<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000
Commission File Number 0-6966
ESCALADE, INCORPORATED
----------------------
(Exact name of registrant as specified in its charter)
Indiana 13-2739290
------- ----------
(State of incorporation) (I.R.S. EIN)
817 Maxwell Avenue, Evansville, Indiana 47717
---------------------------------------------
(Address of principal executive office)
812-467-1200
-------------
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act
NONE
----
Securities registered pursuant to section 12(g) of the Act
Common Stock, No Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares of Registrant's common stock (no par value)
outstanding as of October 18, 2000: 2,167,753
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheet (Unaudited)
September 30, 2000, October 2, 1999, and
December 25, 1999 3
Consolidated Condensed Statement of Income (Unaudited)
Three Months and Nine Months Ended
September 30, 2000 and October 2, 1999 4
Consolidated Statement of Comprehensive
Income (Unaudited) Three Months and
Nine Months Ended September 30, 2000
and October 2, 1999 4
Consolidated Condensed Statement of Cash Flows (Unaudited)
Nine Months Ended September 30, 2000 and October 2, 1999 5
Notes to Consolidated Condensed Financial Statements 6 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations: 10 - 11
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk 11
Part II. Other Information 12
Signatures 12
Exhibit 27 Financial Data Schedule 13
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands) Sept.30, October 2, December 25,
2000 1999 1999
ASSETS ---------------------------------------
<S> <C> <C> <C>
Current assets:
Cash $ 1,886 $ 163 $ 1,756
Receivables, less allowances of
$936, $556 and $761 24,255 16,237 24,773
Inventories 20,882 16,010 12,432
Prepaid expense 60 258 126
Deferred income tax benefit 801 1,097 1,248
-------- -------- --------
TOTAL CURRENT ASSETS 47,884 33,765 40,335
Property, plant, and equipment 34,498 35,694 33,516
Accum. depr. and amortization (25,374) (26,449) (24,126)
-------- -------- --------
9,124 9,245 9,390
Goodwill 11,018 6,988 11,729
Other assets 4,854 3,961 5,396
-------- -------- --------
$ 72,880 $ 53,959 $ 66,850
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 12,810 $ 10,625 $ 9,570
Current portion of long-term debt 2,800 300 2,000
Trade accounts payable 5,545 4,862 2,967
Accrued liabilities 10,398 7,368 9,590
Federal income tax payable 675 755 1,310
-------- -------- --------
TOTAL CURRENT LIABILITIES 32,228 23,910 25,437
Other Liabilities:
Long-term debt 19,100 2,400 10,700
Deferred compensation 1,172 1,246 1,275
-------- -------- --------
20,272 3,646 11,975
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 - 2,167,753,
2,945,613, and 2,918,178 at
9-30-00, 10-02-99, and 12-25-99 2,168 3,186 2,918
Retained earnings 17,984 22,957 26,319
Accumulated other comprehensive
income 228 260 201
-------- -------- --------
20,380 26,403 29,438
-------- -------- --------
$ 72,880 $ 53,959 $ 66,850
======== ======== ========
</TABLE>
See notes to Consolidated Condensed Financial Statement.
<PAGE> 4
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED)
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Oct. 2, Sept. 30, Oct. 2,
2000 1999 2000 1999
----------------------------------------
<S> <C> <C> <C> <C>
Net sales $31,560 $21,296 $73,170 $51,360
Costs, expenses and other income:
Cost of products sold 22,082 14,435 49,506 35,263
Selling, administrative and
general expenses 4,876 3,636 14,026 11,029
Interest 596 156 1,467 409
Amortization of Goodwill 214 134 711 359
Other (income) expense (2) 47 164 (33)
Gain on Disposal of Escalade
International -- -- -- (103)
------- ------- ------- -------
27,766 18,408 65,874 46,924
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 3,794 2,888 7,296 4,436
Provision for income taxes 1,435 1,165 2,845 1,867
------- ------- ------- -------
NET INCOME $ 2,359 $ 1,723 $ 4,451 $ 2,569
======= ======= ======= =======
Per share data:
Basic earnings per share $ 1.09 $ .57 $ 1.84 $ .84
Diluted earning per share $ 1.08 $ .57 $ 1.83 $ .84
</TABLE>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
NET INCOME $ 2,359 $ 1,723 $ 4,451 $ 2,569
UNREALIZED GAIN (LOSS)
ON SECURITIES, NET OF TAX 20 (31) 27 19
------- ------- ------- -------
COMPREHENSIVE INCOME $ 2,379 $ 1,692 $ 4,478 $ 2,588
======= ======= ======= =======
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 5
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, 2000 Oct. 2, 1999
Operating Activities: --------------------------------
<S> <C> <C>
Net Income $ 4,451 $ 2,569
Depreciation and amortization 2,765 2,253
Adjustments necessary to reconcile
net income to net cash provided by
operating activities (4,008) 5,948
-------- -------
Net cash provided by
operating activities 3,208 10,770
-------- -------
Investing Activities:
Purchase of property and equipment (882) (1,763)
Purchase of certain assets of
Lifetime Products, Inc. (1,100) --
-------- -------
Net cash used by investing activities (1,982) (1,763)
-------- -------
Financing Activities:
Net increase in notes pay.- bank 3,240 2,825
Net increase (decrease) in long-term debt 9,200 (6,000)
Proceeds from exercise of stock options 114 279
Purchase of common stock (13,650) (3,166)
Payment of special cash dividend -- (3,122)
-------- -------
Net cash used by financing activities (1,096) (9,184)
-------- -------
Increase (Decrease) in cash 130 (177)
Cash, beginning of period 1,756 340
-------- -------
Cash, end of period $ 1,886 $ 163
======== =======
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 6
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
The significant accounting policies followed by the Company and its wholly
owned subsidiaries for interim financial reporting are consistent with the
accounting policies followed for annual financial reporting. All adjustments
which are of a normal recurring nature and are in the opinion of management
necessary for a fair statement of the results for the periods reported have been
included in the accompanying consolidated condensed financial statements.
Note B - Seasonal Aspects
The results of operations for the nine month periods ended September 30,
2000 and October 2, 1999 are not necessarily indicative of the results to be
expected for the full year.
Note C - Inventories (Dollars in Thousands)
<TABLE>
<CAPTION>
9-30-00 10-2-99 12-25-99
------- ------- --------
<S> <C> <C> <C>
Raw Materials $ 4,161 $ 4,210 $ 4,063
Work In Process 4,066 3,253 3,184
Finished Goods 12,655 8,547 5,185
------- ------- -------
$20,882 $16,010 $12,432
======= ======= =======
</TABLE>
Note D - Income Taxes
The provision for income taxes was computed based on financial statement
income.
<PAGE> 7
Note E - Earnings Per Share
Earnings per share were computed as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30, 2000
----------------------------------------
Weighted
Average Per Share
Income Shares Amount
------ -------- ---------
<S> <C> <C> <C>
Net Income $2,359
------
Basic Earnings per Share
Income available to common
stockholders 2,359 2,168 $1.09
=====
Effect of Dilutive Securities
Stock options 8
------ -----
Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $2,359 2,176 $1.08
====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
October 2, 1999
----------------------------------------
Weighted
Average Per Share
Income Shares Amount
------ -------- ---------
<S> <C> <C> <C>
Net Income $1,723
------
Basic Earnings per Share
Income available to common
stockholders 1,723 3,038 $ .57
=====
Effect of Dilutive Securities
Stock options 4
------ -----
Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $1,723 3,042 $ .57
====== ===== =====
</TABLE>
<PAGE> 8
Note E - Earnings Per Share (Continued)
Earnings per share were computed as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 2000
----------------------------------------
Weighted
Average Per Share
Income Shares Amount
------ -------- ---------
<S> <C> <C> <C>
Net Income $4,451
------
Basic Earnings per Share
Income available to common
stockholders 4,451 2,424 $1.84
=====
Effect of Dilutive Securities
Stock options 8
------ -----
Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $4,451 2,432 $1.83
====== ===== =====
</TABLE>
<TABLE>
Nine Months Ended
October 2, 1999
----------------------------------------
Weighted
Average Per Share
Income Shares Amount
------ -------- ---------
<S> <C> <C> <C>
Net Income $2,569
------
Basic Earnings per Share
Income available to common
stockholders 2,569 3,069 $ .84
=====
Effect of Dilutive Securities
Stock options 4
------ -----
Diluted Earnings Per Share
Income available to common
stockholders and assumed
conversions $2,569 3,073 $ .84
====== ===== =====
</TABLE>
<PAGE> 9
Note F - Segment Information
<TABLE>
<CAPTION>
As of and for the Nine Months Ended
September 30, 2000
---------------------------------------------
Office and
Sporting Graphic
Goods Arts Corporate Total
-------- ---------- --------- -------
<S> <C> <C> <C> <C>
Revenues from external customers $45,085 $28,085 $ -- $73,170
Net income (loss) 1,990 3,362 (901) 4,451
Assets $46,792 $22,025 $4,063 $72,880
</TABLE>
<TABLE>
<CAPTION>
As of and for the Nine Months Ended
October 2, 1999
---------------------------------------------
Office and
Sporting Graphic
Goods Arts Corporate Total
-------- ---------- --------- -------
<S> <C> <C> <C> <C>
Revenues from external customers $25,668 $25,692 $ -- $51,360
Net income (loss) (11) 2,524 56 2,569
Assets $26,340 $23,565 $4,054 $53,959
</TABLE>
<PAGE> 10
ESCALADE, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings during the
periods included in the accompanying consolidated condensed statements of
income.
RESULTS OF OPERATIONS
THIRD QUARTER COMPARISON 2000 vs. 1999
Net sales were $31,560,000 in the third quarter of 2000 as compared to
$21,296,000 in the third quarter of 1999, an increase of $10,264,000 or 48.2%.
Sales of sporting goods increased $10,659,000, or 85.2% and sales of office and
graphic arts products decreased $395,000 or 4.5%.
The increase in sporting goods net sales for the quarter was about 10% in
the Zue acquisition product (upper end basketball systems) and about 90% in game
parlor products (pool tables, table tennis tables, game tables and equipment).
The decrease in office and graphic arts products net sales for the quarter was
mainly in the master paper punches and catalog racks and the Mead Hatcher
computer accessories product lines.
Cost of sales was $22,082,000 in the third quarter of 2000 as compared to
$14,435,000 in the third quarter of 1999.
Cost of sales as a percentage of net sales was 70.0% in the third quarter
of 2000 as compared to 67.8% in the third quarter of 1999. This increase in cost
of sales as a percentage of net sales was in sporting goods and was mainly due
to higher sales volume of imported products which have lower margins.
Selling, general, and administrative expenses were $4,876,000 in the third
quarter of 2000 as compared to $3,636,000 in the third quarter of 1999, an
increase of $1,240,000 or 34.1%.
Selling, general and administrative expenses as a percentage of net sales
were 15.5% in the third quarter of 2000 as compared to 17.1% in the third
quarter of 1999. This decrease as a percentage of net sales was mainly due to
the higher sales volume in the sporting goods segment.
Interest expense increased $440,000 or 282.1% from $156,000 last year to
$596,000 this year because of higher average borrowing levels.
Net income for the quarter this year was $2,359,000 as compared to
$1,723,000 last year, an increase of $636,000 or 36.9%. This increase was
$885,000 in sporting goods, $177,000 in office and graphic arts and corporate
was down by $426,000.
NINE MONTHS COMPARISON 2000 VS. 1999
Net sales were $73,170,000 in the first nine months of 2000 as compared to
$51,360,000 in the first nine months of 1999, an increase of $21,810,000 or
42.5%. Sales of sporting goods increased $19,417,000 or 75.6% and sales of
office and graphic arts products increased $2,393,000 or 9.3%.
The increase in year to date sporting goods net sales was about 32% in the
<PAGE> 11
Zue acquisition products and about 68% in Game Parlor products. The increase in
office and graphic arts products year to date net sales was mainly in the Mead
Hatcher acquisition products (computer accessories).
Cost of sales was $49,506,000 in the first nine months of 2000 as compared
to $35,263,000 in 1999, an increase of $14,243,000 or 40.4%.
Cost of sales as a percentage of net sales was 67.6% in 2000 as compared to
68.6% in 1999.
Selling, general, and administrative expenses were $14,026,000 in the first
nine months of 2000 as compared to $11,029,000 in the first nine months of 1999,
an increase of $2,997,000 or 27.2%.
Selling, general, and administrative expenses as a percentage of net sales
were 19.2% in 2000 as compared to 21.5% in 1999. The decrease in these expenses
as a percentage of net sales was mainly due to the higher sales level in the
sporting goods segment which has lower selling, general and administrative
expenses.
Interest expense was $1,467,000 in the first nine months of 2000 as
compared to $409,000 in the first nine months of 1999, an increase of
$1,058,000, or 258.7% due to higher average borrowing levels.
The net income in the first nine months of 2000 was $4,451,000 as compared
to $2,569,000 in the first nine months of 1999. This is a $1,882,000 increase
with sporting goods being up $2,001,000 and office and graphic arts being up
$838,000 and corporate down $957,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was $3,208,000 in
the first nine months of 2000 as compared to $10,770,000 in the first nine
months of 1999. Most of the cash provided by operating activities in 2000 was
from operations. The Company's net cash used for investing activities was
$1,982,000 in the first nine months of 2000 as compared to $1,763,000 in the
first nine months of 1999. This was used for the purchase of property and
equipment and for the purchase of certain assets of Lifetime Products, Inc. The
Company's net cash used by financing activities was $1,096,000 in the first nine
months of 2000 as compared to $9,184,000 in the first nine months of 1999.
The Company's working capital requirements are currently funded by cash
flow from operations and a domestic line of credit in the amount of $30,000,000,
which includes a letter of credit facility in the amount of $2,000,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
<PAGE> 12
PART II. OTHER INFORMATION
There were no reports on Form 8-K filed for the three months ended September 30,
2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESCALADE, INCORPORATED
Date: October 20, 2000 C. W. (Bill) Reed
---------------- ----------------------------
C. W. (Bill) Reed
President and
Chief Executive Officer
Date: October 20, 2000 John R. Wilson
---------------- ----------------------------
John R. Wilson
Vice President and
Chief Financial Officer
