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 23, 1996 Commission File Number 0-6966 ESCALADE, INCORPORATED ---------------------- (exact name of registrant as specified in its charter) Indiana 13-2739290 ------- ---------- (State of incorporation) (I.R.S. EIN) 817 Maxwell Avenue, Evansville, Indiana 47717 --------------------------------------------- (Address of principal executive 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 10, 1996 : 4,123,954 INDEX Page No. Part I. Financial Information: Item 1 - Financial Statements: Consolidated Condensed Balance Sheet -- March 23, 1996, March 25, 1995, and December 30, 1995 3 Consolidated Condensed Statement of Income -- Three Months Ended March 23, 1996 and March 25,1995 4 Consolidated Condensed Statement of Cash Flows -- Three Months Ended March 23, 1996 and March 25, 1995 5 Notes to Consolidated Condensed Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations: 7-8 Part II. Other Information 8 Signatures 8 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED) (Dollars in Thousands) March 23, March 25, December 30, 1996 1995 1995 ASSETS ------------------------------------------ Current assets: Cash $ 261 $ 118 $ 1,247 Receivables, less allowances of $753, $589 and $726 12,830 10,645 25,285 Inventories 15,994 27,067 15,152 Prepaid expense 119 198 267 Income tax refundable --- 399 275 Deferred income tax benefit 1,828 1,631 1,828 ------- ------- ------- TOTAL CURRENT ASSETS 31,032 40,058 44,054 Property, plant, and equipment 33,273 37,908 33,064 Accum. depr. and amortization (22,508) (24,718) (21,840) ------- ------- ------- 10,765 13,190 11,224 Deferred income tax benefit 662 706 662 Other assets 1,819 1,850 1,827 ------- ------- ------- $44,278 $55,804 $57,767 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable - bank $ 200 $11,500 $14,350 Current portion of long-term debt 3,007 2,478 2,383 Trade accounts payable 3,032 2,802 2,370 Accrued liabilities 7,472 6,428 7,553 Federal income tax payable 202 329 ------- ------- ------- TOTAL CURRENT LIABILITIES 13,913 23,208 26,985 Other Liabilities: Long-term debt 5,641 8,648 6,265 Deferred compensation 1,203 1,100 1,179 ------- ------- ------- 6,844 9,748 7,444 Stockholders' equity: Preferred stock: Authorized 1,000,000 shares; no par value, none issued Common stock: Authorized 10,000,000 shares; no par value,Issued and outstanding - 4,123,954, 4,133,361, and 4,133,954 at 3-23-96, 3-25-95, and 12-30-95 $17,523 $17,571 $17,572 Retained earnings 5,998 5,277 5,766 ------- ------- ------- $23,521 $22,848 $23,338 ------- ------- ------- $44,278 $55,804 $57,767 ======= ======= ======= See notes to Consolidated Condensed Financial Statements. ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF INCOME (UNAUDITED) (Dollars in Thousands, except per share amounts) Three Months Ended ------------------------------- March 23, 1996 March 25, 1995 -------------- -------------- Net sales $15,381 $18,110 Costs, expenses and other income: Cost of products sold 11,128 14,117 Selling, administrative and general expenses 3,552 3,521 Interest 309 571 Other income (55) (53) ------- ------- 14,934 18,156 INCOME (LOSS) BEFORE INCOME TAXES 447 (46) Provision (benefit) for income taxes 215 (5) ------- ------- NET INCOME (LOSS) $ 232 $ (41) ======= ======= Per share data: NET INCOME (LOSS) $ .06 $ (.01) ======= ======= See notes to Consolidated Condensed Financial Statements. ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) Three Months Ended March 23, 1996 March 25, 1995 Operating Activities: ------------------------------- Net Income (Loss) $ 232 $ (41) Depreciation and amortization 668 903 Adjustments necessary to reconcile net income to net cash provided by operating activities 12,522 16,381 ------- ------- Net cash provided by operating activities 13,422 17,243 ------- ------- Investing Activities: Purchase of property and equipment (209) (383) ------- ------- Net cash used by investing activities (209) (383) ------- ------- Financing Activities: Net decrease in notes pay.- bank (14,150) (17,737) Purchase of common stock (49) --- ------- ------- Net cash used by financing activities (14,199) (17,737) ------- ------- Decrease in cash (986) (877) Cash, beginning of period 1,247 995 ------- ------- Cash, end of period $ 261 $ 118 ======= ======= See notes to Consolidated Condensed Financial Statements. ESCALADE, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note A - Basis of Presentation - ------------------------------ In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the company as of March 23, 1996, March 25, 1995, and December 30, 1995 and the results of operations and changes in financial position for the three months ended March 23, 1996 and March 25, 1995. The balance sheet at December 30, 1995 was derived from the audited balance sheet included in the 1995 annual report to shareholders. Note B - Seasonal Aspects - ------------------------- The results of operations for the three month periods ended March 23, 1996 and March 25, 1995 are not necessarily indicative of the results to be expected for the full year. Note C - Inventories (Dollars in Thousands) - ------------------------------------------- 3-23-96 3-25-95 12-30-95 ------- ------- -------- Raw Materials $ 6,655 $10,472 $ 6,692 Work In Process 3,153 3,619 3,136 Finished Goods 6,186 12,976 5,324 ------- ------- ------- $15,994 $27,067 $15,152 ======= ======= ======= Note D - Earnings Per Share - --------------------------- Earnings (loss) per common and common equivalent shares are based on average shares outstanding. Dilutive effects of stock options on net income (loss) are not material. The number of shares used to calculate earnings (loss) per share for the three months ended March 23, 1996 and March 25, 1995 was 4,133,359 and 4,133,361. Note E - Income Taxes - --------------------- The provision (benefit) for income taxes was computed based on financial statement income (loss). 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 1996 vs. 1995 Net sales were $ 15,381,000 in the first quarter of 1996 as compared to $18,110,000 in the first quarter of 1995 a decrease of $2,729,000 or 15.1%. Sales of sporting goods decreased $3,349,000 or 23.5% and sales of office and graphic arts products increased $620,000 or 16.2%. The decrease in sporting goods sales was mainly due to decreased volume in the dartboard cabinet product line. The increase in office and graphic arts machines and equipment sales is primarily due to increased market share in the office machines and equipment product line. Cost of sales was $11,128,000 in the first quarter of 1996 as compared to $14,117,000 in the first quarter of 1995, a decrease of $2,989,000 or 21.2%. Cost of sales as a percentage of net sales was 72.3% in the first quarter of 1996 as compared to 78.0% in the first quarter of 1995. Sporting goods cost of sales as a percentage of net sales decreased 4.2% and office and graphic arts cost of sales as a percentage of net sales decreased 1.6%. These decreases in the cost of sales percentage of net sales were due to lower material costs and reduced direct labor costs. Selling, general, and administrative expenses were $3,552,000 in the first quarter of 1996 as compared to $3,521,000 in the first quarter of 1995, an increase of $31,000 or .9%. Selling, general and administrative expenses as a percentage of net sales was 23.1% in the first quarter of 1996 as compared to 19.4% in the first quarter of 1995. This increase as a percentage of net sales was mainly due to decreased sales volume. Interest expense decreased $262,000 to $309,000 in 1996 from $571,000 in 1995, a decrease of 45.9% due to decreased borrowing levels. LIQUIDITY AND CAPITAL RESOURCES The Company's net cash provided by operating activities was $13,422,000 in the first quarter of 1996 as compared to $17,243,000 in the first quarter of 1995. 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 $25,285,000 and at the end of the first quarter the net accounts receivable balance was $12,830,000. The Company's net cash used for investing activities was $209,000 in the first quarter of 1996 as compared to $383,000 in the first quarter of 1995. This decrease of $174,000 was in the purchase of property and equipment. The Company's net cash used by financing activities was $14,199,000 in the first quarter of 1996 as compared to $17,737,000 in the first quarter of 1995. Most of the cash used by financing activities was for the pay down of notes payable - bank. At the end of the year, the notes payable - bank was $14,350,000 and at the end of the first quarter notes payable - bank was $200,000. The Company's working capital requirements are currently funded by cash flow from operations, a domestic line of credit in the amount of $28,000,000, and a letter of credit facility in the amount of $4,000,000. The outstanding loans under the domestic line of credit bear interest at either of the following rates, as selected by the Company from time to time; the bank's prime lending rate or the London Inter-Bank Offered Rate plus 1.25%. The Company's domestic line of credit agreement expires on May 31, 1996 and will be renewed during the second quarter. The Company reactivated its stock buy back program in the first quarter of 1996. Under the plan the Company purchased 10,000 shares at $4.9375 per share during the first quarter. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (b) Reports on Form 8-K - There were no reports on Form 8-K filed for the three months ended March 23, 1996. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ESCALADE, INCORPORATED Date:April 10, 1996 Robert E. Griffin -------------- ---------------------------- Robert E. Griffin Chairman and Chief Executive Officer Date:April 10, 1996 John R. Wilson -------------- ---------------------------- John R. Wilson Vice President and Chief Financial Officer