1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 24, 2001 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 offices) 812-467-1200 ------------ Securities registered pursuant to Section 12(b) of the Act NONE ---- Securities registered pursuant to section 12(g) of the Act: Common Stock, No Par Value -------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of Registrant's common stock (no par value) outstanding as of April 6, 2001 : 2,166,951
2 INDEX <TABLE> <CAPTION> Page No. <S> <C> Part I. Financial Information: Item 1 - Financial Statements: Consolidated Condensed Balance Sheet (Unaudited) March 24, 2001, March 18, 2000, and December 30, 2000 3 Consolidated Condensed Statement of Income (Unaudited) Three Months Ended March 24, 2001 and March 18,2000 4 Consolidated Statement of Comprehensive Income (Unaudited) Three Months Ended March 24, 2001 and March 18, 2000 4 Consolidated Condensed Statement of Cash Flows (Unaudited) Three Months Ended March 24, 2001 and March 18, 2000 5 Notes to Consolidated Condensed Financial Statements 6-8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations: 9-10 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 10 Part II. Other Information 10 Signatures 10 </TABLE>
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED) <TABLE> <CAPTION> (Dollars in Thousands) March 24, March 18, December 30, 2001 2000 2000 ASSETS ----------------------------------------------- <S> <C> <C> <C> Current assets: Cash $ 348 $ 7 $ 1,147 Receivables, less allowances of $686, $811 and $611 13,600 13,609 26,406 Inventories 16,899 13,926 15,589 Prepaid expense 75 59 137 Deferred income tax benefit 824 1,248 824 ------- ------- ------- TOTAL CURRENT ASSETS 31,746 28,849 44,103 Property, plant, and equipment 34,715 34,785 34,133 Accum. depr. and amortization (25,662) (24,716) (25,077) ------- ------- ------- 9,053 10,069 9,056 Other assets 6,178 5,274 5,418 Goodwill 10,672 11,537 10,899 ------- ------- ------- $57,649 $55,729 $69,476 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable - bank $ 3,500 $ 1,000 $13,267 Current portion of long-term debt 167 2,000 --- Trade accounts payable 3,030 3,742 2,093 Accrued liabilities 9,628 9,081 14,282 Federal income tax payable 552 544 1,976 ------- ------- ------- TOTAL CURRENT LIABILITIES 16,877 16,367 31,618 Other Liabilities: Long-term debt 14,967 7,700 12,700 Deferred compensation 1,220 1,304 1,198 ------- ------- ------- 16,187 9,004 13,898 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 - 2,166,951, 2,918,178, and 2,165,862 at 3-24-01, 3-18-00, and 12-30-00 2,167 2,918 2,166 Retained earnings 22,246 27,238 21,597 Accumulated other comprehensive income 172 202 197 ------- ------- ------- 24,585 30,358 23,960 ------- ------- ------- $57,649 $55,729 $69,476 ======= ======= ======= </TABLE> See notes to Consolidated Condensed Financial Statements.
4 ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED) (Dollars in Thousands, except per share amounts) <TABLE> <CAPTION> Three Months Ended March 24, 2001 March 18, 2000 -------------- -------------- <S> <C> <C> Net sales $18,496 $17,575 Costs, expenses and other income: Cost of products sold 12,710 11,578 Selling, administrative and general expenses 4,060 3,858 Interest 317 234 Amortization of goodwill 227 192 Other (income) expense 167 118 ------- ------- 17,481 15,980 INCOME BEFORE INCOME TAXES 1,015 1,595 Provision for income taxes 381 676 ------- ------- NET INCOME $ 634 $ 919 ======= ======= Per share data: Basic earnings per share $ .29 $ .31 Diluted earnings per share $ .29 $ .31 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) NET INCOME $ 634 $ 919 UNREALIZED GAIN (LOSS)ON SECURITIES, NET OF TAX (25) 1 ------- ------- COMPREHENSIVE INCOME $ 609 $ 920 ======= ======= </TABLE> See notes to Consolidated Condensed Financial Statements.
5 ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended March 24, 2001 March 18, 2000 Operating Activities: ---------------------------------------- <S> <C> <C> Net Income $ 634 $ 919 Depreciation and amortization 821 782 Adjustments necessary to reconcile net income to net cash provided by operating activities 7,370 9,389 ------- ------- Net cash provided by operating activities 8,825 11,090 ------- ------- Investing Activities: Purchase of property and equipment (341) (169) Purchase of certain assets of Lifetime Products, Inc. --- (1,100) Purchase of certain assets of Accudart (1,966) --- ------- ------- Net cash used by investing activities (2,307) (1,269) ------- ------- Financing Activities: Net decrease in notes payable- bank (9,767) (11,570) Net increase in long term debt 2,434 --- Proceeds from exercise of stock options 16 --- ------- ------- Net cash used by financing activities (7,317) (11,570) ------- ------- Decrease in cash (799) (1,749) Cash, beginning of period 1,147 1,756 ------- ------- Cash, end of period $ 348 $ 7 ======= ======= </TABLE> See notes to Consolidated Condensed Financial Statements.
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 three month periods ended March 24, 2001 and March 18, 2000 are not necessarily indicative of the results to be expected for the full year. Note C - Inventories (Dollars in Thousands) - ------------------------------------------- <TABLE> <CAPTION> 3-24-01 3-18-00 12-30-00 ------- ------- -------- <S> <C> <C> <C> Raw Materials $ 4,855 $ 4,311 $ 4,871 Work In Process 3,672 2,906 3,748 Finished Goods 8,372 6,709 6,970 ------- ------- ------- $16,899 $13,926 $15,589 ======= ======= ======= </TABLE> Note D - Income Taxes - --------------------- The provision for income taxes was computed based on financial statement income.
7 Note E - Earnings Per Share - ----------------------------- Earnings per share were computed as follows: <TABLE> <CAPTION> Three Months Ended March 24, 2001 ----------------------------------------------------------- Weighted Average Per Share Income Shares Amount ------- --------- ---------- <S> <C> <C> <C> Net Income $634 ------- Basic Earnings per Share Income available to common stockholders 634 2,166 $.29 ======= Effect of Dilutive Securities Stock options 16 ------- ------- Diluted Earnings Per Share Income available to common stockholders and assumed conversions $634 2,182 $.29 ======= ======= ======= </TABLE> <TABLE> <CAPTION> Three Months Ended March 18, 2000 ----------------------------------------------------------- Weighted Average Per Share Income Shares Amount ------- --------- ---------- <S> <C> <C> <C> Net Income $ 919 ------- Basic Earnings per Share Income available to common stockholders 919 2,918 $.31 ======= Effect of Dilutive Securities Stock options 5 ------- ------- Diluted Earnings Per Share Income available to common stockholders and assumed conversions $ 919 2,923 $.31 ======= ======= ======= </TABLE>
8 Note F - Segment Information - ----------------------------- <TABLE> <CAPTION> As of and for the Three Months Ended March 24, 2001 ------------------------------------------------------------- Office and Sporting Graphic Goods Arts Corporate Total -------- ---------- --------- --------- <S> <C> <C> <C> <C> Revenues from external customers $10,734 $ 7,762 $ --- $ 18,496 Net income (loss) (197) 973 (142) 634 Assets $31,166 $22,347 $ 4,136 $ 57,649 </TABLE> <TABLE> <CAPTION> As of and for the Three Months Ended March 18, 2000 ------------------------------------------------------------- Office and Sporting Graphic Goods Arts Corporate Total -------- ---------- --------- --------- <S> <C> <C> <C> <C> Revenues from external customers $ 9,023 $ 8,552 $ --- $ 17,575 Net income (loss) (31) 1,015 (65) 919 Assets $28,301 $23,239 $4,189 $ 55,729 </TABLE>
9 ESCALADE, INCORPORATED AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is Management's discussion and analysis of certain significant factors which have affected the Company's earnings during the periods included in the accompanying consolidated condensed statements of income. RESULTS OF OPERATIONS FIRST QUARTER COMPARISON 2001 vs. 2000 Net sales were $18,496,000 in the first quarter of 2001 as compared to $17,575,000 in the first quarter of 2000 an increase of $921,000 or 5.2%. Net sales of sporting goods increased $1,711,000 or 19.0% and net sales of office and graphic arts decreased $790,000 or 9.2%. Of the increase in sporting goods net sales 65% was in game parlor products and the remaining 35% was spread over archery, basketball and darts. The increase in game parlor products was in imported game tables and the increases in basketball and darts was in product from recent acquisitions. The decrease in office and graphic arts net sales is believed to be mainly due to the slowing economy causing a decrease in the incoming order rate. Cost of sales was $12,710,000 in the first quarter of 2001 as compared to $11,578,000 in the first quarter of 2000, an increase of $1,132,000 or 9.8%. Cost of sales as a percentage of net sales was 68.7% in the first quarter of 2001 as compared to 65.9% in the first quarter of 2000. Sporting goods cost of sales as a percentage of net sales increased 2.0% and office and graphic arts cost of sales as a percentage of net sales decreased .7%. Sporting goods cost of sales increase was mainly due to a shift in sales to less profitable product lines (import game tables). Office and graphic arts cost of sales decrease was mainly due to a reduction in factory expenses. Selling, general, and administrative expenses were $4,060,000 in the first quarter of 2001 as compared to $3,858,000 in the first quarter of 2000, an increase of $202,000 or 5.2%. Selling, general and administrative expenses as a percentage of net sales was 21.9% in the first quarter of 2001 and 2000. Interest expense increased $83,000 to $317,000 in 2001 from $234,000 in 2000, an increase of 35.5% due to higher average borrowing levels. The effective income tax rate for the first quarter of 2001 was 37.5% as compared to 42.4% in 2000.
10 LIQUIDITY AND CAPITAL RESOURCES The Company's net cash provided by operating activities was $8,825,000 in the first quarter of 2001 as compared to $11,090,000 in the first quarter of 2000. Most of the cash provided by operating activities was from collection of the year end accounts receivable during the first quarter. The net accounts receivable balance at the end of the year was $26,406,000 and at the end of the first quarter the net accounts receivable balance was $13,600,000. The Company's net cash used for investing activities was $2,307,000 in the first quarter of 2001 as compared to $1,269,000 in the first quarter of 2000. $1,966,000 of the cash used in 2001 was for the purchase of certain assets of Accudart. The Company's net cash used by financing activities was $7,317,000 in the first quarter of 2001 as compared to $11,570,000 in the first quarter of 2000. The cash used by financing activities was for the pay down of bank debt. At the end of the year, the bank debt was $25,967,000 and at the end of the first quarter the bank debt was $18,634,000. The Company's working capital requirements are currently funded by cash flow from operations and a revolving line of credit in the amount of $30,000,000. There was $3,500,000 borrowed under this revolving line of credit at the end of the first quarter. This report contains forward-looking statements relating to present or future trends or factors that are subject to risks and uncertainties. Escalade's future financial performance could differ materially from the expectations of management contained herein. Escalade undertakes no obligation to release revisions to these forward-looking statements after the date of this report. PART II. OTHER INFORMATION There were no reports on Form 8-K filed for the three months ended March 24, 2001. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ESCALADE, INCORPORATED Date: April 12, 2001 C. W. (Bill) Reed -------------- ---------------------------- C. W. (Bill) Reed President and Chief Executive Officer Date: April 12, 2001 John R. Wilson -------------- ---------------------------- John R. Wilson Vice President and Chief Financial Officer