND EXPENSES
Cost of goods sold 31,160 21,579 49,819 33,913 127,070 109,325
Selling, and administrative costs 14,389 6,635 24,321 11,617 39,033 23,761
--------- --------- --------- --------- --------- ---------
Total operating expenses 45,549 28,214 74,140 45,530 166,103 133,086
--------- --------- --------- --------- --------- ---------
OPERATING INCOME 4,288 3,988 4,800 4,177 18,585 19,219
OTHER INCOME (EXPENSE)
Interest expense (652) (246) (1,100) (367) (1,683) (1,003)
Other income (expense) 11 326 (40) 151 (260) (62)
Amortization of goodwill -- -- -- -- -- (332)
--------- --------- --------- --------- --------- ---------
Total other income (expense) (641) 80 (1,140) (216) (1,943) (1,397)
--------- --------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 3,647 4,068 3,660 3,961 16,642 17,822
PROVISION FOR INCOME TAXES (1,399) (1,465) (1,403) (1,426) (5,782) (6,360)
MINORITY INTEREST HOLDERS SHARE IN
SUBSIDIARY NET LOSS 6 -- 4 -- 4 --
--------- --------- --------- --------- --------- ---------
NET INCOME $ 2,254 $ 2,603 $ 2,261 $ 2,535 $ 10,864 $ 11,462
========= ========= ========= ========= ========= =========
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ 0.35 $ 0.40 $ 0.35 $ 0.39 $ 1.67 $ 1.78
DILUTED EARNINGS PER SHARE $ 0.34 $ 0.39 $ 0.34 $ 0.38 $ 1.64 $ 1.73
AVERAGE SHARES OUTSTANDING 6,500 6,495 6,505 6,467 6,506 6,446
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, In Thousands)
July 12, 2003 July 13, 2002 December 28, 2002
ASSETS
Current assets $ 81,140 $ 52,379 $ 59,417
Fixed assets 18,558 10,017 9,060
Other assets 15,700 12,323 14,960
Goodwill 17,791 13,351 13,351
-------- -------- --------
TOTAL $133,189 $ 88,070 $ 96,788
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 52,049 $ 31,211 $ 32,376
Other liabilities 34,310 19,516 18,537
Stockholders' equity 46,830 37,343 45,875
-------- -------- --------
TOTAL $133,189 $ 88,070 $ 96,788
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