UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
| Date of report (Date of earliest event reported) | April 16, 2020 |
ESCALADE, INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
Indiana
(State or Other Jurisdiction of Incorporation)
| 0-6966 | 13-2739290 |
| (Commission File Number) | (IRS Employer Identification No.) |
| 817 Maxwell Avenue, Evansville, Indiana | 47711 |
| (Address of Principal Executive Offices) | (Zip Code) |
(812) 467-1358
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of Exchange on which registered |
| Common Stock, No Par Value | ESCA | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Section 2 – Financial Information
Item 2.02 Results of Operations and Financial Condition.
On April 16, 2020, Escalade, Incorporated ("Escalade") issued the press release attached hereto as Exhibit 99.1 announcing financial information regarding Escalade's first quarter results for 2020.
The information under this Item 2.02 shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Section 8 – Other Events
Item 8.01 Other Events.
On April 16, 2020, the Board of Directors of Escalade announced that a quarterly dividend of twelve and a half cents $0.125 per share would be paid to all shareholders of record on June 1, 2020 and disbursed on June 8, 2020.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit | Description |
| 99.1 | Press release dated April 16, 2020 |
| 2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Escalade, Incorporated has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: April 16, 2020 | ESCALADE, INCORPORATED | |
| By: /s/ STEPHEN R. WAWRIN | ||
| Stephen R. Wawrin, Vice President and Chief Financial Officer | ||
| 3 |
EXHIBIT 99.1
Press Release
Escalade Reports First Quarter 2020 Results
First-Quarter Highlights
| · | Revenue up 16.2% on net sales of $37.3 million |
| · | Gross margin increase of 100 bps to 27.4% |
| · | Operating income up 515.2% |
| · | Diluted EPS of $0.14 per share |
Evansville, IN (April 16, 2020) Escalade, Incorporated (NASDAQ: ESCA) - “Our first quarter results reflect the benefits of the operational and organizational changes we made during 2019 which enabled us to achieve operational leverage during the quarter and helped drive significant operating income improvement,” said Dave Fetherman, President and CEO of Escalade, Inc. “The 16.2% revenue growth was driven by our outdoor categories – basketball, pickleball, and Victory Tailgate. These categories, along with table tennis and billiard accessories, helped to drive the margin improvement. We made progress in reducing inventory and improving turns during the quarter. These efforts resulted in a significant improvement in EPS for our shareholders. We ended the quarter with a strong balance sheet, with available cash and full availability under our $50 million revolving facility with our long-term banking partner, JPMorgan Chase. With the emerging COVID-19 pandemic, we are focused on safeguarding and protecting our employees. Due to shelter in place mandates issued across the country, our e-commerce channel is experiencing increased demand for our fitness and home recreation products. As I turn over the reins to Scott Sincerbeaux, our incoming President and CEO, I want to thank all the employees that make up Escalade for your dedication, commitment and friendship over the years.”
Net sales for the first quarter of 2020 were $37.3 million compared to net sales of $32.1 million for the same quarter in 2019, an increase of $5.2 million or 16.2%. The increase in sales was primarily driven by growth in our outdoor categories, including basketball, pickleball and Victory Tailgate.
Gross margin ratio for the first quarter of 2020 was 27.4%, compared to 26.4% for the same period in the prior year. The improvement in gross margin was primarily due to product mix and operational improvements the Company has performed over the last year. Gross profit for the first quarter of 2020 was $10.2 million compared to gross profit of $8.5 million for the same quarter in 2019.
Selling, general and administrative expenses (SG&A) were $7.5 million for the quarter compared to $7.7 million for the same period in the prior year, a decrease of $0.2 million or 3.7%. The reduction in SG&A was a result of organizational changes and operating efficiencies put in place during 2019. SG&A, as a percent of sales, for the first quarter of 2020 decreased to 20.0% from 24.1% reported for the same period prior year.
Operating income for the first quarter of 2020 was $2.4 million compared to operating income of $0.4 million for the same period in the prior year.
Net income for the first quarter of 2020 was $2.0 million, or $0.14 diluted earnings per share compared to net income of 0.3 million, or $0.02 diluted earnings per share for the same quarter in 2019.
The Company announced a quarterly dividend of $0.125 per share to be paid to all shareholders of record on June 1, 2020 and disbursed on June 8, 2020.
Escalade is a leading manufacturer and marketer of sporting goods products sold worldwide. To obtain more information on the Company and its products, visit our website at: www.EscaladeInc.com or contact Patrick Griffin, Vice President of Corporate Development & Investor Relations at 812/467-1358.
ABOUT ESCALADE SPORTS
Headquartered in Evansville, IN, Escalade Sports is a global manufacturer and distributor of sports and outdoor recreational equipment. Leaders in their respective categories, Escalade Sports’ brands include Bear® Archery, Bear X™, Trophy Ridge®, Rocket®, SIK® and Cajun Bowfishing™ archery equipment; STIGA® and Ping-Pong® table tennis; Accudart® and Unicorn® darting; Atomic®, Victory Tailgate®, Triumph™ Sports, Viva Sol®, Zume Games® recreational games; DURA® and Onix® pickleball equipment; Goalrilla™, Goalsetter® residential in-ground basketball systems, Goaliath® and Silverback® residential in-ground and portable basketball goals; Lifeline® and the STEP® fitness products; Woodplay® premium playsets; Vuly™ trampolines; and Cue&Case® - a leader in specialty billiard accessories. Escalade Sports’ products are available at sporting goods dealers and independent retailers nationwide. For more information on Escalade Sports, its brands, instruction manuals, retailers, warranty, replacement parts or customer service, please call 1-888-784-4288 or visit www.escaladesports.com.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements relating to
present or future trends or factors that are subject to risks and uncertainties. These risks include, but are not limited to: specific
and overall impacts of the COVID-19 global pandemic on Escalade’s financial condition and results of operations; Escalade’s
plans and expectations surrounding the transition to its newly hired Chief Executive Officer and all potential related effects
and consequences; the impact of competitive products and pricing; product demand and market acceptance; new product development;
Escalade’s ability to achieve its business objectives, especially with respect to its Sporting Goods business on which it
has chosen to focus; Escalade’s ability to successfully achieve the anticipated results of strategic transactions, including
the integration of the operations of acquired assets and businesses and of divestitures or discontinuances of certain operations,
assets, brands, and products; the continuation and development of key customer, supplier, licensing and other business relationships;
the ability to successfully negotiate the shifting retail environment and changes in consumer buying habits; the financial health
of our customers; disruptions or delays in our business operations, including without limitation disruptions or delays in our supply
chain, arising from political unrest, war, labor strikes, natural disasters, public health crises such as the coronavirus pandemic,
and other events and circumstances beyond our control; Escalade’s ability to control costs; Escalade’s ability to successfully
implement actions to lessen the potential impacts of tariffs and other trade restrictions applicable to our products and raw materials,
including impacts on the costs of producing our goods, importing products and materials into our markets for sale, and on the pricing
of our products; general economic conditions; fluctuation in operating results; changes in foreign currency exchange rates; changes
in the securities markets; Escalade’s ability to obtain financing and to maintain compliance with the terms of such financing;
the availability, integration and effective operation of information systems and other technology, and the potential interruption
of such systems or technology; risks related to data security of privacy breaches; and other risks detailed from time to time in
Escalade’s filings with the Securities and Exchange Commission. Escalade’s future financial performance could differ
materially from the expectations of management contained herein. Additionally, many of these risks and uncertainties are currently
elevated by and may or will continue to be elevated by the COVID-19 pandemic. It is not possible to predict or identify all such
risks, but may become material in the future. Escalade undertakes no obligation to release revisions to these forward-looking statements
after the date of this report.
| 2 |
Escalade, Incorporated and Subsidiaries
Consolidated Statements of Operations
(Unaudited, In Thousands Except Per Share Data)
| Three Months Ended | ||||||||
| All Amounts in Thousands Except Per Share Data | March 21, 2020 | March 23, 2019 | ||||||
| Net sales | $ | 37,289 | $ | 32,102 | ||||
| Costs and Expenses | ||||||||
| Cost of products sold | 27,074 | 23,625 | ||||||
| Selling, administrative and general expenses | 7,457 | 7,745 | ||||||
| Amortization | 334 | 338 | ||||||
| Operating Income | 2,424 | 394 | ||||||
| Other Income (Expense) | ||||||||
| Interest expense | (44 | ) | (68 | ) | ||||
| Other income | 46 | 6 | ||||||
| Income Before Income Taxes | 2,426 | 332 | ||||||
| Provision for Income Taxes | 475 | 65 | ||||||
| Net Income | $ | 1,951 | $ | 267 | ||||
| Earnings Per Share Data: | ||||||||
| Basic earnings per share | $ | 0.14 | $ | 0.02 | ||||
| Diluted earnings per share | $ | 0.14 | $ | 0.02 | ||||
| Dividends declared | $ | 0.125 | $ | 0.125 | ||||
| 3 |
Consolidated Balance Sheets
(Unaudited, In Thousands)
| All Amounts in Thousands Except Share Information | March 21, 2020 | December 28, 2019 | March 23, 2019 | |||||||||
| (Unaudited) | (Audited) | (Unaudited) | ||||||||||
| ASSETS | ||||||||||||
| Current Assets: | ||||||||||||
| Cash and cash equivalents | $ | 6,167 | $ | 5,882 | $ | 4,299 | ||||||
| Receivables, less allowance of $565; $483; and $548; respectively | 32,594 | 35,450 | 31,951 | |||||||||
| Inventories | 42,235 | 42,269 | 47,744 | |||||||||
| Prepaid expenses | 2,646 | 3,151 | 2,986 | |||||||||
| Prepaid income tax | -- | 163 | 1,033 | |||||||||
| TOTAL CURRENT ASSETS | 83,642 | 86,915 | 88,013 | |||||||||
| Property, plant and equipment, net | 14,867 | 15,111 | 15,523 | |||||||||
| Operating lease right-of-use assets | 1,581 | 1,080 | 878 | |||||||||
| Intangible assets, net | 18,513 | 18,847 | 19,447 | |||||||||
| Goodwill | 26,749 | 26,749 | 26,381 | |||||||||
| Other assets | 69 | 77 | 90 | |||||||||
| TOTAL ASSETS | $ | 145,421 | $ | 148,779 | $ | 150,332 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
| Current Liabilities: | ||||||||||||
| Note payable | $ | -- | $ | 135 | $ | -- | ||||||
| Trade accounts payable | 6,387 | 7,765 | 7,756 | |||||||||
| Accrued liabilities | 8,029 | 9,689 | 6,512 | |||||||||
| Income tax payable | 315 | -- | -- | |||||||||
| Current operating lease liabilities | 730 | 621 | 595 | |||||||||
| TOTAL CURRENT LIABILITIES | 15,461 | 18,210 | 14,863 | |||||||||
| Other Liabilities: | ||||||||||||
| Long-term debt | -- | -- | 3,662 | |||||||||
| Deferred income tax liability | 3,537 | 3,537 | 3,409 | |||||||||
| Operating lease liabilities | 867 | 475 | 288 | |||||||||
| Other liabilities | 387 | 387 | 1,094 | |||||||||
| TOTAL LIABILITIES | 20,252 | 22,609 | 23,316 | |||||||||
| Stockholders' Equity: | ||||||||||||
| Preferred stock: | ||||||||||||
| Authorized 1,000,000 shares; no par value, none issued | ||||||||||||
| Common stock: | ||||||||||||
| Authorized 30,000,000 shares; no par value, issued and outstanding – 14,096,874; 14,214,777; and 14,471,496; shares respectively | 14,097 | 14,215 | 14,471 | |||||||||
| Retained earnings | 111,072 | 111,955 | 112,545 | |||||||||
| TOTAL STOCKHOLDERS' EQUITY | 125,169 | 126,170 | 127,016 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 145,421 | $ | 148,779 | $ | 150,332 | ||||||
| 4 |