<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 25, 1999
COMMISSION FILE NUMBER 0-6966
ESCALADE, INCORPORATED
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(Exact name of registrant as specified in its charter)
INDIANA 13-2739290
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(State of incorporation) (IRS EIN)
817 MAXWELL AVENUE, EVANSVILLE, INDIANA 47717
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(Address of principal executive office)
(812) 467-1200
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(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
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(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. X
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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Aggregate market value of voting stock held by nonaffiliates of the registrant
as of March 10, 2000: $33,103,314
The number of shares of Registrant's common stock (no par value) outstanding as
of March 10, 2000: 2,918,178
Documents Incorporated by Reference
Certain portions of the registrant's Proxy Statement relating to its annual
meeting of stockholders scheduled to be held on April 29, 2000 are incorporated
by reference into Part III of this Report.
Index to Exhibits is found on page 15.
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ESCALADE, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 7. A. Quantitative and Qualitative Disclosures About Market Risk 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial Owners and Management 14
Item 13. Certain Relationships and Related Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 15
</TABLE>
<PAGE> 3
PART I
ITEM 1--BUSINESS
GENERAL
Escalade, Incorporated (Escalade or Company) is a diversified company engaged in
the manufacture and sale of sporting goods products and office and graphic arts
products. Escalade and its predecessors have produced sporting goods products
for over 70 years and have produced office and graphic arts products for over 40
years.
Escalade is the successor to The Williams Manufacturing Company, an Ohio-based
manufacturer and retailer of women's and children's footwear formed in 1922.
Through a series of acquisitions commencing in the 1970's, the Company has
diversified its business. The Company currently manufactures sporting goods
products in Evansville, Indiana and Tijuana, Mexico and manufactures office and
graphic arts products in Wabash, Indiana, Los Angeles, California and Tijuana,
Mexico.
In 1972, the Company merged with Martin Yale Industries, Inc. (Martin Yale), an
Illinois manufacturer of office and graphic arts products and leisure time items
such as toys and hobby and craft items. In 1973, the Company acquired both
Indian Industries, Inc. (Indian), an Indiana manufacturer of archery equipment
and table tennis tables, and Harvard Table Tennis, Inc., a Massachusetts
manufacturer of table tennis accessories. Escalade discontinued the Williams
Manufacturing footwear operations in 1976 and sold Martin Yale's leisure time
product line to an unaffiliated party in 1979. In 1980, the Company purchased
Harvard Sports, Inc. (formerly Crown Recreation (West), Inc.), a California
manufacturer of table tennis tables and home pool tables. In 1983, the Company
closed Harvard Table Tennis, Inc. and consolidated it with Harvard Sports, Inc.
(Harvard).
Escalade has diversified within both the sporting goods products and office and
graphic arts products industries, principally through the introduction of new
product lines and acquisitions of related assets and businesses. Escalade
expanded its sporting goods business in 1982 with the introduction of basketball
backboards, goals and poles. In 1988, the Company acquired the business machine
division assets of Swingline, Inc., further expanding the range of products
offered within the office machine and equipment product lines. In 1989, the
Company started limited manufacturing in Tijuana, Mexico under a shelter program
known as "maquiladora". In 1990, the Company built a new manufacturing and
office facility in Wabash, Indiana and consolidated the manufacturing of office
and graphic arts products into the new facility. In 1992, the Company
established a European distribution office and warehouse based in the United
Kingdom under the name of Escalade International, Limited and then in 1999 the
Company sold 50% of the stock of Escalade International to an investment group
who assumed responsibility for running the day-to-day operations. In 1994, the
Company purchased certain assets of Data-Link Corporation which manufactured
products to apply postage and other stamps. In 1997, the Company purchased
Master Products Manufacturing Company, Inc. (Master Products), a manufacturer of
paper punches and catalog rack systems. In 1999, the Company acquired certain
assets of Mead Hatcher which manufactured keyboard drawers, computer storage,
copyholders, media retention systems and posting trays. Also, in 1999, the
Company purchased the assets of Zue Corporation which manufactured high quality
basketball systems.
Escalade's sporting goods products are produced by Indian and Harvard and are
sold through a single consolidated sales and marketing group, Escalade Sports.
Escalade's office and graphic arts products are produced by Martin Yale and
Master Products and are sold through a single consolidated sales and marketing
group, Martin Yale.
The following table presents the percentages contributed to Escalade's net sales
by each of its business segments:
FISCAL YEAR 1999 1998 1997
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Sporting goods 61% 67% 73%
Office and graphic arts products 39 33 27
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Total net sales 100% 100% 100%
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For additional segment information, see the notes to consolidated financial
statements.
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SPORTING GOODS
Escalade manufactures and sells a variety of sporting goods such as table tennis
tables and accessories, archery equipment, home pool tables and accessories,
combination bumper pool and card tables, game tables, basketball backboards,
goals, poles and portables, darts, and dart cabinets. Some of Escalade's
domestic sporting goods shipments are made from National City, California, which
primarily services the Company's U. S. Western marketing region, but most of
such shipments are made from Evansville, Indiana, which primarily serves the
rest of the United States. The majority of foreign shipments are made through
Escalade FSC Inc., a foreign sales corporation established by the Company in
1994.
Escalade produces and sells sporting goods under the Indian, Harvard, Xi, Ping
Pong, Stiga, Goalrilla and Goaliath brand names. Escalade also manufactures
various sporting goods under private label for Sears Roebuck & Co. (Sears) and
various other customers. Many of Escalade's products are sold to Sears,
Escalade's largest customer, which accounted for approximately 46% of Escalade's
sporting goods item net sales in 1999. One other customer accounted for more
than 10% of Escalade's sporting goods net sales in 1999 but not more than 10% of
consolidated sales.
Certain of the Company's sporting goods products are subject to the regulation
of the Consumer Product Safety Commission. The Company believes that it is in
compliance with such regulations.
In October 1997, the Company retained CIBC Oppenheimer Corp. (CIBC) to assist in
exploring potential opportunities to enhance stockholder value through
transactions involving the Company's sporting goods operations, including a
possible sale. No transaction was completed in 1998 and the Company has
abandoned plans to sell its sporting goods operations.
In December 1998, the Company adopted a plan to discontinue its distribution
operations. Those operations were performed by Escalade International, Limited a
foreign subsidiary located in the United Kingdom. The Company's other
subsidiaries are all manufacturing operations. On July 8, 1999, the Company
completed a transaction to sell 50% of the stock of Escalade International to an
investment group who assumed responsibility for running the day-to-day
operations. The sale was for $500,000 with $50,000 cash paid and notes
receivable of $450,000.
The estimated loss on the disposal of Escalade International, Limited was
$1,222,279 including a provision of $250,000 for operating losses during
phaseout. The actual loss on the sale was $1,118,892 which included $213,057 in
operating losses up to the time of sale. 1999 shows a profit of $103,387 which
was the amount by which the reserve for loss on this transaction exceeded actual
losses. Since only 50% was sold, the operations are not considered discontinued
and the financial statements have been revised to eliminate discontinued
operations. Going forward, the Company's ownership value in Escalade
International of $500,000 will be shown as an investment and will be accounted
for under the equity method.
In December 1999, the Company purchased the assets of Zue Corporation which
manufactured high quality basketball systems.
(2)
<PAGE> 5
OFFICE AND GRAPHIC ARTS PRODUCTS
Escalade's office and graphic arts products include paper trimmers, paper
folding machines, paper drills, collators, decollators, bursting machines,
letter openers, paper joggers, checksigners, stamp affixers, paper shredders,
paper punches, paper cutters, catalog rack systems, bindery carts, business card
slitters, thermography machines, keyboard drawers, computer storage,
copyholders, media retention systems, posting trays and related accessories.
Escalade's office and graphic arts products business is conducted through Martin
Yale and Master Products.
In 1986, the Company introduced a combination checksigner and bursting machine,
which automatically imprints facsimile signatures on payroll checks and then
separates each check for distribution. The Company also further diversified its
office equipment product lines by its August 1988 purchase of the business
machine division assets of Swingline, Inc. consisting primarily of a line of
forms handling equipment including decollators, bursters and checksigners and a
line of shredders and other products, by its 1994 purchase of certain assets of
Data-Link Corporation consisting primarily of products which apply postage and
other stamps, by its 1997 purchase of Master Products, a manufacturer of paper
punches and catalog rack systems, by its 1998 purchase of certain assets of
Steele Industries consisting primarily of its line of business card slitters and
thermography machines and by its 1999 purchase of certain assets of Mead Hatcher
consisting of keyboard drawers, computer storage, copyholders, media retention
systems and posting trays.
Escalade produces and sells office and graphic arts products under the Martin
Yale brand name, the Premier(R) trademark and the Master Products brand name.
The Company also manufactures various office and graphic arts products under
private label for original equipment manufacturers. Three customers individually
accounted for more than 10% of Escalade's office and graphic arts products sales
but not more than 10% of consolidated sales.
RELATIONSHIP WITH SEARS
The Company has supplied sporting goods to Sears for over 30 years beginning
with sales of archery equipment by Indian to Sears. Sears currently purchases
for resale a wide variety of Escalade's sporting goods. Sales to Sears accounted
for approximately 28% in 1999, 25% in 1998 and 24% in 1997 of Escalade's
consolidated sales. Even though the Company has no long-term contracts with
Sears, the Company believes that sales to Sears will continue and that relations
with Sears are good.
Escalade was awarded the coveted Sears "Partners in Progress Award" for 1999 and
has been recognized by Sears for its outstanding service in eleven of the last
14 years and in 21 of the last 27 years. Sears has awarded Escalade the Sears
"Partners in Progress Award" during those years based upon quality, service and
product innovation. Sears makes this award to less than 80 suppliers each year.
During this period, Sears had more than 10,000 suppliers. In 1987, Sears further
recognized the Company by awarding Escalade the Sears 1986 "Source of the Year
Award" in the recreation-automotive group.
(3)
<PAGE> 6
MARKETING AND PRODUCT DEVELOPMENT
Escalade has developed its existing product lines to adapt to changing
conditions. Escalade believes that it is prepared to react to changing market
and economic developments primarily by continuing the quality/price structure of
the Company's product lines and by conducting ongoing research and development
of new products. Escalade is committed to being customer focused.
For many of its sporting goods products, Escalade offers its customers a choice,
based on quality and price, of its line of "good, better and best" items. Such
products are priced in relation to their quality which enables the Company to
sell its goods through a variety of department stores, mass merchandisers,
wholesale clubs, catalog showrooms, discount houses, general sporting goods
stores, specialty sporting goods stores and hardware chains. As a result of such
quality/price structure, Escalade is able to meet the quality/price objectives
of the consumers served by such retail channels.
Escalade sells its office and graphic arts products through office machine
dealers, office supply houses and office product catalogs. Certain of Escalade's
office products, such as paper trimmers and paper folders, are marketed in a
quality/price range designed to accommodate customer needs. Lower cost items are
generally intended for light duty office applications, whereas higher cost items
are more rugged or more sophisticated, and are intended for use in heavy duty or
commercial applications.
Escalade conducts much of its marketing efforts through a network of independent
sales representatives in the office and graphic arts industries. Marketing
efforts in the sporting goods business are coordinated through a marketing
department as well as through a network of Company and independent sales
representatives.
The Company engaged in ongoing research and development activities for new
products in each of its business segments. Escalade spent approximately
$1,450,000 in 1999, $1,500,000 in 1998 and $1,400,000 in 1997 for research and
development activities.
COMPETITION
Escalade is subject to competition with various manufacturers of each product
line produced or sold by Escalade. The Company is not aware of any other single
company that is engaged in both the same industries as Escalade or that produces
the same range of products as Escalade within such industries. Nonetheless,
competition exists for many Escalade products within both the sporting goods and
office and graphic arts industries and some competitors are larger and have
substantially greater resources than the Company. Escalade believes that its
long-term success depends on its ability to strengthen its relationship with
existing customers, to attract new customers and to develop new products that
satisfy the quality and price requirements of sporting goods and office and
graphic arts customers.
(4)
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LICENSES, TRADEMARKS AND BRAND NAMES
Escalade Sports has an agreement and contract with Sweden Table Tennis AB for
the exclusive right and license to distribute and produce table tennis equipment
under the brand name STIGA for the United States and Canada.
Escalade is the owner of several registered trademarks and brand names. For its
sporting goods, the Company holds the Ping-Pong(R), Harvard(R) and Goaliath(R),
registered trademarks and utilizes the Indian, Indian Archery, Indian Xi and
Goalrilla brand names. The Company permits limited uses of the Ping-Pong(R)
trademark by other manufacturers pursuant to various licensing agreements. The
Company also owns the Premier(R) registered trademark for its office and graphic
arts products, in addition to manufacturing such products under the Martin Yale
and Master Products brand names.
SEASONALITY
The backlog of unshipped orders by industry segment is shown below at the
Company's 1999, 1998 and 1997 fiscal year end. All orders in backlog at year end
are generally shipped during the following year. The backlog includes all orders
received but not shipped. Escalade's sporting goods business is seasonal and,
therefore, the backlog is subject to fluctuations.
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YEARS ENDED DECEMBER 25, DECEMBER 26
AND DECEMBER 27 1999 1998 1997
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Orders received but not shipped
Sporting goods $1,912,800 $1,266,400 $4,375,600
Office and graphic arts products 632,000 438,000 570,100
</TABLE>
EMPLOYEES
The Company employs between 550 and 725 employees, consisting of between 200 and
325 people at Indian's Evansville, Indiana facilities, between 100 and 150 at
Harvard's National City, California and Tijuana, Mexico facilities,
approximately 125 employees at Martin Yale's Wabash, Indiana facilities and
approximately 125 at Master Products' Los Angeles, California and Tijuana,
Mexico facilities. All hourly rated employees at Evansville are represented by
the International Union of Electronic, Electrical, Salaried, Machine and
Furniture Workers AFL-CIO, whose contract expires April 30, 2000.
Escalade believes that its employee relations are satisfactory.
SOURCES OF SUPPLIES
Raw materials for Escalade's various product lines consist of wood, particle
board, slate, standard grades of steel, steel tubing, plastic vinyl, steel
cables, fiberglass and packaging. Escalade relies upon European suppliers for
its requirement of billiard balls and slate utilized in the production of home
pool tables and upon various Asian manufacturers for certain of its table tennis
needs and other items.
The Company believes that these sources will continue to provide adequate
supplies as needed. All other materials needed for the Company's various
operations are available in adequate quantities from a variety of domestic and
foreign sources.
(5)
<PAGE> 8
ITEM 2--PROPERTIES
The Company operates the following facilities:
LOCATION SIZE LEASED OR OWNED
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Evansville, Indiana (1) 346,000 sq. ft. Owned
National City, California (1) 34,039 sq. ft. Leased
Tijuana, Mexico (1) 50,000 sq. ft. Owned
Wabash, Indiana (2) 141,000 sq. ft. Owned
Los Angeles, California (2) 72,312 sq. ft. Owned
Tijuana, Mexico (2) 15,000 sq. ft. Leased
(1) Sporting goods facilities
(2) Office products facilities
The Company leases warehousing and office space at its National City, California
facilities and has a five-year option to extend the lease. The lease rate ranges
from $11,920 per month in year one to $13,025 per month in year five of the
extension period. The Company also shares in common area expenses not to exceed
8(cent) per sq. ft. per month. The lease expires March 31, 2003.
The Company's Wabash facilities are held subject to a mortgage financed by
Economic Development Revenue Bonds. The 141,000 square foot facility is a
pre-engineered metal building supported by structured steel and concrete block
consisting of 21,000 square feet warehousing, 6,000 square feet office and
114,000 square feet manufacturing.
The Company also leases warehousing space next to its Evansville facility for
$17,730 per month. The lease expires on October 31, 2000. The Company has three
two-year renewal options followed by two five-year renewal options.
The Company leases space in Tijuana, Mexico for its office products operations
for $62,646 per year. The lease expires on July 31, 2002.
The Company rents additional space in Tijuana, Mexico for its sporting goods
operations for $2,010 per month.
The Company believes that its facilities are in excellent condition and suitable
for their respective operations. The Evansville, Wabash and Tijuana sites also
contain several undeveloped acres which could be utilized for expansion.
The Company believes that all of its facilities are in compliance with
applicable environment regulations and is not subject to any proceeding by any
federal, state or local authorities regarding such matter. The Company provides
regular maintenance and service on its plants and machinery as required.
ITEM 3--LEGAL PROCEEDINGS
The Company is involved in litigation arising in the normal course of its
business. The Company does not believe that the disposition or ultimate
resolution of such claims or lawsuits will have a material adverse affect on the
business or financial condition of the Company.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
(6)
<PAGE> 9
PART II
ITEM 5--MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is traded under the symbol "ESCA" on the Nasdaq
National Market. The following table sets forth, for the calendar periods
indicated, the high and low sales prices of the Common Stock as reported by the
Nasdaq National Market:
PRICES HIGH LOW
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1999
First quarter ended March 20, 1999 $21.00 $17.00
Second quarter ended July 10, 1999 18.00 14.75
Third quarter ended October 2, 1999 18.38 15.63
Fourth quarter ended December 25, 1999 17.63 13.56
1998
First quarter ended March 21, 1998 $19.88 $14.00
Second quarter ended July 11, 1998 25.25 19.38
Third quarter ended October 3, 1998 25.50 18.50
Fourth quarter ended December 26, 1998 22.13 16.00
The closing market price on March 10, 2000 was $17.13 per share.
On February 24, 2000, the Company announced an offer to purchase up to 700,000
shares of its common stock at a price of $14.50 to $18 per share through a Dutch
Auction tender offer. The offer will expire on Friday, March 24, 2000 unless
extended.
In the fourth quarter of 1998, on December 21, 1998, the Company announced that
Escalade's Board of Directors declared a special cash dividend of $1.00 per
share to shareholders of record January 8, 1999. The dividend was declared at
Escalade's Regular Board Meeting, December 19, 1998. The dividend was paid on
January 22, 1999.
In the fourth quarter of 1997, the Company announced its offer to purchase up to
1,000,000 shares of its common stock at a price of $11 to $14 per share.
Pursuant to such offer, the Company purchased 117,766 shares of its common stock
at $14 per share in December 1997.
There were approximately 315 holders of record of the Company's Common Stock at
March 10, 2000. The approximate number of stockholders, including those held by
depository companies for certain beneficial owners, was 750.
(7)
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ITEM 6--SELECTED FINANCIAL DATA (In thousands, except per share data)
DECEMBER 25, December 26, December 27, December 28, December 30,
AT AND FOR YEARS ENDED 1999 1998 1997 1996 1995
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INCOME STATEMENT DATA
Net sales
Sporting goods $52,767 $63,072 $66,666 $74,077 $73,858
Office and graphic
arts products 33,407 30,486 24,836 19,132 17,321
Total net sales 86,174 93,558 91,502 93,209 91,179
Net income 6,100 6,136 6,361 5,247 448
Weighted average shares 3,038 3,095 3,110 3,850 4,134
PER SHARE DATA
Basic earnings per share $2.01 $1.98 $2.05 $1.36 $.11
Cash dividends 0 1.00 0 0 0
BALANCE SHEET DATA
Working capital 14,899 15,763 15,478 13,309 17,069
Total assets 66,850 63,489 66,145 54,430 57,767
Short-term bank debt 11,570 10,100 14,075 13,675 16,732
Long-term bank debt 10,700 6,400 10,700 5,500 6,266
Total stockholders' equity 29,438 26,702 23,501 19,305 23,338
</TABLE>
(8)
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ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1999 COMPARED TO 1998
In 1999, net sales decreased 7.9%, or $7,384,000 to $86,174,000 from $93,558,000
in 1998.
Sporting goods net sales decreased by $10,305,000, or 16.3% from $63,072,000 to
$52,767,000. 72% of this decrease was mainly in game parlor which includes table
tennis, pool and game tables and accessories and was due to a decrease in units
sold. 28% was due to the disposal of Escalade International, Limited.
Office and graphic arts machines and equipment net sales increased by
$2,921,000, or 9.6% to $33,407,000 from $30,486,000. Most of this increase was
due to the Mead Hatcher acquisition on June 21, 1999.
Cost of sales of $60,038,000 as a percentage of net sales was 69.7% in 1999 as
compared to $62,626,000, or 66.9% in 1998. This increase in cost of sales was in
sporting goods and was mainly due to lower sales volume reducing factory expense
absorption and some product labeling and warranty issues.
Selling, administrative and general expenses in 1999 were $15,524,000, or 18% of
net sales as compared to $17,041,000, or 18.2% in 1998. Decreases in selling,
general and administrative expenses in the sporting goods segment were offset by
increases in the office and graphic arts machines and equipment segment. These
increases were due to Y2K expenses and catalog allowances.
Interest expense in 1999 was $616,000 as compared to $1,118,000 in 1998, a
decrease of $502,000, or 55.1%. This decrease in interest expense was due to
lower borrowing levels in 1999.
The income tax provision for 1999 was $3,542,525 for an effective rate of 36.7%.
Net income for the year was $6,100,000 as compared to $6,136,000 in 1998. Lower
operating profit in 1999 was offset by lower interest expense, no loss on
terminated sporting goods sale and a small gain as opposed to a loss on disposal
of Escalade International as compared to 1998. Consequently, the net income
levels are similar in both years.
(9)
<PAGE> 12
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1998 COMPARED TO 1997
In 1998, net sales increased 2.2%, or $2,056,000 to $93,558,000 from $91,502,000
in 1997.
Sporting goods net sales decreased by $3,594,000, or 5.4% from $66,666,000 to
$63,072,000. This decrease was mainly in game parlor which includes table
tennis, pool and game tables and accessories and was due to a decrease in units
sold.
Office and graphic arts machines and equipment net sales increased by
$5,650,000, or 22.7%, to $30,486,000 from $24,836,000. Most of this increase was
due to the acquisition of Master Products.
Cost of sales of $62,626,000 as a percentage of net sales was 66.9% in 1998 as
compared to $61,717,000, or 67.4% in 1997.
Selling, administrative and general expenses in 1998 were $17,041,000, or 18.2%,
of net sales as compared to $17,398,000, or 19% in 1997. This decrease as a
percentage of net sales was mainly in the office and graphic arts machines and
equipment segment. Consolidation of some sales, marketing and administrative
functions was the reason for the decrease in these expenses as a percentage of
net sales.
Interest expense in 1998 was $1,118,000 as compared to $1,277,000 in 1997, a
decrease of $159,000, or 12.5%. This decrease in interest expense was due to
slightly lower borrowing levels in 1998.
The Company incurred expenses totaling $427,000 relating to the potential sale
of Escalade Sports. The Company terminated its plans to sell Escalade Sports.
The income tax provision for 1998 was $4,791,000 for an effective rate of 43.8%.
In December 1998, the Company adopted a plan to discontinue its distribution
operations. Those operations were performed by Escalade International, Limited,
a foreign subsidiary located in the United Kingdom. The Company's other
subsidiaries are all manufacturing operations. On July 8, 1999, the Company
completed a transaction to sell 50% of the stock of Escalade International to an
investment group who assumed responsibility for running the day-to-day
operations. The sale was for $500,000 with $50,000 cash paid and notes
receivable of $450,000. The estimated loss on the disposal of Escalade
International, Limited was $1,222,279 including a provision of $250,000 for
operating losses during phaseout.
Net income for the year was $6,136,000 as compared to $6,361,000 in 1997. This
decrease in net income was primarily due to the loss on disposal of Escalade
International, Limited of $1,222,279.
(10)
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
The Company's net cash provided by operating activities was $14,871,899,
$8,605,601 and $8,784,231 in 1999, 1998 and 1997. Inventory management provided
(used) cash of $1,655,781, $(10,009) and $272,909 in 1999, 1998 and 1997.
Accounts receivable provided (used) cash of $5,971,315, $(561,035) and
$(2,113,236) in 1999, 1998 and 1997.
INVESTING ACTIVITIES
The Company's net cash used by investing activities was $12,780,536, $1,429,596
and $10,651,115 in 1999, 1998 and 1997. The Company used $1,104,897, $1,067,546
and $1,597,055 in 1999, 1998 and 1997 to purchase property and equipment. In
1997, the Company used $8,958,745 for the purchase of certain assets of Master
Products, net of cash acquired. In 1999, the Company used $7,969,672 to purchase
certain assets of Zue Corporation and $3,481,170 to purchase certain assets of
Mead Hatcher.
FINANCING ACTIVITIES
Net cash provided (used) by financing activities in 1999, 1998 and 1997 was
$(675,720), $(8,082,003) and $1,793,961. In 1998, the Company paid $7,800,000 on
long-term debt. At year end, the short-term debt had decreased $475,000 from
1997. In 1999, the Company paid $6,000,000 on long-term debt and borrowed
$10,000,000 additional long-term debt for acquisitions.
The Company's working capital requirements are funded by cash flow from
operations and a domestic short-term line of credit. The maximum amount that
could be drawn under its domestic line of credit at year end was $15,000,000, of
which $9,569,672 was used. The domestic line of credit was paid down to zero as
of January 25, 2000.
The Company declared no cash dividends during 1997 and 1999. On December 21,
1998, the Company announced that Escalade's Board of Directors declared a
special cash dividend of $1.00 per share to shareholders of record January 8,
1999. The dividend was declared at Escalade's Regular Board Meeting, December
19, 1998 and was paid on January 22, 1999.
EFFECT OF INFLATION
The Company cannot accurately determine the precise effects of inflation;
however, there were some increases in sales and costs due to inflation in 1999.
The Company attempts to pass on increased costs and expenses through price
increases when necessary. The Company is working on reducing expense levels,
improving manufacturing technologies and redesigning products to keep these
costs under control.
YEAR 2000 COMPLIANCE
The Company's sporting goods division, Escalade Sports, has completed the
conversion and testing of its critical business systems to determine whether
such systems will be able to properly process data for the year 2000. Escalade
Sports employees first reviewed the underlying software codes for year 2000
compatibility, and then converted the codes where necessary to allow years to be
read using four digits rather than two digits. Escalade Sports employees then
tested the converted code to determine whether the affected business system
would operate without interruption when data using the year 2000 was input.
Based on these processes, the Company believes that Escalade Sports' internal
software systems are currently year 2000 compliant and have so notified the
customers of Escalade Sports where appropriate.
(11)
<PAGE> 14
Escalade Sports has also completed the conversion and testing of its business
and manufacturing equipment to prepare for the year 2000. Escalade Sports has
requested year 2000 compliance assurances from its customers, vendors and other
third parties such as utility companies.
Martin Yale completed the conversion and testing phase of its critical business
systems for year 2000 compatibility in the third quarter of 1999. Outside third
parties worked with Martin Yale employees in preparing for the year 2000. Martin
Yale requested year 2000 compliance assurances from its customers, vendors and
other third parties, such as utility companies.
As of the end of its fourth quarter of 1999, the Company had incurred
approximately $525,000 in connection with preparing for the year 2000. The
Company estimates that its actual expenditures in this area were 80%
attributable to internal costs and external fees for conversion of systems. The
remaining 20% of year 2000 expenses were attributable to new software and
equipment. The Company funded these expenses from working capital. To the extent
that the Company utilized internal resources to remedy potential year 2000
problems, the Company has foregone evaluating and upgrading its systems that it
otherwise would have undertaken in the ordinary course of business.
The Company believes that its operations, including those of Escalade Sports and
Martin Yale, timely met all requirements necessary to be year 2000 compliant. At
this time, the Company believes it is year 2000 compliant, has not experienced
any material year 2000 problems and does not expect it will be material
adversely affected by year 2000 issues.
(12)
<PAGE> 15
ITEM 7. A.--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Item 8 are set forth
in Part IV, Item 14.
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
(13)
<PAGE> 16
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this item with respect to Directors and Executive
Officers is contained in the registrant's Proxy Statement relating to its annual
meeting of stockholders scheduled to be held on April 29, 2000 under the
captions "Certain Beneficial Owners" and "Election of Directors" and is
incorporated herein by reference.
ITEM 11--EXECUTIVE COMPENSATION
Information required under this item is contained in the registrant's Proxy
Statement relating to its annual meeting of stockholders scheduled to be held on
April 29, 2000 under the caption "Executive Compensation" and is incorporated
herein by reference, except that the information required by Items 402(k) and
(l) of Regulation S-K which appear within such caption under the sub-headings
"Compensation and Stock Option Committees" and "Financial Performance" are
specifically not incorporated by reference into this Form 10-K or into any other
filing by the registrant under the Securities Act of 1933 or the Securities
Exchange Act of 1934.
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this item is contained in the Registrant's Proxy
Statement relating to its annual meeting of stockholders scheduled to be held on
April 29, 2000 under the caption "Certain Beneficial Owners" and is incorporated
herein by reference.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
(14)
<PAGE> 17
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) Documents filed as a part of this report:
(1) FINANCIAL STATEMENTS
Independent Auditor's Report
Consolidated financial statements of Escalade, Incorporated and
subsidiaries:
Consolidated balance sheet--December 25, 1999
and December 26, 1998
Consolidated statement of income--fiscal years ended
December 25, 1999, December 26, 1998 and
December 27, 1997
Consolidated statement of stockholders' equity--fiscal
years ended December 25 1999, December 26, 1998 and
December 27, 1997
Consolidated statement of cash flows--fiscal years ended
December 25, 1999, December 26, 1998 and December 27,
1997
Notes to consolidated financial statements
(2) FINANCIAL STATEMENT SCHEDULES
Independent Auditor's Report on financial statement schedule
For the three-year period ended December 25, 1999:
Schedule II--Valuation and qualifying accounts
All other schedules are omitted because of the absence of
conditions under which they are required or because the required
information is given in the consolidated financial statements or
notes thereto.
(3) EXHIBITS
3.1 Articles of incorporation of Escalade, Incorporated (a)
3.2 By-Laws of Escalade, Incorporated (a)
4.1 Form of Escalade, Incorporated's common stock
certificate (a)
10.3 Licensing agreement between Sweden Table Tennis AB and
Indian Industries, Inc. dated January 1, 1995 (d)
10.8 Federal trademark registration 283,766 for
Ping-Pong(R)bats and rackets (a)
10.9 Federal trademark registration 283,767 for
Ping-Pong(R)balls (a)
10.10 Federal trademark registration 294,408 for Ping-Pong(R)
tables and parts (a)
10.11 Federal trademark registration 520,270 for Ping-Pong(R)
game (a)
10.12 Federal trademark registration 1,003,289 for Mr. Table
Tennis(R) table tennis equipment (a)
10.13 Federal trademark registration 1,187,832 for
Harvard(R)table tennis equipment (a)
10.14 Federal trademark registration 1,442,274 for Mini
Court(R)(a)
10.15 Federal trademark registration 1,292,167 for
Premier(R)table tennis tables and accessories (a)
10.16 Federal trademark registration 1,456,647 for Mini
Pool(R)(a)
(15)
<PAGE> 18
(3) EXHIBITS (continued)
10.17 Trademark Assignment--Federal trademark registration
1,348,890 for Sandmar(R)office machines (b)
10.18 Agreement dated April 28, 1997 between Indian
Industries, Inc. and International Union of Electronic,
Electrical, Salaried, Machine and Furniture Workers,
AFL-CIO Local No. 848 (e)
10.21 Amendments to credit agreement dated May 31, 1996
between Escalade, Incorporated and Bank One,
Indianapolis, National Association dated December 8,
1999 and February 17, 2000
10.32 Loan agreement dated September 1, 1998 between Martin
Yale Industries, Inc. and City of Wabash, Indiana (g)
10.33 Trust Indenture between the City of Wabash, Indiana and
Bank One Trust Company, NA as Trustee dated September 1,
1998 relating to the Adjustable Rate Economic
Development Revenue Refunding Bonds, Series 1998 (Martin
Yale Industries, Inc. Project) (g)
10.34 Real Estate Sales Contract dated September 17, 1990
between Martin Yale Industries, Inc. and Fritkin-Jones
Design Group, Inc. (c)
10.36 Stock purchase agreement dated June 17, 1997 between
Martin Yale Industries, Inc. and James Crean
International, G.V. regarding the purchase of Master
Products Manufacturing Company, Inc. (e)
10.37 Asset Purchase Agreement dated June 26, 1998 by and
among Jen Sports, Inc., Sportcraft, Ltd. and Escalade,
Incorporated to sell substantially all of the assets of
Escalade Sports. (h)
10.38 Termination Agreement dated November 25, 1998 by and
among Jen Sports, Inc., Sportcraft, Ltd. and Escalade,
Incorporated to sell substantially all of the assets of
Escalade Sports. (i)
10.39 Offer to Purchase Common Stock--Tender Offer Statement
dated February 24, 2000 (j)
21 Subsidiaries of the Registrant
23 Consent of Olive LLP
27 Financial Data Schedule
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.24 The Harvard Sports/Indian Industries, Inc. 401(k) Plan
as amended and merged in 1993 (d)
10.26 Martin Yale Industries, Inc. 401(k) Retirement Plan as
amended in 1993 (d)
10.27 Incentive Compensation Plan for Escalade, Incorporated
and its subsidiaries (a)
10.29 Example of contributory deferred compensation agreement
between Escalade, Incorporated and certain management
employees allowing for deferral of compensation (a)
10.30 1997 Director Stock Compensation and Option Plan (f)
10.31 1997 Incentive Stock Option Plan (f)
(16)
<PAGE> 19
(a) Incorporated by reference from the Company's Form S-2
Registration Statement, File No. 33-16279, as declared effective
by the Securities and Exchange Commission on September 2, 1987
(b) Incorporated by reference from the Company's 1988 Annual Report
on Form 10-K
(c) Incorporated by reference from the Company's 1990 Annual Report
on Form 10-K
(d) Incorporated by reference from the Company's 1995 Annual Report
on Form 10-K
(e) Incorporated by reference from the Company's 1997 Second Quarter
Report on Form 10-Q
(f) Incorporated by reference from the Company's 1997 Proxy Statement
(g) Incorporated by reference from the Company's 1998 Third Quarter
Report on Form 10-Q
(h) Incorporated by reference from the Company's 1998 Form 8-K filed
July 8, 1998
(i) Incorporated by reference from the Company's 1998 Amended Form
8-K filed December 1, 1998
(j) Incorporated by reference from the Company's Schedule TO Tender
Offer Statement filed February 24, 2000
(B) Reports on Form 8-K--There was a report on Form 8-K filed on December
22, 1999 reporting that on December 8, 1999 Escalade's wholly owned
subsidiary, Indian Industries, Inc. acquired substantially all of the
assets of Zue Corporation for cash. Zue was a manufacturer of high
quality basketball systems.
(17)
<PAGE> 20
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Escalade, Incorporated
Evansville, Indiana
We have audited the accompanying consolidated balance sheet of Escalade,
Incorporated and subsidiaries as of December 25, 1999 and December 26, 1998 and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 25, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Escalade, Incorporated and subsidiaries at December 25, 1999 and December 26,
1998 and the results of their operations and their cash flows for each of the
three years in the period ended December 25, 1999 in conformity with generally
accepted accounting principles.
OLIVE LLP
Evansville, Indiana
February 3, 2000
(F-1)
<PAGE> 21
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 25 AND DECEMBER 26 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,756,041 $ 340,398
Receivables, less allowances of $761,363
and $581,830 24,772,584 30,791,608
Inventories 12,432,354 12,647,354
Prepaid expenses 126,305 129,735
Deferred income tax benefit 1,248,270 1,002,064
---------------------------
Total current assets 40,335,554 44,911,159
Property, plant and equipment 9,390,022 10,103,690
Other assets 5,395,678 2,844,111
Goodwill, net of accumulated amortization
of $1,084,630 and $615,509 11,728,707 5,630,066
---------------------------
$66,849,961 $63,489,026
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable--bank $ 9,569,672 $ 7,800,000
Current portion of long-term debt 2,000,000 2,300,000
Trade accounts payable 2,967,276 2,959,282
Accrued liabilities 9,590,171 11,642,828
Federal income tax payable 1,309,493 1,324,416
Dividends payable 3,121,718
---------------------------
Total current liabilities 25,436,612 29,148,244
---------------------------
Other liabilities
Long-term debt 10,700,000 6,400,000
Deferred compensation 1,275,345 1,165,969
Deferred income tax liability 72,647
---------------------------
11,975,345 7,638,616
---------------------------
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--2,918,178 and
3,097,357 shares 2,918,178 6,072,824
Retained earnings 26,318,825 20,387,917
Accumulated other comprehensive income 201,001 241,425
---------------------------
29,438,004 26,702,166
---------------------------
$66,849,961 $63,489,026
===========================
See notes to consolidated financial statements.
</TABLE>
(F-2)
<PAGE> 22
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 25, DECEMBER 26
AND DECEMBER 27 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $86,174,390 $93,557,971 $91,501,865
------------------------------------------------------------
Costs, Expenses and Other Income
Cost of products sold 60,037,740 62,626,061 61,716,502
Selling, administrative and general expenses 15,524,377 17,041,492 17,397,633
Loss on terminated sporting goods sale 427,315
Amortization of goodwill 469,121 398,286 217,223
Interest 615,564 1,117,851 1,276,883
Loss on disposal of assets 64,287 207,687 319,066
Other income (75,773) (410,252) (475,580)
(Gain) loss on disposal of Escalade International (103,387) 1,222,279
------------------------------------------------------------
76,531,929 82,630,719 80,451,727
------------------------------------------------------------
Income Before Income Taxes 9,642,461 10,927,252 11,050,138
Provision for Income Taxes 3,542,525 4,791,463 4,689,487
------------------------------------------------------------
NET INCOME $ 6,099,936 $ 6,135,789 $ 6,360,651
============================================================
Per Share Data
Basic earnings per share $2.01 $1.98 $2.05
============================================================
Diluted earnings per share $2.00 $1.97 $2.02
============================================================
See notes to consolidated financial statements.
</TABLE>
(F-3)
<PAGE> 23
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK ACCUMULATED
-------------------------- OTHER
COMPREHENSIVE RETAINED COMPREHENSIVE
SHARES AMOUNT INCOME EARNINGS INCOME TOTAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1997 3,084,449 $8,291,516 $11,013,195 $19,304,711
Comprehensive income
Net income $6,360,651 6,360,651 6,360,651
Unrealized gains on securities,
net of tax 246,992 $246,992 246,992
-------------------
Comprehensive income $6,607,643
===================
Exercise of stock options 84,808 433,808 433,808
Purchase of stock (118,566) (1,656,368) (1,656,368)
Put option to retire warrants (1,189,129) (1,189,129)
-------------------------- ---------------------------------------------
BALANCES AT DECEMBER 27, 1997 3,050,691 5,879,827 17,373,846 246,992 23,500,665
Comprehensive income
Net income $6,135,789 6,135,789 6,135,789
Unrealized losses on
securities,
net of tax (5,567) (5,567) (5,567)
-------------------
Comprehensive income $6,130,222
===================
Stock issued under the Director
Stock Option Plan 6,638 65,550 65,550
Exercise of stock options 51,279 341,216 341,216
Purchase of stock (11,251) (213,769) (213,769)
Payment of dividend (3,121,718) (3,121,718)
-------------------------- ---------------------------------------------
BALANCES AT DECEMBER 26, 1998 3,097,357 6,072,824 20,387,917 241,425 26,702,166
Comprehensive income
Net income $6,099,936 6,099,936 6,099,936
Unrealized losses on
securities,
net of tax (40,424) (40,424) (40,424)
-------------------
Comprehensive income $6,059,512
===================
Exercise of stock options 25,768 189,958 189,958
Stock issued under the Director
Stock Option Plan 4,256 89,376 89,376
Purchase of stock (209,203) (3,433,980) (169,028) (3,603,008)
-------------------------- ---------------------------------------------
BALANCES AT DECEMBER 25, 1999 2,918,178 $2,918,178 $26,318,825 $201,001 $29,438,004
========================== =============================================
See notes to consolidated financial statements.
</TABLE>
(F-4)
<PAGE> 24
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 25, DECEMBER 26 AND DECEMBER 27 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,099,936 $6,135,789 $ 6,360,651
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 2,757,986 2,796,004 2,381,201
Provision for doubtful accounts 577,150 371,672 474,050
Deferred income taxes (591,379) (153,633) 1,303,683
Provision for deferred compensation 109,376 99,996 98,183
Loss on disposals of assets 64,287 207,687 319,066
Change in cash surrender value, net of loans and premiums (36,186) 30,510 (36,000)
Changes in
Accounts receivable 5,971,315 (561,035) (2,113,236)
Inventories 1,655,781 (10,009) 272,909
Prepaids 3,430 106,765 96,969
Other assets (377,312) 33,362 (89,397)
Income tax payable (14,923) (225,584) 450,928
Accounts payable and accrued expenses (1,347,562) (225,923) (734,776)
-----------------------------------------------------
Net cash provided by operating activities 14,871,899 8,605,601 8,784,231
-----------------------------------------------------
INVESTING ACTIVITIES
Premiums paid for life insurance (150,000) (297,000)
Purchase of property and equipment (1,104,897) (1,067,596) (1,597,055)
Purchase of long-term investments (74,797) (65,000) (95,315)
Purchase of certain Master Products assets,
net of cash acquired (8,958,745)
Purchase of certain Zue Corporation assets (7,969,672)
Purchase of certain Mead Hatcher assets (3,481,170)
-----------------------------------------------------
Net cash used by investing activities (12,780,536) (1,429,596) (10,651,115)
-----------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in notes payable--bank 1,769,672 (475,000) 3,120,650
Proceeds from exercise of stock options 279,334 406,766 433,808
Reduction of long-term debt (6,000,000) (7,800,000) (10,300,000)
Purchase of stock and warrants (3,603,008) (213,769) (2,845,497)
Proceeds from long-term debt 10,000,000 11,500,000
Deferred compensation paid (115,000)
Cash dividends paid (3,121,718)
-----------------------------------------------------
Net cash provided (used) by financing activities (675,720) (8,082,003) 1,793,961
-----------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,415,643 (905,998) (72,923)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 340,398 1,246,396 1,319,319
-----------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,756,041 $ 340,398 $ 1,246,396
=====================================================
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest paid $ 627,904 $1,120,229 $ 1,302,577
Income taxes paid, net 4,256,320 4,775,283 3,819,632
Fixed assets in accounts payable 31,954 35,253
See notes to consolidated financial statements.
</TABLE>
(F-5)
<PAGE> 25
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Escalade, Incorporated (Company) is primarily engaged in the manufacture and
sale of sporting goods and office and graphic arts products. The Company is
located in Evansville, Indiana and has five manufacturing facilities, one in
Evansville, Indiana; Wabash, Indiana and Los Angeles, California and two in
Tijuana, Mexico. The Company sells products to customers throughout the United
States and provides foreign shipments of sporting goods through a foreign sales
corporation. The consolidated financial statements include the accounts of all
significant subsidiaries. Intercompany transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of bank deposits in federally insured
accounts. For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments; if any, purchased with an original maturity of
three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is based on the
first-in, first-out method.
INVESTMENTS
The Company has long-term marketable equity securities, which are included in
other assets on the consolidated balance sheet and are recorded at fair value
with unrealized gains and losses reported, net of tax, in accumulated other
comprehensive income.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation and
amortization are computed by the straight-line and double declining balance
methods.
The estimated useful lives used in computing depreciation are as follows:
YEARS
- ------------------------------------------------
Buildings 20-30
Leasehold improvements 4-8
Machinery and equipment 5-15
Tooling, dies and molds 2-4
The cost of maintenance and repairs are charged to income as incurred;
significant renewals and improvements are capitalized. When assets are retired
or otherwise disposed of, the costs and related accumulated depreciation are
removed from the accounts, and the resulting gains or losses are recognized in
income for the period.
(F-6)
<PAGE> 26
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
FINANCIAL INSTRUMENTS
The carrying values of all of the Company's financial instruments approximate
their fair values.
EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted average common
shares outstanding during each year.
FISCAL YEAR END
The Company's fiscal year ends on the Saturday nearest December 31, within the
calendar year.
BAD DEBTS
The Company uses the reserve method of accounting for bad debts on receivables.
PRODUCT WARRANTY
The Company provides for the estimated cost of its warranty obligations at the
time of the sale.
EMPLOYEE BENEFITS
The Company has an employee profit sharing salary reduction plan, pursuant to
the provisions of Section 401(k) of the Internal Revenue Code, for non-union
employees. It is the Company's policy to fund costs accrued on a current basis.
INCOME TAXES
Income tax in the consolidated statement of income includes deferred income tax
provisions or benefits for all significant temporary differences in recognizing
income and expenses for financial reporting and income tax purposes.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to income as incurred. The research
and development costs incurred during 1999, 1998 and 1997 were approximately
$1,450,000, $1,500,000 and $1,400,000.
INTANGIBLE ASSETS
The Company has various intangible assets including consulting and
noncompetition agreements and goodwill. Amortization is computed using the
straight-line method over the following lives:
YEARS
- ----------------------------------------------------------
Consulting agreements 1
Non-compete agreements 5
Goodwill 15
REVENUE RECOGNITION
Revenue from the sale of the Company's products is recognized as products are
shipped to customers.
SELF INSURANCE
The Company has elected to act as a self-insurer for certain costs related to
employee health and accident benefit programs. Costs resulting from non-insured
losses are charged to income when incurred. The Company has purchased insurance
which limits its exposure for individual claims and which limits its aggregate
exposure to $1,100,000.
(F-7)
<PAGE> 27
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 2 -- INVENTORIES
Inventories consist of the following:
DECEMBER 25 AND DECEMBER 26 1999 1998
- -------------------------------------------------------------------------------
Finished products $ 5,184,896 $ 5,717,096
Work in process 3,183,855 3,442,410
Raw materials and supplies 4,063,603 3,487,848
-------------------------------------
$ 12,432,354 $ 12,647,354
=====================================
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
DECEMBER 25 AND DECEMBER 26 1999 1998
- -------------------------------------------------------------------------------
Land $ 712,705 $ 757,210
Buildings and leasehold improvements 10,387,479 10,733,231
Machinery and equipment 22,416,055 23,952,194
----------------------------------
Total cost 33,516,239 35,442,635
Accumulated depreciation and amortization (24,126,217) (25,338,945)
-------------------------------------
$ 9,390,022 $ 10,103,690
=====================================
NOTE 4 -- LINE OF CREDIT
The Company has an unsecured line of credit for short-term borrowings. The
line-of-credit arrangement is based upon a written agreement and can be
withdrawn at the banks' option. At December 25, 1999, the line of credit for
short-term borrowings aggregated $15,000,000, of which $9,569,672 was borrowed.
The interest rate on the line of credit is at the Bank One Indianapolis, N.A.
prime rate. A LIBOR option is also available to use for the interest rate. At
December 31, 1999, $9,569,672 of this line of credit was at a LIBOR option rate
of 7.48% This line of credit is subject to the same restrictive covenants as the
long-term debt as discussed in Note 5.
(F-8)
<PAGE> 28
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 5 -- LONG-TERM DEBT
DECEMBER 25 AND DECEMBER 26 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage payable (Wabash, Indiana Adjustable Rate Economic Development Revenue
Refunding Bonds), annual installments are optional, interest varies with
short-term rates and is adjustable weekly based on market conditions, maximum
rate is 10.00%, current rate is 4.85%, due September 2028, secured by
plant facility, machinery and equipment, and letter of credit $ 2,700,000 $2,700,000
Term loan, due in quarterly installments of $500,000, interest
varies from prime to London Interbank Offered Rate (LIBOR) plus 1.75%,
secured by equipment, inventory, accounts
receivable, general intangibles and securities. Paid in 1999 6,000,000
Term loan, due in annual installments of $2,000,000 on
March 31, interest varies from prime to London Interbank
Offered Rate (LIBOR) plus 1.25%, unsecured 10,000,000
--------------------------------------------
12,700,000 8,700,000
Portion classified as current (2,000,000) (2,300,000)
--------------------------------------------
$10,700,000 $6,400,000
============================================
</TABLE>
Maturities of long-term indebtedness for the ensuing five years are: 2000,
$2,000,000; 2001, $2,000,000; 2002, $2,000,000; 2003, $2,000,000; 2004,
$2,000,000 and thereafter, $2,700,000.
The mortgages payable and term loan agreements contain certain restrictive
covenants, of which the more significant include maintenance of specified net
worth and maintenance of specified ranges of debt service and leverage ratios.
<TABLE>
<CAPTION>
NOTE 6 -- INVESTMENTS
GROSS APPROXIMATE
AMORTIZED UNREALIZED MARKET
COST GAINS VALUE
-----------------------------------------------------
<S> <C> <C> <C>
DECEMBER 25, 1999
Available for sale
Marketable equity securities (included in
other assets) $912,013 $335,001 $1,247,014
=====================================================
DECEMBER 26, 1998
Available for sale
Marketable equity securities (included in
other assets) $755,486 $402,375 $1,157,861
=====================================================
</TABLE>
(F-9)
<PAGE> 29
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 7 -- STOCK OPTIONS AND WARRANTS
There were no options outstanding at year end from the 1984 Stock Option Plan
(Plan). The date for granting options under this Plan expired on October 26,1994
and the date for exercising options expired on September 26, 1999. At the
Company's 1997 annual meeting, the stockholders approved two new Stock Option
Plans reserving 300,000 common shares for issuance under an Incentive Stock
Option Plan (ISO) and 100,000 common shares for issuance under a Director Stock
Option Plan (DSO). During 1999, there were 37,000 options granted under the ISO
and there were 74,786 options outstanding at year end under this plan. During
1999, there were 2,128 options granted and 5,447 options outstanding at year end
under the DSO.
Under the Company's ISO, which is accounted for in accordance with Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations, the Company grants selected executives and other
key employees stock option awards which vest over four years of continued
employment. The exercise price of each option, which has a five-year life, was
equal to the market price of the Company's stock on the date of grant;
therefore, no compensation expense was recognized. Options are exercisable
commencing one year from the date of issuance to the extent vested.
Although the Company has elected to follow APB Opinion No. 25, Statement of
Financial Accounting Standards (SFAS) No. 123 requires pro forma disclosures of
net income and earnings per share as if the Company had accounted for its
employee stock options under that statement. The fair value of each option grant
was estimated on the grant date using an option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rates 5.00% 4.75% 6.00%
Dividend yields 0% 0% 0%
Volatility factors of expected market price of common stock 36% 51% 49%
Weighted average expected life of the options 5 YEARS 5 years 5 years
</TABLE>
Under SFAS No. 123, compensation cost is recognized in the amount of the
estimated fair value of the options and amortized to expense over the options'
vesting period. The pro forma effect on net income and earnings per share of
this statement is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C> <C>
Net income As reported $6,099,936 $6,135,789 $6,360,651
Pro forma 5,982,255 6,076,755 6,363,257
Basic earnings per share As reported $2.01 $1.98 $2.05
Pro forma 1.97 1.96 2.04
Diluted earnings per share As reported $2.00 $1.97 $2.02
Pro forma 1.97 1.95 2.02
</TABLE>
(F-10)
<PAGE> 30
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Stock option transactions are summarized as follows:
1999 1998 1997
-------------------------------------------------------------------------------------------
OPTION Option Option
SHARES PRICE Shares Price Shares Price
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning $5.50 TO $6.30 to $3.26 to
of year 70,450 18.75 101,821 9.88 168,311 7.25
$17.69 TO $9.88 to
Issued during year 39,128 21.00 22,569 18.75 25,000 $9.88
Canceled or expired (3,577) (2,661) (6,682)
$5.50 TO $3.26 to $3.26 to
Exercised during year (25,768) 9.88 (51,279) 9.88 (84,808) 7.25
-------------------------------------------------------------------------------------------
$9.88 TO $5.50 to $6.30 to
Outstanding at end of year 80,233 21.00 70,450 18.75 101,821 9.88
================ ================ ================
Exercisable at end of year 16,890 30,297 63,113
================ ================ ================
Weighted-average fair value
of options granted during
the year $7.10 $9.83 $4.99
================ ================ ================
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 25, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/25/99 CONTRACTUAL LIFE EXERCISE PRICE AT 12/25/99 EXERCISE PRICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 9.88 23,155 2.6 years $ 9.88 12,405 $ 9.88
18.75 17,950 3.2 18.75 4,485 18.75
17.69 37,000 4.2 17.69 17.69
21.00 2,128 3.3 21.00 21.00
------------------ --------------------
$9.88 to 21.00 80,233 3.5 15.76 16,890 12.24
================== ====================
</TABLE>
The incentive stock options granted in 1999 and 1998 are exercisable at the rate
of 25% over each of the four years beginning in 2000 and 1999.
2,128 Director Stock Options were issued during the year 1999 at an option price
of $21.00 and can be exercised after April 24, 2000 with an expiration date of
April 23, 2003.
To acquire all of the common stock of Marcy Fitness Products, Inc., the Company
exchanged 272,112 Escalade warrants with an exercise price of $9.13 per share.
The warrants were exercisable until August 19, 1999. During 1997, these warrants
were put to the Company and retired at $13.50 per share for a total cost of
$1,189,129.
(F-11)
<PAGE> 31
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 8 -- STOCKHOLDERS' EQUITY TRANSACTIONS
During 1997, the Company conducted a Dutch Auction self-tender offer whereby it
purchased 117,766 shares of its common stock at $14.00 per share.
The Company paid no cash dividends during 1997 and 1999. On December 21, 1998,
the Company announced that Escalade's Board of Directors declared a special cash
dividend of $1.00 per share to shareholders of record January 8, 1999. The
dividend was declared at Escalade's Regular Board Meeting, December 19, 1998.
The dividend was paid on January 22, 1999.
<TABLE>
<CAPTION>
NOTE 9 -- EARNINGS PER SHARE
Earnings per share (EPS) were computed as follows:
WEIGHTED PER
AVERAGE SHARE
YEAR ENDED DECEMBER 25, 1999 INCOME SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $6,099,936
------------------
Basic Earnings per Share
Income available to common stockholders 6,099,936 3,038,282 $2.01
==================
Effect of Dilutive Securities
Stock options 5,180
------------------------------------
Diluted Earnings Per Share
Income available to common stockholders and
assumed conversions $6,099,936 3,043,462 $2.00
=====================================================
YEAR ENDED DECEMBER 26, 1998
Net Income $6,135,789
------------------
Basic Earnings per Share
Income available to common stockholders 6,135,789 3,094,638 $1.98
==================
Effect of Dilutive Securities
Stock options 18,741
------------------------------------
Diluted Earnings Per Share
Income available to common stockholders and
assumed conversions $6,135,789 3,113,379 $1.97
=====================================================
YEAR ENDED DECEMBER 27, 1997
Net Income $6,360,651
------------------
Basic Earnings per Share
Income available to common stockholders 6,360,651 3,109,514 $2.05
==================
Effect of Dilutive Securities
Stock options 35,328
------------------------------------
Diluted Earnings Per Share
Income available to common stockholders and
assumed conversions $6,360,651 3,144,842 $2.02
=====================================================
</TABLE>
(F-12)
<PAGE> 32
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Warrants to purchase 272,112 shares of common stock at $9.13 per share were
outstanding at December 28, 1996 and during a portion of the year ended December
27, 1997 but were not included in the computation of diluted EPS because the
warrants' exercise price was greater than the average market price of the common
shares.
NOTE 10 -- OPERATING LEASES
The Company leases warehousing and office space at its National City, California
facilities and has a five-year option to extend the lease. The lease rate ranges
from $11,920 per month in year one to $13,025 per month in year five of the
extension period. The Company also shares in common area expenses not to exceed
8(cent) per sq. ft. per month. The lease expires March 31, 2003.
The Company also leases warehousing space next to its Evansville facility for
$17,730 per month. The lease expires on October 31, 2000. The Company has three
two-year renewal options followed by two five-year renewal options.
The Company also leases manufacturing space in Tijuana, Mexico for $5,220 per
month. The lease expires on July 31, 2002.
At December 25, 1999, the minimum rental payments under noncancelable leases
with terms of more than one year are as follows:
YEARS ENDING AMOUNT
- ------------------------------------------------
2000 $386,208
2001 213,298
2002 191,714
2003 39,077
------------------
$830,297
==================
The following schedule shows the composition of total rental expense for
operating leases except those with terms of a month or less:
1999 1998 1997
--------------------------------------------------
Rentals $448,516 $469,650 $611,405
==================================================
(F-13)
<PAGE> 33
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 11 -- INCOME TAXES
Provision for income taxes consists of the following:
YEARS ENDED DECEMBER 25, DECEMBER 26 AND
DECEMBER 27 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------
Current
<S> <C> <C> <C>
Federal $3,255,081 $3,888,985 $3,435,532
State 878,823 1,056,111 803,547
-----------------------------------------------------
4,133,904 4,945,096 4,239,079
-----------------------------------------------------
Deferred
Federal (497,779) (121,668) 365,830
State (93,600) (31,965) 84,578
-----------------------------------------------------
(591,379) (153,633) 450,408
-----------------------------------------------------
$3,542,525 $4,791,463 $4,689,487
=====================================================
</TABLE>
The provision for income taxes was computed based on financial statement income.
A reconciliation of the provision for income taxes to the amount computed using
the statutory rate follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 25, DECEMBER 26
AND DECEMBER 27 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax at statutory rate $3,278,437 $3,715,266 $3,757,047
Increase (decrease) in income tax resulting from
Recurring permanent differences (goodwill
amortization, dividend exclusion and non-
deductible officers' life insurance expense) 55,662 (76,770) 25,893
State tax expense, net of federal effect 518,247 675,936 586,163
Benefit of foreign subsidiary loss not recognized 558,280 369,996
Other (309,821) (81,249) (49,612)
---------------------------------------------------
Provision for income taxes recorded $3,542,525 $4,791,463 $4,689,487
===================================================
</TABLE>
At December 25, 1999, a cumulative deferred tax asset of $1,520,796 is included
in current assets and other assets. At December 26, 1998, a cumulative deferred
tax asset of $929,417 is included in current assets and other liabilities.
(F-14)
<PAGE> 34
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The components of the net deferred tax asset are as follows:
DECEMBER 25 AND DECEMBER 26 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Employee benefits $ 584,559 $ 429,186
Valuation reserves 681,472 527,677
Goodwill 94,352 94,869
Deferred compensation 480,490 395,800
------------------------------------
Total assets 1,840,873 1,447,532
------------------------------------
LIABILITIES
Depreciation (186,076) (357,165)
Unrealized gain on securities available for sale (134,001) (160,950)
------------------------------------
Total liabilities (320,077) (518,115)
------------------------------------
$ 1,520,796 $ 929,417
====================================
</TABLE>
NOTE 12 -- EMPLOYEE BENEFIT PLANS
The Company has an employee profit sharing salary reduction plan, pursuant to
the provisions of Section 401(k) of the Internal Revenue Code, for non-union
employees. The Company's contribution is a matching percentage of the employee
contribution as determined by the Board of Directors annually. The Company's
expense for the plan was $273,763, $316,155 and $339,931 for 1999, 1998 and
1997.
NOTE 13 -- VOLUNTARY EMPLOYEE BENEFITS ASSOCIATION TRUST (VEBA)
The Company established a VEBA as a tax-exempt organization to provide life,
medical, disability and other similar welfare benefits permitted pursuant to
Internal Revenue Code Section 501(c)(9) for its employees.
(F-15)
<PAGE> 35
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 14 -- SEGMENT INFORMATION AND CONCENTRATIONS
YEARS ENDED DECEMBER 25, DECEMBER 26
AND DECEMBER 27 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Sales to unaffiliated customers
Sporting goods $52,767 $63,072 $66,666
Office and graphic arts products 33,407 30,486 24,836
-----------------------------------------------------
Total consolidated $86,174 $93,558 $91,502
=====================================================
Operating profit
Sporting goods $ 4,200 $ 6,875 $ 7,435
Office and graphic arts products 7,277 7,442 5,244
Corporate (865) (427) (291)
-----------------------------------------------------
Total consolidated 10,612 13,890 12,388
Consolidated other income 76 410 475
-----------------------------------------------------
10,688 14,300 12,863
Consolidated interest expense 616 1,118 1,277
Consolidated loss on disposal of assets 64 208 319
Consolidated amortization of goodwill 469 398 217
Consolidated loss on terminated sporting goods sale 427
Consolidated (gain) loss on disposal of Escalade International (103) 1,222
-----------------------------------------------------
Consolidated income from operations before
income taxes $ 9,642 $10,927 $11,050
=====================================================
Identifiable assets
Sporting goods $37,208 $39,819 $40,904
Office and graphic arts products 23,971 20,770 21,815
Corporate 5,671 2,900 3,427
-----------------------------------------------------
Total assets $66,850 $63,489 $66,146
=====================================================
Depreciation and amortization charged to operations
Sporting goods $ 1,154 $ 1,207 $ 1,214
Office and graphic arts products 1,604 1,589 1,167
-----------------------------------------------------
Total consolidated $ 2,758 $ 2,796 $ 2,381
=====================================================
Capital expenditures
Sporting goods $ 862 $ 699 $ 582
Office and graphic arts products 276 372 923
-----------------------------------------------------
$ 1,138 $ 1,071 $ 1,505
=====================================================
</TABLE>
(F-16)
<PAGE> 36
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The Company operates principally in two industries, sporting goods and office
and graphic arts products. The Company sells its products primarily to retailers
and wholesalers located throughout the United States. Operations in the sporting
goods industry consist of production and sale of table tennis tables and
accessories, archery equipment, home pool tables and accessories, combination
bumper pool and card tables, game tables, basketball backboards, goals, poles
and portables, darts and dart cabinets. Operations in the office and graphic
arts products industry consist of production and sale of paper trimmers, paper
folding machines, paper drills, collators, decollators, bursting machines,
letter openers, paper joggers, checksigners, stamp affixers, paper shredders,
paper punches, paper cutters, catalog rack systems, bindery carts, business card
slitters, thermography machines, keyboard drawers, computer storage,
copyholders, media retention systems, posting trays and related accessories.
Operating profit is total revenue less operating expenses. In computing
operating profit, neither interest expense nor income taxes have been deducted.
Identifiable assets are principally those assets used in each industry.
Corporate assets are principally cash and cash equivalents, deferred taxes,
marketable equity securities and the cash surrender value of life insurance.
In 1999, 1998 and 1997, approximately 46% (28% of consolidated sales), 38% (25%
of consolidated sales) and 33% (24% of consolidated sales) of the sporting goods
were sold to Sears, Roebuck & Co. At December 25, 1999 and December 26, 1998,
accounts receivable included $9,117,867 and $16,328,252 due from Sears, Roebuck
& Co.
Approximately 29% of the Company's labor force is covered by a collective
bargaining agreement. Management acknowledges that there usually will be
differences between Company offers and union demands during negotiations.
However, management has no reason to expect such differences to result in
protracted conflict. The current contract expires in 2000.
Consolidated assets include approximately $2.3 million of assets located in the
United Kingdom and Mexico.
(F-17)
<PAGE> 37
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 15 -- CERTAIN SIGNIFICANT ESTIMATES
Management's estimates that influence the financial statements are normally
based on knowledge and experience about past and current events and assumptions
about future events. The following estimates affecting the financial statements
are particularly sensitive because of their significance, and it is at least
reasonably possible that a change in these estimates will occur in the near
term:
Product warranty reserves--based on an analysis of customers' product
return histories, current status, sales volume and management's
expectations from new products introduced into the market.
Customer allowance reserves--based on agreements for customer purchase
rebates and shared advertising, and prior year's shipments.
Inventory valuation reserves--based on estimates of costs of inventory
amounts overstocked or obsolete in excess of realizable value.
<TABLE>
<CAPTION>
NOTE 16 -- ADDITIONAL INFORMATION
DECEMBER 25 AND DECEMBER 26 1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Accrued Liabilities
Employees' compensation $2,478,862 $ 3,758,290
Payroll taxes and taxes withheld from employees'
compensation 191,926 257,331
Taxes other than taxes on income 342,960 646,692
Accrued interest 129,950 111,484
Customer volume discounts payable 5,193,302 4,059,848
Other accrued items 1,253,171 2,809,183
----------------------------------
$9,590,171 $11,642,828
==================================
</TABLE>
NOTE 17 -- DEFERRED COMPENSATION PLAN
In October 1985, the Board of Directors approved the adoption of a Contributory
Deferred Compensation Plan pursuant to which some recipients of incentive
compensation could elect to defer receipt thereof. For each dollar of deferred
compensation, the Company provided a 75% matching amount. Amounts deferred earn
interest at the rate of 9%. Such amounts are not intended to be recognized for
tax purposes until receipt. All deferrals allowed under this plan have been
made. Participants have no vested rights in deferred amounts credited to their
accounts and are general creditors of the Company until such amounts are
actually paid.
(F-18)
<PAGE> 38
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 18 -- COMMITMENTS AND CONTINGENCIES
At December 25, 1999, standby letters of credit aggregated $199,470 of which the
Company was obligated in the amount of $49,470 relating to the purchase of
certain raw materials and finished goods from suppliers.
Additionally, the Company has obtained a letter of credit for the benefit of the
mortgage holders. At December 25, 1999, the balance of the letter of credit was
$2,733,750. It is to be used in the event of a default in either interest or
principal payments.
The Company is involved in litigation arising in the normal course of its
business. The Company does not believe that the disposition or ultimate
resolution of existing claims or lawsuits will have a material adverse effect on
the business or financial condition of the Company.
<TABLE>
<CAPTION>
NOTE 19 -- SUMMARY OF QUARTERLY RESULTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
MARCH 21 JULY 11 OCTOBER 3 DECEMBER 26
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Net sales $12,978 $17,086 $21,296 $34,814
Gross profit 4,085 5,151 6,861 10,039
Net income 434 412 1,723 3,531
Basic earnings per share .14 .13 .57 1.20
1998
Net sales $15,783 $19,077 $22,178 $36,519
Gross profit 4,917 5,294 7,723 12,997
Net income 585 338 2,072 3,141
Basic earnings per share .19 .11 .67 1.01
</TABLE>
During 1999, the Company reduced its outstanding shares by 179,179 shares. These
reductions occurred at various times throughout the year. Consequently, if the
four quarters earnings per share are added together, they are different than the
actual earnings per weighted average share for the year.
(F-19)
<PAGE> 39
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 20 -- DISPOSAL OF ESCALADE INTERNATIONAL, LIMITED
In December 1998, the Company adopted a plan to discontinue its distribution
operations. Those operations were performed by Escalade International, Limited,
a foreign subsidiary located in the United Kingdom. The Company's other
subsidiaries are all manufacturing operations. On July 8, 1999, the Company
completed a transaction to sell 50% of the stock of Escalade International to an
investment group who assumed responsibility for running the day-to-day
operations. The sale was for $500,000 with $50,000 cash paid and notes
receivable of $450,000.
The estimated loss on the disposal of Escalade International, Limited was
$1,222,279 including a provision of $250,000 for operating losses during
phaseout. The actual loss on the sale was $1,118,892 which included $213,057 in
operating losses up to the time of sale. 1999 shows a profit of $103,387 which
was the amount by which the reserve for loss on this transaction exceeded actual
losses. Since only 50% was sold, the operations are not considered discontinued
and the financial statements have been revised to eliminate discontinued
operations. Going forward, the Company's ownership value in Escalade
International of $500,000 will be shown as an investment and will be accounted
for under the equity method.
NOTE 21 -- ACQUISITIONS
ACQUISITION OF MEAD HATCHER
On June 21, 1999, Martin Yale, the Company's office and graphic arts products
subsidiary, acquired certain assets of Mead Hatcher for cash. The purchased
assets include all of Mead Hatcher's manufactured products consisting of
keyboard drawers, computer storage, copyholders, media retention systems, and
posting trays along with all associated tooling and production machinery
necessary to manufacture the products. The purchase price was $3,481,170. The
acquisition was accounted for as a purchase and the excess of cost over the fair
value of net assets acquired was $1,417,594, which is being amortized over 15
years on the straight-line method. Martin Yale relocated the manufacturing of
these products to its Los Angeles, California facility. It is estimated that
annual sales of these products will be approximately $6,000,000.
ACQUISITION OF ZUE CORPORATION
On December 8, 1999, Indian Industries, the Company's sporting goods subsidiary,
acquired substantially all of the assets of Zue Corporation for cash. Zue was a
manufacturer of high quality basketball systems located in Noblesville, Indiana.
The Zue product line will complement Indian's product line and the manufacturing
operations were relocated to Indian's Evansville, Indiana facility. The cost of
the purchase was $7,969,672. The acquisition was accounted for as a purchase and
the excess of cost over the fair value of net assets acquired was $5,150,172,
which is being amortized over 15 years on the straight-line method.
(F-20)
<PAGE> 40
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 22 -- OTHER COMPREHENSIVE INCOME
1999
-----------------------------------------------------
BEFORE-TAX TAX NET-OF-TAX
YEAR ENDED DECEMBER 31 AMOUNT BENEFIT AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Unrealized holding losses arising during the year $(67,374) $26,950 $(40,424)
=====================================================
1998
-----------------------------------------------------
BEFORE-TAX TAX NET-OF-TAX
YEAR ENDED DECEMBER 31 AMOUNT BENEFIT AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
Unrealized holding losses arising during the year $(9,278) $3,711 $(5,567)
=====================================================
</TABLE>
NOTE 23 -- SUBSEQUENT EVENTS
On January 5, 2000, Indian Industries acquired certain assets of the table
tennis business of Lifetime Products, Inc., a Utah corporation, who wished to
discontinue its table tennis business. Those assets consisted mainly of
machinery, equipment and tooling and are being relocated to Indian's Evansville,
Indiana facility. The cost of the purchase was $1,400,000, which was paid on
January 5, 2000 plus an amount to be determined later for inventory.
It is estimated that this acquisition accompanied by the Zue Corporation
acquisition by Indian Industries will increase sporting goods sales by
$10,000,000 to $12,000,000 in 2000.
On February 24, 2000, the Company announced an offer to purchase up to 700,000
shares of its common stock at a price of $14.50 to $18 per share through a Dutch
Auction tender offer. The offer will expire on Friday, March 24, 2000 unless
extended.
(F-21)
<PAGE> 41
INDEPENDENT AUDITOR'S REPORT
Stockholders and Board of Directors
Escalade, Incorporated
Evansville, Indiana
We have audited the consolidated financial statements of Escalade, Incorporated
as of December 25, 1999 and December 26, 1998 and for each of the three years in
the period ended December 25, 1999 and have issued our report thereon dated
February 3, 2000; such consolidated financial statements and report are included
elsewhere in this Form 10-K. Our audits also included the consolidated financial
statement schedules of Escalade, Incorporated listed in Item 14. These
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
OLIVE LLP
Evansville, Indiana
February 3, 2000
(S-1)
<PAGE> 42
ESCALADE, INCORPORATED AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE (2) OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
and discounts (1)
Fiscal year ended December 25, 1999 $581,830 $577,150 $397,617 $761,363
Fiscal year ended December 26, 1998 893,434 371,672 683,276 581,830
Fiscal year ended December 27, 1997 681,606 474,050 262,222 893,434
(1) Deducted from related assets
(2) Accounts charged off, less recoveries
</TABLE>
(S-2)
<PAGE> 43
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<CAPTION>
ESCALADE, INCORPORATED
<S> <C> <C>
By: \s\C. W. "Bill" Reed March 10, 2000
- -------------------------------------------
C. W. "Bill" Reed
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Chief Executive Officer
and Director
\s\C. W. Reed (Principal Executive Officer) March 10, 2000
- -------------------------------------------
C. W. Reed
\s\Robert E. Griffin Chairman and Director March 10, 2000
- -------------------------------------------
Robert E. Griffin
Secretary and Treasurer
(Principal Financial and Accounting
\s\John R. Wilson Officer) March 10, 2000
- -------------------------------------------
John R. Wilson
\s\Blaine E. Matthews, Jr. Director March 10, 2000
- -------------------------------------------
Blaine E. Matthews, Jr.
\s\A. Graves Williams, Jr. Director March 10, 2000
- -------------------------------------------
A. Graves Williams, Jr.
\s\Gerald J. Fox Director March 10, 2000
- -------------------------------------------
Gerald J. Fox
\s\Keith P. Williams Director March 10, 2000
- -------------------------------------------
Keith P. Williams
\s\Yale Blanc Director March 10, 2000
- -------------------------------------------
Yale Blanc
\s\Robert D. Orr Director March 10, 2000
- -------------------------------------------
Robert D. Orr
(S-3)
</TABLE>
<PAGE> 1
Exhibit 10.21
SEVENTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
ESCALADE, INCORPORATED, an Indiana corporation (the "Company"), and
BANK ONE, INDIANA, National Association, a national banking association (the
"Bank") being parties to that certain Amended and Restated Credit Agreement
dated as of May 31, 1996 as amended from time to time (collectively the
"Agreement"), hereby agree to amend the Agreement by this Seventh Amendment to
Amended and Restated Credit Agreement (the "Seventh Amendment"), on the terms
and subject to the conditions set forth as follows:
1. DEFINITIONS. Terms used in this Seventh Amendment with their initial letter
capitalized which are not defined herein shall have the meanings ascribed to
them in the Agreement.
2. TERM LOAN: Section 2.c. of the Agreement is hereby amended and restated in
its entirety, to read as follows:
c. THE TERM LOAN. The Bank will make a term loan (the "Term Loan") to the
Company contemporaneously with the execution of this Agreement on the
following terms and subject to the following conditions:
(i) AMOUNT. The principal amount of the Term Loan shall be Ten Million
and No/100 Dollars ($10,000,000) or so much thereof as shall be
advanced for the purposes set forth herein.
(ii) THE TERM NOTE. The obligation of the Company to repay the Term
Loan shall be evidenced by a promissory note (the "Term Note") in the
form of EXHIBIT A. The principal of the Term Loan shall be repayable
in equal annual installments of $2,000,000 each, due and payable on
the last day of each March commencing March31, 2000. On March 31,
2004, the entire remaining principal amount of the Term Loan shall be
due and payable, together with all accrued and unpaid interest.
Subject to the contemporaneous payment of any Prepayment Premium which
would become due on account of any proposed prepayment, the principal
of the Term Loan may be prepaid at any time in whole or in part,
provided that any partial prepayment shall be in an amount which is an
integral multiple of $250,000.00 and provided, further, that any
partial prepayment shall be applied to the principal installments
payable on the Term Loan in the inverse order of their maturities.
(iii) INTEREST ON THE TERM LOAN. The unpaid principal balance from
time to time of the Term Loan shall bear interest from the date the
Loan is made prior to the maturity of the Term Note at a rate per
annum equal to the Prime Rate plus the Applicable Spread, except that
at the option of the Company exercised from time to time as provided
in Section 2.d(i) of the Agreement, interest may accrue prior to
maturity on the entire outstanding balance of the Term Loan or on any
portion thereof which is in excess of $1,000,000.00 and as to which no
Optional Rate previously selected remains in effect at a LIBOR-based
Rate for a period of 30, 60, 90 or 180 days; provided that no Optional
Rate may be elected for a period extending beyond the scheduled final
maturity of the Term Loan. After maturity, whether scheduled maturity
or maturity by virtue of acceleration on account of the occurrence of
an Event of Default, interest will accrue on the Term Loan at a rate
per annum equal to the Prime Rate plus the Applicable Spread plus two
percent (2%), except that as to any portion of the Loan for which the
Company may have elected an Optional Rate for a period of time that
has not expired at maturity, such portion shall, during the remainder
of such period, bear interest at the greater of the Prime Rate plus
the Applicable Spread plus two percent (2%) per annum or the Optional
Rate then in effect plus two percent (2%) per annum. Prior to
maturity, interest shall be due and payable on the last Banking Day of
each month in addition to any installment of principal which may be
due and payable on such date. After maturity, interest shall be
payable as accrued and without demand.
<PAGE> 2
(iv) USE OF PROCEEDS OF THE TERM LOAM, REDUCTION OF PRINCIPAL AMOUNT.
The proceeds of the Term Loan shall be used to finance the purchase by
the Company of the assets of Zue Corporation, associated acquisition
costs and other general corporate purposes.
(v) COMMITMENT FEE. In consideration of the Bank's agreement to
advance new funds to the Company, the Company shall pay a Commitment
Fee in the amount of $25,000 which shall be paid on or before closing.
3. AFFIRMATIVE COVENANTS. Sections 5.g(i) and (iii) of the Agreement are
hereby amended to read in their entirety as follows:
(i) TANGIBLE NET WORTH. The Company shall maintain its Tangible Net
Worth, determined on a consolidated basis, of not less than
$26,000,000 at all times.
(ii) DEBIT SERVICE COVERAGE. For each period of four consecutive
fiscal quarters ending during the periods indicated in the table
below, the Company shall maintain a debt service coverage ratio
(hereinafter defined), determined on a consolidated basis, of not less
than that indicated in the table below.
Period Ratio
------ -----
from the date of this Amendment and through
December 30, 2000 1.10 to 1.0
At all times thereafter 1.20 to 1.0
For purposes of this covenant, the phrase "debt service coverage
ratio" means the ratio of (A) the sum of consolidated net income
before taxes plus interest expense plus depreciation and amortization
expense plus non-recurring and extraordinary charges, plus up to
$2,000,000 of such items described herein resulting from the Zue
Corporation asset acquisition effective as of December 25, 1999, and
provided that such amount added herein as a result of such
acquisition, shall be reduced by 25% as of each fiscal quarter end
hereafter, all for the period for which the ratio is being determined,
over (B) the sum of scheduled Term Loan and other debt payments plus
interest expense plus cash income taxes plus capital expenditure which
were not financed, plus stock repurchases and cash dividends paid, all
for the period for which such ratio is being determined.
4. NEGATIVE COVENANT. Section 6.a of the Agreement, entitled "Restricted
Payments" is hereby deleted effective at fiscal year end December 25, 1999.
5. WAIVER. The Bank hereby agrees to waive the failure by the Company to
comply with Section 6.a of the Agreement with respect to past or future stock
repurchases, provided that the aggregate amount of stock purchases for the
fiscal year ending December 25, 1999 shall not exceed $4,000,000. Such waiver of
the Company's noncompliance relates only to the covenant expressly waived herein
for the time period set forth and shall not be construed as a waiver of any
other violations of this or any other covenant.
<PAGE> 3
6. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter into
this Seventh Amendment, the Company represents and warrants to the Bank that:
a. The execution and delivery of this Seventh Amendment, the execution
and delivery of all of the other documents executed in connection herewith,
and the performance by the Company and the Guarantors of their obligations
under this Seventh Amendment and all of the documents executed in
connection herewith are within the corporate power of the Company and each
Guarantor, have been duly authorized by all necessary corporate action,
have received any required governmental or regulatory agency approvals and
do not and will not contravene or conflict with any provision of law or of
the Articles of Incorporation or Bylaws of the Company or any Guarantor or
of any agreement binding upon the Company or any Guarantor or any of its
property.
b. This Seventh Amendment and all of the documents executed by the
Company and the Guarantors in connection herewith are the legal, valid and
binding obligations of the Company and the Guarantors, enforceable against
the Company and the Guarantors in accordance with their respective terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws enacted for the
relief of debtors generally and other similar laws affecting the
enforcement of creditors' rights generally or by equitable principles which
may affect the availability of specific performance and other equitable
remedies.
c. The representations and warranties contained in Section 3 of the
Agreement are true and correct as of the date hereof except that the
representations contained in Section 3.d. of the Agreement shall be deemed
to refer to the latest financial statements furnished by the Company to the
Bank.
d. No Event of Default or Unmatured Event of Default has occurred and is
continuing as of the date of this Seventh Amendment, except as specifically
waived herein.
7. CONDITIONS PRECEDENT. This Seventh Amendment shall become effective upon
the Bank's receipt of the following, contemporaneously with the execution of
this Seventh Amendment, each duly executed, dated and in form and substance
satisfactory to the Bank:
a. This Seventh Amendment;
b. The Term Loan Note;
c. The Commitment Fee of $25,000;
d. Receipt of payment of the reasonable legal fees and expenses of Bank's
counsel at closing or immediately upon receipt by Borrower of an
invoice therefor;
e. Borrowing resolutions of the Board of Directors of Borrower; and
f. Such other documents as the Bank may reasonably request.
8. PRIOR AGREEMENTS. The Agreement, as amended by this Seventh Amendment,
supersedes all previous agreements and commitments made or issued by the Bank,
related to all of the subjects of the Agreement, as amended by this Seventh
Amendment, and any oral or written proposals or commitments made or issued by
the Bank.
<PAGE> 4
9. AFFIRMATION. Except as expressly amended by this Seventh Amendment, all of
the terms and conditions of the Agreement and each of the Loan Documents remains
in full force and effect.
Executed and delivered on this 8TH day of DECEMBER , 1999.
------- ------------------
ESCALADE, INCORPORATED
By: \S\JOHN R. WILSON
------------------------------
John R. Wilson,
Chief Financial Officer
BANK ONE, INDIANA, NATIONAL
ASSOCIATION
By: \S\STEVEN J. KRAKOSKI, VP
---------------------------
STEVEN J. KRAKOSKI, VP
--------------------------
(Printed Name and Title)
<PAGE> 5
EIGHTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
ESCALADE, INCORPORATED, an Indiana corporation (the "Company"), and
BANK ONE, INDIANA, National Association, a national banking association (the
"Bank") being parties to that certain Amended and Restated Credit Agreement
dated as of May 31, 1996 as amended from time to time (collectively the
"Agreement"), hereby agree to amend the Agreement by this Eighth Amendment to
Amended and Restated Credit Agreement (the "Eighth Amendment"), on the terms and
subject to the conditions set forth as follows-.
1. DEFINITIONS.
a. Term used in this Eighth Amendment with their initial letter
capitalized which are not defined herein shall have the meaning
ascribed to them in the Agreement.
b. The following definition set forth in Section 1 of the Agreement
is hereby amended and restated in its entirety to read as follows:
"CONSOLIDATED EBITDA" shall mean, with respect to any period of
time, an amount equal to the sum of (i) the consolidated net
income of the Company and the Subsidiaries determined with
respect to such time period; plus (ii) to the extent deducted in
determining such consolidated net income, an amount equal to the
consolidated income tax, depreciation, amortization and interest
expense of the Company and the Subsidiaries and determined with
respect to such time period; plus (iii) $2,000,000 of such items
described in (i) and (ii) above and such adjustments as agreed to
by the Bank resulting from the Zue Corporation asset acquisition
effective as of December 25, 1999, provided that such amount
added herein as a result of such acquisition, shall be reduced by
25% as of each fiscal quarter end hereinafter.
2. REVOLVING LOAN. Section 2.a(i) is hereby amended to change the amount
of Advances which can be made under the Revolving Loan to amounts not exceeding
Twelve Million and no/100 Dollars ($12,000,000.00) in the aggregate at any time
outstanding. The obligation to repay the Revolving Loan shall be evidenced by a
promissory note in the form of EXHIBIT A to this Eighth Amendment.
3. AFFIRMATIVE COVENANTS. Section 5.g(iii) of the Agreement is hereby
amended to read in its entirety as follows:
(iii) DEBT SERVICE COVERAGE. For each period of four consecutive
fiscal quarters ending during the periods indicated in the table
below, the Company shall maintain a debt service coverage ratio
(hereinafter defined), determined on a consolidated basis, of not
less than that indicated in the table below.
Period Ratio
------ -----
effective December 25, 1999 and through
December 30,2000 1.10 to 1.0
At all times thereafter 1.20 to 1.0
<PAGE> 6
For purposes of this covenant, the phrase "debt service coverage
ratio" means the ratio of (A) the sum of consolidated net income
before taxes plus interest expense plus depreciation and
amortization expense plus non-recurring and extraordinary
charges, all for the period for which the ratio is being
determined, over (B) the sum of scheduled Term Loan and other
debt payments plus interest expense plus cash income taxes plus
capital expenditure which were not financed, plus stock
repurchases and cash dividends paid, all for the period for which
such ratio is being determined.
4. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Eighth Amendment, the Company represents and warrants to the Bank
that:
a. The execution and delivery of this Eighth Amendment, the
execution and delivery of all of the other documents executed in connection
herewith, and the performance by the Company and the Guarantors of their
obligations under this Eighth Amendment and all of the documents executed
in connection herewith are within the Corporate power of the Company and
each Guarantor, have been duly authorized by all necessary corporate
action, have received any required governmental or regulatory agency
approvals and do not and will not contravene or conflict with any provision
of law or of the Articles of Incorporation or Bylaws of the Company or any
Guarantor or of any agreement binding upon the Company or any Guarantor or
any of its property.
b. This Eighth Amendment and all of the documents executed by the
Company and the Guarantors in connection herewith are the legal, valid and
binding obligations of the Company and the Guarantors, enforceable against
the Company and the Guarantors in accordance with their respective terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws enacted for the
relief of debtors generally and other similar laws affecting the
enforcement of creditors' rights generally or by equitable principles which
may affect the availability of specific performance and other equitable
remedies.
c. The representations and warranties contained in Section 3 of the
Agreement are true and correct as of the date hereof except that the
representations contained in Section 3.d. of the Agreement shall be deemed
to refer to the latest financial statements furnished by the Company to the
Bank.
d. No Event of Default or Unmatured Event of Default has occurred
and is continuing as of the date of this Eighth Amendment, except as
specifically waived herein.
5. CONDITIONS PRECEDENT. This Eighth Amendment shall become effective upon the
Bank's receipt of the following, contemporaneously with the execution of this
Eighth Amendment, each duly executed, dated and in form and substance
satisfactory to the Bank:
a. This Eighth Amendment;
b. The Revolving Loan Note;
c. Receipt of payment of the reasonable legal fees and expenses of Bank's
counsel at closing or immediately upon receipt by Borrower of an
invoice therefor;
d. Borrowing resolutions of the Board of Directors of Borrower; and
e. Such other documents as the Bank may reasonably request.
<PAGE> 7
6. PRIOR AGREEMENTS. The Agreement, as amended by this Eighth Amendment,
supersedes all previous agreements and commitments made or issued by the Bank,
related to all of the subject matter of the Agreement, as amended by this Eighth
Amendment, and any oral or written proposals or commitments made or issued by
the Bank.
7. AFFIRMATION. Except as expressly amended by this Eighth Amendment,
all of the terms and conditions of the Agreement and each of the Loan Documents
remains in full force and effect.
Executed and delivered on this 17TH day of FEBRUARY 2000.
ESCALADE, INCORPORATED
By: \S\JOHN R. WILSON
-------------------------
John R. Wilson, Secretary
BANK ONE, INDIANA, NATIONAL
ASSOCIATION
By: \S\STEVEN J. KRAKOSKI, VP
--------------------------
\S\STEVEN J. KRAKOSKI, VP
--------------------------
(Printed Name and Title)
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 21
ESCALADE, INCORPORATED AND SUBSIDIARIES
LIST OF SUBSIDIARIES AT DECEMBER 25, 1999
STATE OF OTHER PERCENT OF VOTING
JURISDICTION OF SECURITIES OWNED
PARENT INCORPORATION BY PARENT
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Escalade, Incorporated Indiana
Subsidiaries
Indian Industries, Inc. (1) Indiana 100%
Martin Yale Industries, Inc. (1) Indiana 100%
Harvard Sports, Inc. (1) California 100%
Master Products Manufacturing
Company, Inc. (1) California 100%
(1) Each subsidiary company so designated has been included in Consolidated
Financial Statements for all periods following its acquisition. See Notes
to Consolidated Financial Statements.
S-4
</TABLE>
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-16279, 333-52475 and 333-52477 of Escalade, Incorporated (Company) on Form
S-8 of our report dated February 3, 2000 on the consolidated financial
statements of the Company appearing in the Company's Annual Report on Form 10-K
for the year ended December 25, 1999.
OLIVE LLP
Evansville, Indiana
March 21, 2000
S-5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000033488
<NAME> ESCALADE, INCORPORATED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-25-1999
<CASH> 1,756
<SECURITIES> 0
<RECEIVABLES> 25,533
<ALLOWANCES> 761
<INVENTORY> 12,432
<CURRENT-ASSETS> 40,336
<PP&E> 33,516
<DEPRECIATION> 24,126
<TOTAL-ASSETS> 66,850
<CURRENT-LIABILITIES> 25,437
<BONDS> 10,700
2,918
0
<COMMON> 0
<OTHER-SE> 26,520
<TOTAL-LIABILITY-AND-EQUITY> 66,850
<SALES> 86,174
<TOTAL-REVENUES> 86,174
<CGS> 60,038
<TOTAL-COSTS> 75,562
<OTHER-EXPENSES> 354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 616
<INCOME-PRETAX> 9,642
<INCOME-TAX> 3,542
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,100
<EPS-BASIC> 2.01
<EPS-DILUTED> 2.00
</TABLE>
