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 22, 1997
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
------------
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 7, 1997 : 3,094,741
2
INDEX
Page No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheet --
March 22, 1997, March 23, 1996, and
December 28, 1996 3
Consolidated Condensed Statement of Income --
Three Months Ended March 22, 1997 and March 23, 1996
4
Consolidated Condensed Statement of Cash Flows --
Three Months Ended March 22, 1997 and March 23, 1996
5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations: 7-8
Part II. Other Information
8
Signatures 8
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
(Dollars in Thousands) March 22, March 23, December 28,
1997 1996 1996
------------------------------------
ASSETS
Current assets:
Cash $ 249 $ 261 $ 1,319
Receivables, less allowances of
$814, $753 and $682 12,067 12,830 27,297
Inventories 13,647 15,994 11,452
Prepaid expense 177 119 222
Deferred income tax benefit 1,561 1,828 1,561
-------- -------- --------
TOTAL CURRENT ASSETS 27,701 31,032 41,851
Property, plant, and equipment 31,886 33,273 31,818
Accum. depr. and amortization (22,059) (22,508) (21,609)
-------- -------- --------
9,827 10,765 10,209
Deferred income tax benefit 519 662 519
Other assets 1,837 1,819 1,851
-------- -------- --------
$ 39,884 $ 44,278 $ 54,430
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 350 $ 200 $ 3,875
Current portion of long-term debt 2,300 3,007 9,800
Trade accounts payable 2,248 3,032 2,394
Accrued liabilities 9,245 7,472 11,374
Federal income tax payable 135 202 1,099
-------- -------- --------
TOTAL CURRENT LIABILITIES 14,278 13,913 28,542
Other Liabilities:
Long-term debt 5,000 5,641 5,500
Deferred compensation 1,107 1,203 1,083
-------- -------- --------
6,107 6,844 6,583
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 - 3,094,626,
4,123,954, and 3,084,449 at
3-22-97, 3-23-96 and 12-28-96
8,335 17,523 8,292
Retained earnings 11,164 5,998 11,013
-------- -------- --------
19,499 23,521 19,305
-------- -------- --------
$ 39,884 $ 44,278 $ 54,430
======== ======== ========
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 22, 1997 March 23, 1996
-------------- --------------
Net sales $ 12,702 $ 15,381
Costs, expenses and other income:
Cost of products sold 9,105 11,128
Selling, administrative and
general expenses 3,120 3,552
Interest 217 309
Other income (60) (55)
-------- --------
12,382 14,934
INCOME BEFORE INCOME TAXES 320 447
Provision for income taxes 169 215
-------- --------
NET INCOME $ 151 $ 232
======== ========
Per share data:
NET INCOME $ .05 $ .06
======== ========
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 22, 1997 March 23, 1996
Operating Activities: -----------------------------
Net Income $ 151 $ 232
Depreciation and amortization 567 668
Adjustments necessary to reconcile
net income to net cash provided by
operating activities 9,879 12,522
-------- --------
Net cash provided by operating
activities 10,597 13,422
-------- --------
Investing Activities:
Purchase of property and equipment (185) (209)
-------- --------
Net cash used by investing activities (185) (209)
-------- --------
Financing Activities:
Net decrease in notes pay - bank (11,525) (14,150)
Purchase of common stock -- (49)
Proceeds from exercise of stock options 43 --
-------- --------
Net cash used by financing activities (11,482) (14,199)
-------- --------
Decrease in cash (1,070) (986)
Cash, beginning of period 1,319 1,247
-------- --------
Cash, end of period $ 249 $ 261
======== ========
See notes to Consolidated Condensed Financial Statements.
6
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 March 22, 1997, March 23, 1996, and December 28, 1996 and the
results of operations and changes in financial position for the three months
ended March 22, 1997 and March 23, 1996. The balance sheet at December 28, 1996
was derived from the audited balance sheet included in the 1996 annual report to
shareholders.
Note B - Seasonal Aspects
- -------------------------
The results of operations for the three month periods ended March 22,
1997 and March 23, 1996 are not necessarily indicative of the results to be
expected for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
3-22-97 3-23-96 12-28-96
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Raw Materials $ 4,537 $ 6,655 $ 3,660
Work In Process 2,753 3,153 2,710
Finished Goods 6,357 6,186 5,082
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$13,647 $15,994 $11,452
======= ======= =======
Note D - Earnings Per Share
- ---------------------------
Earnings per common and common equivalent shares are based on average
shares outstanding. Dilutive effects of stock options on net income are not
material. The number of shares used to calculate earnings per share for the
three months ended March 22, 1997 and March 23, 1996 was 3,089,173 and
4,133,359.
Note E - Income Taxes
- ---------------------
The provision for income taxes was computed based on financial
statement income.
7
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 1997 vs. 1996
Net sales were $ 12,702,000 in the first quarter of 1997 as compared to
$15,381,000 in the first quarter of 1996 a decrease of $2,679,000 or 17.4%.
Sales of sporting goods decreased $2,786,000 or 25.5% and sales of office and
graphic arts products increased $107,000 or 2.4%.
The decrease in sporting goods sales was mainly due to decreased volume
caused by excess inventory carryover from the prior year by several large
customers and about 25% of the decrease was due to the discontinuance of the
yard games and fitness product lines. The increase in office and graphic arts
machines and equipment sales is primarily due to increased export sales.
Cost of sales was $9,105,000 in the first quarter of 1997 as compared
to $11,128,000 in the first quarter of 1996, a decrease of $2,023,000 or 18.2%.
Cost of sales as a percentage of net sales was 71.7% in the first
quarter of 1997 as compared to 72.3% in the first quarter of 1996. Sporting
goods cost of sales as a percentage of net sales increased 3.3% and office and
graphic arts machines and equipment cost of sales as a percentage of net sales
decreased 2.9%. The increase in the sporting goods percentage was mainly in
material cost and the decrease in the office and graphic arts machines and
equipment percentage was mainly in factory expense.
Selling, general, and administrative expenses were $3,120,000 in the
first quarter of 1997 as compared to $3,552,000 in the first quarter of 1996, a
decrease of $432,000 or 12.2%.
Selling, general and administrative expenses as a percentage of net
sales was 24.6% in the first quarter of 1997 as compared to 23.1% in the first
quarter of 1996. This increase as a percentage of net sales was mainly due to
decreased sales volume.
Interest expense decreased $92,000 to $217,000 in 1997 from $309,000 in
1996, a reduction of 29.8% due to lower borrowing levels.
The effective income tax rate for the first quarter of 1997 was 52.8%
as compared to 48.0% in 1996. Both of these rates are higher than normal due to
non-deductible foreign losses.
8
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was $10,597,000
in the first quarter of 1997 as compared to $13,422,000 in the first quarter of
1996. 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 $27,297,000 and at the end of the
first quarter the net accounts receivable balance was $12,067,000. The Company's
net cash used for investing activities was $185,000 in the first quarter of 1997
as compared to $209,000 in the first quarter of 1996. This decrease of $24,000
was in the purchase of property and equipment. The Company's net cash used by
financing activities was $11,482,000 in the first quarter of 1997 as compared to
$14,199,000 in the first quarter of 1996. Most of the cash used by financing
activities was for the pay down of short term and long term bank debt. At the
end of the year, the bank debt was $19,175,000 and at the end of the first
quarter the bank debt bank was $7,650,000.
The Company's working capital requirements are currently funded by cash
flow from operations, a domestic line of credit in the amount of $18,000,000,
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 or the London Inter-Bank Offered Rate plus 1.00%. The Company's domestic
line of credit agreement expires on May 31, 1997 and will be renewed during the
second quarter. The amount brrowed under this domestic line of credit at the end
of the first quarter was $350,000.
PART II. OTHER INFORMATION
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
three months ended March 22, 1997.
9
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 11, 1997 Robert E. Griffin
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Robert E. Griffin
Chairman and Chief
Executive Officer
Date: April 11, 1997 John R. Wilson
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John R. Wilson
Vice President and
Chief Financial Officer