EXHIBIT 99.2
MESSAGE TO THE SHAREHOLDERS
Your company's seasonally slow first quarter produced a record start
for the year. Net sales increased 21% to $32,250,000 and net income moved from a
breakeven to a $598,000 profit or nine cents per share.
Escalade Sports' net sales of sporting goods increased 40% to
$15,689,000 due primarily to the inclusion of the Bear Archery acquisition
completed in the second quarter of 2003, increased demand of basketball
products, and the return to more normal first quarter purchase levels from our
customers as their 2003 year end inventories declined from the excesses held at
2002 year end. Net income at Sports moved from a loss in the first quarter of
2003 to a level that accounts for the entire gain in this year's consolidated
first quarter results. The increased income is due equally to the increased
sales and to a successful program to substantially reduce factory operating
expenses. Escalade Sports was awarded a fifth consecutive Sears "Partners in
Progress" award for its 2003 performance. Our outlook for Sports remains
optimistic, however, we are still in the process of finalizing product placement
decisions with our customers and we are facing significant raw material
increases that must be negotiated into our selling prices with our customers.
The Martin Yale Group's net sales of office and graphic products
increased 9% to $19,561,000 primarily due to exchange rate gains but also due to
increases in sales of folding machines in the U.S. and Europe, and increases of
paper trimmers and letter openers in Europe. Net income decreased 31% with gains
in the U.S. being more than offset with European losses. The synergies and cost
reductions identified and implemented in the U.S. operations last year were
partially offset by increased purchased prices of shredders in the first quarter
due to the strong euro, so we have not yet seen the full impact. Price increases
are being implemented during April of this year to offset this increased cost.
The increased loss in Europe is due to the extra expense associated with the
late development and delivery of new products, operating inefficiencies in
Germany, and inadequate pricing. We have identified and are implementing cost
reductions and price changes in Europe and we have an intensive ongoing
identification process that is identifying more. We continue to believe we can
achieve an incremental gain in 2004 and then emerge to realize the full synergy
benefits in 2005.
During the quarter, we paid our first annual dividend of $.24 per
share. We are continuing to evaluate acquisitions as well as other means of
enhancing shareholder value.
Thank you for your continued support,
C.W. Reed
President & CEO
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited, In Thousands Except Per Share Amounts)
3 Months Ended 12 Months Ended
----------------------------------- ----------------------------------
20 March 2004 22 March 2003 20 March 2004 22 March 2003
------------- ------------- ------------- -------------
NET SALES .......................... $ 35,250 $ 29,103 $ 227,875 $ 167,053
OPERATING EXPENSES
Cost of goods sold ........... 24,518 18,659 159,223 117,489
Selling and administrative ... 9,240 9,932 46,675 31,279
--------- --------- --------- ---------
OPERATING INCOME ................... 1,492 512 21,977 18,285
OTHER INCOME (EXPENSE)
Interest expense ............. (365) (448) (2,200) (1,277)
Other income (expense) ....... (18) (53) 2,543 52
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ......... 1,109 11 22,320 17,062
PROVISION (BENEFIT) FOR INCOME TAXES
511 4 6,880 5,847
--------- --------- --------- ---------
NET INCOME ......................... $ 598 $ 7 $ 15,440 $ 11,213
========= ========= ========= =========
PER SHARE DATA
Basic earnings per share ..... $ 0.09 $ 0.00 $ 2.39 $ 1.72
========= ========= ========= =========
Diluted earnings per share ... $ 0.09 $ 0.00 $ 2.35 $ 1.68
========= ========= ========= =========
Average shares outstanding ... 6,455 6,511 6,460 6,505
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited, In Thousands)
20 March 2004 22 March 2003 27 December 2003
------------- ------------- ----------------
ASSETS
Current assets ........................... $ 71,911 $ 64,028 $ 79,619
Property, Plant & Equipment - net ........ 17,024 17,987 17,537
Other assets ............................. 17,670 12,468 18,318
Goodwill ................................. 18,707 13,351 18,777
-------- -------- --------
Total ................................. $125,312 $107,834 $107,834
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ...................... $ 37,681 $ 39,254 $ 53,669
Other liabilities ........................ 27,428 22,274 19,116
Stockholders' equity ..................... 60,203 46,306 61,466
-------- -------- --------
Total ................................. $125,312 $107,834 $107,834
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