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 13, 1996
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)
817 Maxwell Avenue, Evansville, Indiana 47717
---------------------------------------------
(Address of principal executive office)
812-467-1200
------------
(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
--- ---
The number of shares of Registrant's common stock (no par value)
outstanding as of August 1, 1996 :4,111,889
INDEX
Page No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheet (Unaudited)
July 13, 1996, July 15, 1995, and
December 30, 1995 3
Consolidated Condensed Statement of Income (Unaudited)
Three Months and Six Months Ended
July 13, 1996 and July 15,1995 4
Consolidated Condensed Statement of Cash Flows (Unaudited)
Six Months Ended July 13, 1996 and July 15, 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations: 7-9
Part II. Other Information 9
Signatures 9
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
(Dollars in Thousands) July 13, July 15, December 30,
1996 1995 1995
ASSETS ------------------------------------
Current assets:
Cash $ 387 $ 351 $ 1,247
Receivables, less allowances of
$849, $690 and $726 12,800 13,501 25,285
Inventories 23,250 27,141 15,152
Prepaid expense 208 310 267
Income tax refundable --- 199 275
Deferred income tax benefit 1,648 2,750 1,828
------- ------- -------
TOTAL CURRENT ASSETS 38,293 44,252 44,054
Property, plant, and equipment 33,909 38,185 33,064
Accum. depr. and amortization (23,411) (25,906) (21,840)
------- ------- -------
10,498 12,279 11,224
Deferred income tax benefit 642 706 662
Other assets 1,816 1,847 1,827
------- ------- -------
$51,249 $59,084 $57,767
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 6,825 $17,600 $14,350
Current portion of long-term debt 3,858 2,727 2,383
Trade accounts payable 4,687 2,670 2,370
Accrued liabilities 7,241 6,328 7,553
Federal income tax payable 84 --- 329
------- ------- -------
TOTAL CURRENT LIABILITIES 22,695 29,325 26,985
Other Liabilities:
Long-term debt 3,340 7,198 6,265
Deferred compensation 1,067 1,131 1,179
------- ------- -------
4,407 8,329 7,444
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 - 4,111,889
4,133,361, and 4,133,954 at
7-13-96, 7-15-95, and 12-30-95
17,461 17,571 17,572
Retained earnings 6,686 3,859 5,766
------- ------- -------
24,147 21,430 23,338
------- ------- -------
$ 51,249 $59,084 $57,767
======= ======= =======
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands, except per share amounts)
Three Months Ended Six Months Ended
July 13, July 15, July 13, July 15,
1996 1995 1996 1995
-------------------------------------------
Net sales $ 19,574 $19,160 $ 34,955 $37,270
Costs, expenses and other income:
Cost of products sold 13,816 15,701 24,944 29,818
Selling, administrative and
general expenses 4,315 4,100 7,867 7,621
Restructuring charge --- 1,040 --- 1,040
Interest 295 679 604 1,250
Other income ( 61) (42) (116) (95)
------- ------- ------- -------
18,365 21,478 33,299 39,634
INCOME (LOSS) BEFORE INCOME TAXES 1,209 (2,318) 1,656 (2,364)
Provision (benefit) 521 (900) 736 (905)
for income taxes ------- ------- ------- -------
NET INCOME (LOSS) $ 688 $(1,418) $ 920 $(1,459)
======= ======= ======= =======
Per share data:
NET INCOME (LOSS) $ .16 $ (.34) .22 $ (.35)
======= ======= ======= =======
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
Six Months Ended
July 13,1996 July 15,1995
Operating Activities: -------------------------------
Net Income (Loss) $ 920 $(1,459)
Depreciation and amortization 1,571 2,091
Adjustments necessary to reconcile
net income to net cash provided by
operating activities 6,580 12,222
------- -------
Net cash provided by operating
activities 9,071 12,854
------- -------
Investing Activities:
Purchase of property and equipment (845) (660)
------- -------
Net cash used by investing activities (845) (660)
------- -------
Financing Activities:
Net decrease in notes pay.- bank (7,525) (11,637)
Reduction of long-term debt (1,450) (1,201)
Proceeds from exercise of stock options 3 ---
Purchase of Common Stock (114) ---
------- -------
Net cash used by financing activities (9,086) (12,838)
------- -------
Decrease in cash ( 860) (644)
Cash, beginning of period 1,247 995
------- -------
Cash, end of period $ 387 $ 351
======= =======
See notes to Consolidated Condensed Financial Statements.
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 July 13, 1996, July 15, 1995, and December 30, 1995 and the
results of operations and changes in financial position for the six months ended
July 13,1996 and July 13, 1995. The balance sheet at December 30, 1995 was
derived from the audited balance sheet included in the 1995 annual report to
shareholders.
Note B - Seasonal Aspects
- -------------------------
The results of operations for the six month periods ended July 13, 1996
and July 15, 1995 are not necessarily indicative of the results to be expected
for the full year.
Note C - Inventories (Dollars in Thousands)
- -------------------------------------------
7-13-96 7-15-95 12-30-95
------- ------- --------
Raw Materials $ 8,156 $10,433 $ 6,692
Work In Process 3,281 3,540 3,136
Finished Goods 11,813 13,168 5,324
------- ------- -------
$23,250 $27,141 $15,152
======= ======= =======
Note D - Earnings Per Share
- ---------------------------
Earnings (loss) per common and common equivalent shares are based on
average shares outstanding. Dilutive effects of stock options on net income
(loss) are not material. The number of shares used to calculate earnings (loss)
per share for the six months ended July 13, 1996 and July 15, 1995 was
4,122,359 and 4,133,361.
Note E - Income Taxes
- ---------------------
The provision (benefit) for income taxes was computed based on financial
statement income (loss).
Note F - Restructuring Charge
- -----------------------------
In the second quarter of 1995, an additional $1,040,000 restructuring
charge was taken as a part of the 1994 restructuring charge. This additional
amount, related to the discontinued product writedown, was the result of larger
than anticipated markdowns to sell this inventory. There were no other material
differences in the actual vs. estimated costs of the exit plan. The exit plan
was completed in the fourth quarter of 1995 with the sale of the marked down
discontinued product.
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
SECOND QUARTER COMPARISON 1996 vs. 1995
Net sales were $19,574,000 in the second quarter of 1996 as compared to
$19,160,000 in the second quarter of 1995 an increase of $414,000 or 2.2%.
Sales of sporting goods decreased $388,000 or 2.7% and sales of office and
graphic arts products increased $802,000 or 15.9%.
The sporting goods sales decrease was mainly in the dartboard cabinet
product line. Office and graphic arts machines and equipment sales increased
mainly due to increased export sales and increases in graphic dealer and buying
group business.
Cost of sales was $13,816,000 in the second quarter of 1996 as compared to
$15,701,000 in the second quarter of 1995, a decrease of $1,885,000 or 12.0%.
Cost of sales as a percentage of net sales was 70.6% in the second quarter
of 1996 as compared to 82.0% in the second quarter of 1995. Sporting goods cost
of sales as a percentage of net sales decreased 13.9% and office and graphic
arts cost of sales as a percentage of net sales decreased 1.4%. The decrease in
the sporting goods cost of sales percentage of net sales was due to lower
material cost (22%), lower labor costs (26%), and lower overhead costs (52%).
The decrease in office and graphic arts cost of sales percentage of net sales
was due to lower material costs.
Selling, general, and administrative expenses were $4,315,000 in the
second quarter of 1996 as compared to $4,100,000 in the second quarter of 1995,
an increase of $215,000 or 5.20%.
Selling, general and administrative expenses as a percentage of net sales
was 22.0% in the second quarter of 1996 as compared to 21.4% in the second
quarter of 1995. This increase as a percentage of net sales was mainly due to
increased selling expenses in the office and graphic arts products segment.
Interest expense decreased $384,000 to $295,000 in 1996 from $679,000 in
1995, a reduction of 56.6% due to lower borrowing levels.
RESULTS OF OPERATIONS CONTINUED
FIRST HALF COMPARISON 1996 VS. 1995
Net sales were $34,955,000 in the first half of 1996 as compared to
$37,270,000 in the first half of 1995, a decrease of $2,315,000 or 6.2%. Sales
of sporting goods decreased $3,737,000 or 13.2% and sales of office and graphic
arts products increased $1,422,000 or 16.0%.
The decrease in sporting goods was mainly due to decreased volume in the
dartboard cabinet product line. In the office and graphic arts products
segment, the increase in sales is due mainly to expanded distribution and new
products.
Cost of sales was $24,944,000 in the first half of 1996 as compared to
$29,818,000 in 1995, a decrease of $4,874,000 or 16.3%.
Cost of sales as a percentage of net sales was 71.4% in the first half of
1996 as compared to 80.0% in the first half of 1995. This decrease is due to
lower factory expenses mainly in depreciation, and warehousing costs, lower
labor costs and lower material costs.
Selling, general, and administrative expenses were $7,867,000 in the first
half of 1996 as compared to $7,621,000 in the first half of 1995, an increase of
$246,000 or 3.2%.
Selling, general, and administrative expenses as a percentage of net sales
were 22.5% in 1996 as compared to 20.4% in 1995. The increase in these expenses
as a percentage of net sales was mainly due to an increase in office and graphic
arts equipment sales which carry higher selling expenses.
Interest expense was $604,000 in the first half of 1996 as compared to
$1,250,000 in the first half of 1995, a decrease of $646,000 or 51.7%. The
decrease was due to lower average borrowing levels in the first half of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was $9,071,000 in
the first half of 1996 as compared to $12,854,000 in the first half of 1995.
Most of the cash provided by operating activities was from collection of the
year end accounts receivable. The net accounts receivable balance at the end of
the year in 1995 was $25,285,000 and at the end of the first half of 1996, the
net accounts receivable balance was $12,800,000. The Company's net cash used
for investing activities was $845,000 in the first half of 1996 as compared to
$660,000 in the first half of 1995. This increase of $185,000 was in the
purchase of property and equipment. The Company's net cash used by financing
activities was $9,086,000 in the first half of 1996 as compared to $12,838,000
in the first half of 1995. Most of the cash used by financing activities was
for the pay down of notes payable - bank. At the end of the year in 1995, the
notes payable - bank was $14,350,000 and at the end of the first half of 1996,
notes payable - bank was $6,825,000.
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.
Inventories at the end of the first half of 1996 were $23,250,000 as
compared to $27,141,000 in the first half of 1995,a decrease of $3,891,000.
PART II. OTHER INFORMATION
Item 1, 2, and 3. Not Required.
Item 4. Submission of Matters to a Vote of Securities Holders.
The annual meeting of the Registrant was held at Evansville, Indiana on April
26, 1996. Proxy materials had been circulated on March 22, 1996, proposing the
reelection of the seven members of the Board of Directors to a one year term and
the appointment of Geo. S. Olive & Co.LLC, to serve as independent auditors of
the Company for the year 1996.
The stockholders approved the reelection of Yale A. Blanc, Gerald J. Fox, Robert
E. Griffin, Blaine E. Matthews, Jr., Robert D. Orr, A. Graves Williams, Jr., and
Keith P. Williams to the Board of Directors and the appointment of Geo. S. Olive
& Co.LLC as the Company's independent auditors.
Item 5. Not Required.
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
six months ended July 13, 1996.
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: August 2, 1996 ROBERT E. GRIFFIN
-------------- ----------------------------
Robert E. Griffin
Chairman and Chief
Executive Officer
Date: August 2, 1996 JOHN R. WILSON
-------------- ----------------------------
John R. Wilson
Vice President and
Chief Financial Officer
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