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 July 10, 2004 Commission File Number 0-6966 ESCALADE, INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) Indiana 13-2739290 ------------------------ ------------ (State of incorporation) (I.R.S. EIN) 251 Wedcor Avenue, Wabash, Indiana 46992 ---------------------------------------- (Address of principal executive office) 260-569-7208 ------------------------------- (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 [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act Yes [X] No [ ] The number of shares of Registrant's common stock (no par value) outstanding as of July 26, 2004: 13,038,664 INDEX Page No. Part I. Financial Information: Item 1 - Financial Statements: Consolidated Condensed Balance Sheets (Unaudited) as of July 10, 2004, July 12, 2003, and December 27, 2003 3 Consolidated Condensed Statements of Income (Unaudited) for the Three Months and Six Months Ended July 10, 2004 and July 12, 2003 4 Consolidated Condensed Statements of Comprehensive Income (Unaudited) for the Three Months and Six Months Ended July 10, 2004 and July 12, 2003 4 Consolidated Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended July 10, 2004 and July 12, 2003 5 Notes to Consolidated Condensed Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 11 Item 4 - Controls and Procedures 11 Part II. Other Information Item 4 - Submission of matters to a Vote of Security Holders 12 Item 6 - Exhibits and Reports on Form 8-K 12 Signatures 13 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (All amounts in thousands except share information) July 10, July 12, December 27, 2004 2003 2003 ------------ ------------ ------------ ASSETS Current Assets: Cash and cash equivalents $ 1,231 $ 1,253 $ 648 Receivables, less allowance of $1,772; $1,318; and $1,991; respectively 35,530 35,760 45,073 Inventories 41,435 40,659 29,853 Prepaid expenses 1,022 1,793 1,611 Deferred income tax benefit 2,456 1,675 2,434 ------------ ------------ ------------ TOTAL CURRENT ASSETS 81,674 81,140 79,619 Property, plant and equipment 51,071 46,964 48,844 Accumulated depreciation and amortization (34,701) (28,406) (31,307) ------------ ------------ ------------ 16,370 18,558 17,537 Intangible assets 8,276 8,542 9,026 Goodwill 18,715 17,791 18,777 Other assets 8,385 7,158 9,478 ------------ ------------ ------------ $ 133,420 $ 133,189 $ 134,437 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 12,228 $ 17,440 $ 21,568 Current portion of long-term debt 354 5,179 354 Trade accounts payable 14,265 12,633 8,139 Accrued liabilities 16,263 14,806 23,321 Income tax payable (259) 1,991 1,580 ------------ ------------ ------------ TOTAL CURRENT LIABILITIES 42,851 52,049 54,962 Other Liabilities: Long-term debt 26,470 31,861 15,729 Interest rate swap agreement 570 728 1,055 Deferred compensation 1,480 1,357 1,408 ------------ ------------ ------------ 28,520 33,946 18,192 Minority Interest -- 364 -- Stockholders' equity: Preferred stock: Authorized 1,000,000 shares; no par value, none issued Common stock: Authorized 30,000,000 shares; no par value, Issued and outstanding - 13,038,664; 12,868,012; and 12,854,162; respectively 13,039 6,434 6,427 Retained Earnings 47,257 40,154 52,609 Accumulated other comprehensive income 1,753 242 2,247 ------------ ------------ ------------ 62,049 46,830 61,283 ------------ ------------ ------------ $ 133,420 $ 133,189 $ 134,437 ============ ============ ============ See notes to Consolidated Condensed Financial Statements. 3 ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (All amounts in thousands, except per share amounts) Three Months Ended Six Months Ended ------------------------ ------------------------ July 10, July 12, July 10, July 12, 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Net Sales $ 54,655 $ 49,837 $ 89,905 $ 78,940 Costs, expenses and other income: Cost of products sold 37,125 31,160 61,643 49,819 Selling, general and administrative expenses 14,227 14,389 23,467 24,321 Interest 573 652 938 1,100 Other expense (income) (319) (11) (301) 40 ---------- ---------- ---------- ---------- 51,606 46,190 85,747 75,280 Net income before income taxes and minority interest 3,049 3,647 4,158 3,660 Net Income in subsidiary allocated to minority interest -- 6 -- 4 Provision for income taxes 1,096 1,399 1,607 1,403 ---------- ---------- ---------- ---------- Net income $ 1,953 $ 2,254 $ 2,551 $ 2,261 ========== ========== ========== ========== Per Share Data: Basic earnings per share $ 0.15 $ 0.17 $ 0.20 $ 0.17 Diluted earnings per share $ 0.15 $ 0.17 $ 0.19 $ 0.17 CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Net income $ 1,953 $ 2,254 $ 2,551 $ 2,261 Unrealized gain (loss) on securities, net of tax (49) 122 7 69 Foreign currency translation adjustment (280) 548 (616) 926 Unrealized gain (loss) on interest rate swap agreement net of deferred tax expense of $62 97 (728) 115 (728) ---------- ---------- ---------- ---------- Comprehensive income $ 1,721 $ 2,196 $ 2,057 $ 2,528 ========== ========== ========== ========== See notes to Consolidated Condensed Financial Statements. 4 ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (All amounts in thousands) Six Months Ended ------------------------------ July 10, 2004 July 12, 2003 ------------- ------------- Operating Activities: Net income $ 2,551 $ 2,261 Depreciation and amortization 2,744 2,785 Adjustments necessary to reconcile net income to net cash provided by operating activities (4,471) (4,923) ------------- ------------- Net cash provided by operating activities 824 123 Investing Activities: Purchase of property and equipment (948) (1,362) Purchase of certain assets of North American Archery Group -- (11,432) Acquisition of majority interest in Schleicher & Co. International AG -- (12,587) Equity investment in Sweden Table Tennis AB -- (187) Step(R)product license buyout -- (875) ------------- ------------- Net cash used by investing activities (948) (26,443) Financing Activities: Net increase in notes payable - Bank 2,221 6,217 Net (decrease) increase in long- term debt (167) 19,673 Proceeds from exercise of stock options 1,083 266 Purchase of common stock (819) (1,839) Dividends Paid (1,556) -- Foreign Currency Translation (55) (114) ------------- ------------- Net cash provided by financing activities 707 24,203 ------------- ------------- Net increase (decrease) in cash and cash equivalents 583 (2,117) Cash and cash equivalents, beginning of period 648 3,370 ------------- ------------- Cash and cash equivalents, end of period $ 1,231 $ 1,253 ============= ============= See notes to Consolidated Condensed Financial Statements. 5 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 that 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. The condensed consolidated balance sheet of the Company as of December 27, 2003 has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K annual report for 2003 filed with the Securities and Exchange Commission. Note B - Seasonal Aspects - -------------------------------------------------------------------------------- The results of operations for the six-month periods ended July 10, 2004 and July 12, 2003 are not necessarily indicative of the results to be expected for the full year. Note C - Stock Split - -------------------------------------------------------------------------------- On May 28, 2004, the Company completed a two-for-one split on Escalade common stock to all shareholders of record as of May 11, 2004. All earnings per share data in these consolidated financial statements and notes to the consolidated financial statements have been restated retroactively to reflect the stock split. The stock split resulted in 6,518 thousand additional shares. The Company has capitalized this transaction by recording a transfer from retained earnings to common stock to allow common stock to remain at $1 per share. Note D - Inventories - -------------------------------------------------------------------------------- (All amounts in thousands) July 10, July 12, December 27, 2004 2003 2003 ------------ ------------ ------------ Raw materials $ 10,725 $ 10,902 $ 7,300 Work in progress 6,975 5,544 5,133 Finished goods 23,735 24,213 17,420 ------------ ------------ ------------ $ 41,435 $ 40,659 $ 29,853 ============ ============ ============ Note E - Notes Payable - -------------------------------------------------------------------------------- On July 15, 2004 the Company's directly owned subsidiary, Indian-Martin, Inc., renewed its revolving line of credit under which it can borrow funds from time to time to purchase eligible accounts receivable from the Company's operating subsidiaries. The terms of the amended agreement remain essentially unchanged with a new expiration date of July 15, 2006. Subject to limitations, the aggregate borrowing under the revolving credit line is $45 million. At July 10, 2004, outstanding borrowings were $10,240 thousand utilizing the prime interest rate option at an effective rate of 3.00%. 6 Note F - Income Taxes - -------------------------------------------------------------------------------- The provision for income taxes was computed based on financial statement income. Note G - Dividend Payment - -------------------------------------------------------------------------------- On March 12, 2004, the Company paid a dividend of $0.24 per common share to all shareholders of record on March 5, 2004. The total amount of the dividend was $1,556 thousand and was charged against retained earnings. Note H - Segment Information - -------------------------------------------------------------------------------- As of and for the Six Months Ended July 10, 2004 -------------------------------------------------- Office - Sporting Graphic In thousands Goods Arts Corp. Total ------------------------------------------------------------------------------------- Revenues from external customers $ 46,309 $ 43,596 $ -- $ 89,905 Net Income (Loss) 2,184 1,024 (657) 2,551 Total Assets $ 64,157 $ 61,222 $ 8,041 $ 133,420 As of and for the Six Months Ended July 12, 2003 -------------------------------------------------- Office - Sporting Graphic In thousands Goods Arts Corp. Total ------------------------------------------------------------------------------------- Revenues from external customers $ 37,591 $ 41,349 $ -- $ 78,940 Net Income (Loss) 1,201 1,213 (153) 2,261 Total Assets $ 67,544 $ 58,620 $ 7,025 $ 133,189 Note I - Earnings Per Share - -------------------------------------------------------------------------------- The shares used in computation of the Company's basic and diluted earnings per common share are as follows: Three Months Ended ----------------------------- All amounts in thousands July 10, 2004 July 12, 2003 -------------------------------------------------------------------- Weighted average common shares outstanding 13,018 13,000 Dilutive effect of stock options 276 248 ---------- ---------- Weighted average common shares outstanding, assuming dilution 13,294 13,248 ========== ========== Six Months Ended ----------------------------- All amounts in thousands July 10, 2004 July 12, 2003 -------------------------------------------------------------------- Weighted average common shares outstanding 12,949 13,010 Dilutive effect of stock options 276 248 ---------- ---------- Weighted average common shares outstanding, assuming dilution 13,225 13,258 ========== ========== 7 Note J - Employee Stock Option Plan - -------------------------------------------------------------------------------- The Company has two stock-based compensation plans. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock issued to Employees, and related interpretations. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation. Three Months Ended ----------------------------- (In Thousands Except Per Share Amounts) July 10, 2004 July 12, 2003 -------------------------------------------------------------------------- Net income, as reported $ 1,953 $ 2,254 Less: Total stock-based employee compensation cost determined under the fair value based method, net of income taxes (194) (110) ------------- ------------- Pro forma net income $ 1,759 $ 2,144 ============= ============= Earnings per share Basic--as reported $ 0.15 $ 0.17 ============= ============= Basic--pro forma $ 0.14 $ 0.16 ============= ============= Diluted--as reported $ 0.15 $ 0.17 ============= ============= Diluted--pro forma $ 0.13 $ 0.16 ============= ============= Six Months Ended ----------------------------- (In Thousands Except Per Share Amounts) July 10, 2004 July 12, 2003 -------------------------------------------------------------------------- Net income, as reported $ 2,551 $ 2,261 Less: Total stock-based employee compensation cost determined under the fair value based method, net of income taxes (389) (220) ------------- ------------- Pro forma net income $ 2,162 $ 2,041 ============= ============= Earnings per share Basic--as reported $ 0.20 $ 0.17 ============= ============= Basic--pro forma $ 0.17 $ 0.15 ============= ============= Diluted--as reported $ 0.19 $ 0.17 ============= ============= Diluted--pro forma $ 0.16 $ 0.15 ============= ============= ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This report contains forward-looking statements relating to present or future trends or factors that are subject to risks and uncertainties. These risks include, but are not limited to, the impact of competitive products and pricing, product demand and market acceptance, new product development, the continuation and development of key customer and supplier relationships, Escalade's ability to control costs, general economic conditions, fluctuation in operating results, changes in the securities market and other risks detailed from time to time in Escalade's filings with the Securities and Exchange Commission. 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. 8 Overview Escalade, Incorporated ("Escalade" or "Company") manufactures and distributes products for two industries: Sporting Goods and Office Products. Within these industries the Company has successfully built a commanding market presence in niche markets. This strategy is heavily dependent on brand recognition and excellent customer service. Management believes the key indicators in measuring the success of this strategy are revenue and earnings growth. One of the Company's key strategic advantages is the Company's established relationships with major retailers which enable the Company to bring new products to the market in a timely and cost effective manner. In addition to strategic customer relations, the Company has over 75 years of manufacturing experience that enable it to be a low cost supplier. Results of Operations Net revenues for the second quarter were 9.7% higher than the same period last year and 13.9% higher for the first half compared to last year. Revenue growth came primarily from the sporting goods segment. Net income for the second quarter was down $301 thousand from the same period last year. However, due to the strong results reported in the first quarter, net income for the first half of 2004 is up 12.9% over the prior year. Net income in the sporting goods segment increased 7.5% for the second quarter over the prior year and when added to the results from the first quarter, net income for the sporting goods business is up 81.8% for the first half of 2004 compared to the same period in 2003. Net income from the office products segment was relatively unchanged in the second quarter from the same period last year, but down 15.6% for the first half of 2004 compared to the same period last year. This decrease is attributed to manufacturing inefficiencies in the office product business. The company has taken actions to resolve these problems and increase profitability in the office products business. The following schedule sets forth certain consolidated statement of income data as a percentage of net revenue for the periods indicated: Three Months Six Months ---------------- ----------------- 2004 2003 2004 2003 --------------------------------------------------------------------------- Net revenue 100.0% 100.0% 100.0% 100.0% Cost of products sold 67.9% 62.5% 68.6% 63.1% ------ ------ ------ ------ Gross margin 32.1% 37.5% 31.4% 36.9% Selling, administrative and general expenses 26.0 28.9% 26.1 30.8% ------ ------ ------ ------ Operating income 6.1% 8.6% 5.3% 6.1% ====== ====== ====== ====== Consolidated Revenue and Gross Margin Revenue growth in the second quarter came primarily from the sporting goods business which experienced an increase in net revenues of 15.9% over the same quarter last year. Sporting goods revenues for the first half were up 23.2% over the same period last year. Roughly half of the increased revenue is directly attributed to the archery acquisition made during the third quarter of 2003. The remainder of the increase is attributed to table tennis and basketball sales which have increased as a result of better retail placement. The Company does not expect the growth rate in the first half of 2004 to continue into the second half due to the timing of the archery business acquisition in June of 2003. Growth expectations for the second half of 2004 are expected to be modest compared to the same period in 2003. Compared to the corresponding periods in the prior year, office product revenues increased 2.6% and 5.4% in the second quarter and first half of the year, respectively. Growth in European revenues grew 16.3% in the second quarter and 19.2% for the first half, however, the bulk of this increase is the result of fluctuations in exchange rates. Ignoring the effects of exchange rates, European revenues increased approximately 7% in the first half of 2004 compared to the 9 same period in 2003. Revenues in North America decreased 8.7% in the second quarter and 6.2% in the first half compared to comparable periods last year. Approximately half of this decline in second quarter revenues is attributed to order delays from the US Government resulting from recent price increases on high security shredders. The remainder of the decline is due to severe price competition on office products produced in Mexico. The Company has now received the delayed orders at the higher price and is taking steps to reduce manufacturing costs to address the increased price competition on product produced in Mexico. The consolidated gross margin rate for the first half of 2004 declined from 36.9% last year to 31.4% in the current year. However, during the second quarter of 2004 the consolidated gross margin rate increased to 32.1% from 30.4% in the first quarter of 2004. The primary reason for the decline in gross margin from 2003 to 2004 is manufacturing inefficiencies in the German factory producing office products and the adverse effect of foreign currency rates on product manufactured in Germany and sold in North America. In response to this, the Company has made significant management changes in the German factory and implemented an aggressive cost reduction effort to improve efficiency. These efforts, combined with price increases on products produced in Germany, are expected to improve the gross margin rates in the office products business in the second half of 2004. Overall gross margins on sporting goods business were marginally better in 2004 compared to 2003 as a result of increased higher margin product sales such as archery and basketball. Consolidated Selling, General and Administrative Expenses Consolidated selling, general and administrative costs ("SG&A") were relatively unchanged from the prior year in both the second quarter and first half of the current year. As a percentage of net revenue, SG&A declined from 30.8% in the first half of last year to 26.1% for the same period this year. The Company has initiated various cost reduction efforts in the office product business and expects to realize results from these efforts in the second half of this year. Financial Condition and Liquidity The financial condition of the company continues to be strong. The current ratio, a basic measure of liquidity (current assets divided by current liabilities), was 1.9 as of July 10, 2004 compared to 1.6 as of July 12, 2003 and 1.4 as of December 27, 2003. The increased current ratio is primarily due to the conversion during the first half of approximately $10 million from short-term debt to long-term debt. The following schedule summarizes the Company's total debt: July 10, July 12, December 27, In thousands 2004 2003 2003 --------------------------------------------------------------------------- Notes payable short-term $ 12,228 $ 17,440 $ 21,568 Current portion long-term debt 354 5,179 354 Long term debt 26,470 31,861 15,729 ------------ ------------ ------------ Total debt $ 39,052 $ 54,480 $ 37,651 ============ ============ ============ Total debt at July 10, 2004 increased slightly from the total at December 27, 2003 as the company begins building product for the holiday sales season. However, total debt at July 10, 2004 is significantly lower than the total at July 12, 2003 reflecting the strong cash flow from operations. As a percentage of stockholders' equity, total debt has decreased from 116% at July 12, 2003, to 63% at July 10, 2004. During the first half of 2004, operations generated $824 thousand in cash compared to $123 thousand during the same time period in 2003. Cash was provided by net income adjusted for non-cash related items. During the first half of 2004, accounts receivable collections generated approximately $11 million in cash, which was offset by planned inventory increases. 10 The Company's working capital requirements are primarily funded from operating cash flows and revolving credit agreements with its banks. The Company's relationship with its primary lending bank remains strong and the Company expects to have access to the same level of revolving credit that was available in 2003. In addition, the Company believes it can quickly reach agreement to increase available credit should the need arise. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to financial market risks, including changes in currency exchange rates, interest rates and marketable equity security prices. To mitigate these risks, the Company utilizes derivative financial instruments, among other strategies. At the present time, the only derivative financial instrument used by the company is an interest rate swap. The Company does not use derivative financial instruments for speculative purposes. A substantial majority of revenue, expense and capital purchasing activities are transacted in U.S. dollars. However, the Company's foreign subsidiaries enter into transactions in other currencies, primarily the Euro. To protect against reductions in value and the volatility of future cash flows caused by changes in currency exchange rates, the Company carefully considers the use of transaction and balance sheet hedging programs. Such programs reduce, but do not entirely eliminate, the impact of currency exchange rate changes. Presently the Company does not employ currency exchange hedging financial instruments, but has adjusted transaction and cash flows to mitigate adverse currency fluctuations. Historical trends in currency exchanges indicate that it is reasonably possible that adverse changes in exchange rates of 20% for the Euro could be experienced in the near term. Such adverse changes would not have resulted in a material impact on income before taxes for the six months ended July 10, 2004. A substantial portion of the Company's debt is based on U.S. prime and LIBOR interest rates. In an effort to lock-in current low rates and mitigate the risk of unfavorable interest rate fluctuations the Company has entered an interest rate swap agreement. This agreement effectively converted a portion of its variable rate debt into fixed rate debt. An adverse movement of equity market prices would have an impact on the Company's long-term marketable equity securities that are included in other assets on the consolidated balance sheet. At July 10, 2004 the aggregate book value of long-term marketable equity securities was $1.4 million. Due to the unpredictable nature of the equity market the Company has not employed any hedge programs relative to these investments. ITEM 4. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Company has investment in certain unconsolidated entities. As the Company does not control or manage these entities, its disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those it maintains with respect to its consolidated subsidiaries. The Company has carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the 11 effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation. Therefore, no corrective actions were taken. PART II. OTHER INFORMATION Item 1, 2, 3. Not Required. Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of the registrant was held on April 23, 2004 at the offices of the Company in Evansville, Indiana. Proxy materials were circulated on March 22, 2004 proposing the election of seven members to the Board of Directors for a one year term, approval of the appointment of BKD LLP to serve as independent auditors of the company for the year 2004, and an amendment to the articles of incorporation to increase the number of authorized shares from 10 million shares to 30 million shares. Shareholders elected the proposed directors by the following vote totals: For Withheld -------------------------------- Robert E. Griffin 11,202,308 171,504 Blain E. Matthews, Jr. 11,139,794 234,018 C. W. "Bill" Reed 11,200,490 173,322 George Savitsky 11,361,198 12,614 Richard D. White 11,369,198 4,614 Edward E. (Ned) Williams 11,371,016 2,796 Keith P. Williams 11,371,016 2,796 Shareholders approved the appointment of BKD LLP to serve as independent auditors of the Company for the year 2004 with the following vote: 11,357,760 shares for, 13,800 shares against and 2,252 shares abstained. Shareholders approved the amendment to the articles of incorporation increasing the number of authorized shares from 10 million shares to 30 million shares by the following vote: 10,927,126 shares for, 350,704 shares against and 95,982 shares abstained. Item 5. Not Required. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Number Description 10.1 First Amendment to Credit Agreement dated September 5, 2003 by and between Indian-Martin, Inc. and Bank One, National Association, a national banking association. The Effective date of the Amendment was July 15, 2004. 31.1 Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification. 31.2 Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification. 32.1 Chief Executive Officer Section 1350 Certification. 12 32.2 Chief Financial Officer Section 1350 Certification. (b) Reports on Form 8-K 1. On April 8, 2004, Escalade filed a report on Form 8-K relating to its financial information for the quarter ended March 20, 2004 and forward-looking statements as presented in the shareholder message and press release dated April 8, 2004. 2. On April 28, 2004, Escalade filed a report on Form 8-K relating to its announcement of a two-for-one stock split to all shareholders of record on May 11, 2004. 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: July 30, 2004 /s/ C. W. (BILL) REED ------------- ---------------------------- C. W. (Bill) Reed President and Chief Executive Officer Date: July 30, 2004 /s/ TERRY D. FRANDSEN ------------- ---------------------------- Terry D. Frandsen Vice President and Chief Financial Officer 13