What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-08-05 · 168 added, 43 removed, 502 unchanged (30% of the section changed)

93 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

All Amounts in Thousands Except Per Share Data

October 2, 2021

October 3, 2020

October 2, 2021

October 3, 2020

$ 81,298  

17 unchanged sentences

26,111  

13,296  

Other Income (Expense)

7 unchanged sentences

26,071  

13,260  

Provision for Income Taxes

24 unchanged sentences

All Amounts in Thousands

Balances at March 21, 2020

Balances at July 11, 2020

14,154  

2 unchanged sentences

$ 132,564  

10,186  

Expense of stock options and restricted stock units

1 unchanged sentence

( 15 )  

Issuance of restricted stock awards

( 35 )  

Dividends declared

( 1,984 )  

Stock issued to directors as compensation

Balances at July 11, 2020

Balances at October 3, 2020

14,169  

21 unchanged sentences

Stock issued to directors as compensation

Balances at July 11, 2020

Balances at October 3, 2020

14,169  

3 unchanged sentences

All Amounts in Thousands

Balances at March 20, 2021

Balances at July 10, 2021

13,779  

3 unchanged sentences

Expense of stock options and restricted stock units

Settlement of restricted stock units

Dividends declared

5 unchanged sentences

Stock issued to directors as compensation

Balances at July 10, 2021

Balances at October 2, 2021

13,558  

20 unchanged sentences

Stock issued to directors as compensation

Balances at July 10, 2021

Balances at October 2, 2021

13,558  

5 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

Nine Months Ended

All Amounts in Thousands

July 10, 2021

July 11, 2020

October 2, 2021

October 3, 2020

Operating Activities:

5 unchanged sentences

Stock-based compensation

Gain on disposal of property and equipment

Gain on disposal of property and equipment

( 27 )  

Adjustments necessary to reconcile net income to net cash provided (used) by operating activities

Adjustments necessary to reconcile net income to net cash used by operating activities

( 26,933 )  

25 unchanged sentences

Net increase in cash and cash equivalents

10,787  

Cash and cash equivalents, beginning of period

15 unchanged sentences

Seasonal Aspects

The results of operations for the three and six month periods ended July 10, 2021 and July 11, 2020 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three and nine month periods ended October 2, 2021 and October 3, 2020 are not necessarily indicative of the results to be expected for the full year.

Note C ‑

18 unchanged sentences

Fair values of long-term debt is estimated based on borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model.

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall in accordance with FASB ASC 825 at July 10, 2021, December 26, 2020 and July 11, 2020.

The following table presents estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall in accordance with FASB ASC 825 at October 2, 2021, December 26, 2020 and October 3, 2020.

Fair Value Measurements Using

July 10, 2021

October 2, 2021

Quoted Prices in

32 unchanged sentences

Fair Value Measurements Using

July 11, 2020

October 3, 2020

Quoted Prices in

11 unchanged sentences

The fair value of stock-based compensation is recognized in accordance with the provisions of FASB ASC 718, Stock Compensation .

During the six months ended July 10, 2021 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors 5,683 shares of common stock.

During the six months ended July 10, 2021, the Company awarded 13,332 restricted stock units to directors and 37,283 restricted stock units to employees.

During the nine months ended October 2, 2021 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors 5,683 shares of common stock.

During the nine months ended October 2, 2021, the Company awarded 13,332 restricted stock units to directors and 37,283 restricted stock units to employees.

The restricted stock units awarded to directors time vest over two years ( one -half one year from grant date and one -half two years from grant date) provided that the director is still a director of the Company at the vest date.

1 unchanged sentence

The 2021 restricted stock units awarded to employees time vest over three years ( one - third one year from grant, one - third two years from grant and one - third three years from grant) provided that the employee is still employed by the Company on the vesting date.

For the three and six months ended July 10, 2021, the Company recognized stock based compensation expense of $ 326 thousand and $ 437 thousand, respectively compared to stock based compensation expense of $ 357 thousand and $ 493 thousand for the same periods in the prior year.

At July 10, 2021 and July 11, 2020, respectively, there was $ 1.1 million and $ 1.4 million in unrecognized stock-based compensation expense related to non-vested stock awards.

For the three and nine months ended October 2, 2021, the Company recognized stock based compensation expense of $ 229 thousand and $ 666 thousand, respectively compared to stock based compensation expense of $ 263 thousand and $ 756 thousand for the same periods in the prior year.

At October 2, 2021 and October 3, 2020, respectively, there was $ 0.9 million and $ 1.2 million in unrecognized stock-based compensation expense related to non-vested stock awards.

Note F ‑

1 unchanged sentence

For the Three Months

Ended July 10, 2021

Ended October 2, 2021

Revenues from external customers

$ 81,298  

Operating income (loss)

As of and for the Six Months

Ended July 10, 2021

( 415 )  

As of and for the Nine Months

Ended October 2, 2021

Revenues from external customers

11 unchanged sentences

For the Three Months

Ended July 11, 2020

Ended October 3, 2020

Revenues from external customers

$ 78,069  

Operating income (loss)

As of and for the Six Months

Ended July 11, 2020

13,177  

( 362 )  

12,815  

10,186  

As of and for the Nine Months

Ended October 3, 2020

Revenues from external customers

$ 198,882  

Operating income (loss)

27,640  

( 1,529 )  

26,111  

20,017  

20,847  

$ 190,309  

$ 8,407  

$ 198,716  

Note G –

Dividend Payment

On September 14, 2021, the Company paid a quarterly dividend of $ 0.14 per common share to all shareholders of record on September 7, 2021.

The total amount of the dividend was approximately $ 1.9 million and was charged against retained earnings.

On June 8, 2021, the Company paid a quarterly dividend of $ 0.14 per common share to all shareholders of record on June 1, 2021.

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Weighted average common shares outstanding

13,706  

14,128  

13,821  

14,117  

Dilutive effect of stock options and restricted stock units

Weighted average common shares outstanding, assuming dilution

13,808  

14,265  

13,923  

14,222  

Stock options that are anti-dilutive as to earnings per share and unvested restricted stock units which have a market condition for vesting that has not been achieved are ignored in the computation of dilutive earnings per share.

2 unchanged sentences

New Accounting Standards and Changes in Accounting Principles

With the exception of that discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended July 10, 2021, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10 -K for the fiscal year ended December 26, 2020, that are of significance, or potential significance to the Company.

With the exception of that discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended October 2, 2021, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10 -K for the fiscal year ended December 26, 2020, that are of significance, or potential significance to the Company.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019 - 12, Income Taxes (Topic 740 ):

31 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

All Amounts in Thousands

October 2, 2021

October 3, 2020

October 2, 2021

October 3, 2020

Gross Sales by Channel:

22 unchanged sentences

16,947  

15,552  

Total Gross-to-Net Sales Adjustments

9 unchanged sentences

Our commenced leases have remaining lease terms of 1 year to 6 years.

As of July 10, 2021, the Company has not entered into any lease arrangements classified as a finance lease.

As of October 2, 2021, the Company has not entered into any lease arrangements classified as a finance lease.

We determine if an arrangement is a lease at inception.

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

All Amounts in Thousands

1 unchanged sentence

Operating Lease Cost

$ 1,151  

Short-term Lease Cost

5 unchanged sentences

Operating Cash Flows

$ 1,050  

New ROU Assets –

1 unchanged sentence

$ 1,189  

$ 2,329  

Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:

Six Months Ended

Nine Months Ended

All Amounts in Thousands

Weighted Average Remaining Lease Term –

Operating Leases (in years)

Operating Leases (years)

Weighted Average Discount Rate –

1 unchanged sentence

5.00 %  

Future minimum lease payments under non-cancellable leases as of July 10, 2021 were as follows:

Future minimum lease payments under non-cancellable leases as of October 2, 2021 were as follows:

All Amounts in Thousands

2 unchanged sentences

$ 2,483  

Reported as of July 10, 2021

Reported as of October 2, 2021

Current operating lease liabilities

1 unchanged sentence

$ 2,483  

As of July 10, 2021, we have entered into a lease for additional warehouse and operations which has not yet commenced.

As of October 2, 2021, we have entered into a lease for additional warehouse and operations which has not yet commenced.

Although the location is currently under construction, we do not control the building during construction, and are thus not deemed to be the owner during construction. Amounts in the table above exclude legally binding minimum lease payments for the lease signed but not yet commenced of $ 9.9 million.

3 unchanged sentences

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.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Interim 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;

Escalade’s ability to develop and implement our own direct to consumer e-commerce distribution channel;

Escalade’s 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.

Escalade undertakes no obligation to release revisions to these forward-looking statements after the date of this report.

Escalade, Incorporated (Escalade, the Company, we, us or our) is focused on growing its Sporting Goods business through organic growth of existing categories, strategic acquisitions, and new product development.

The Sporting Goods business competes in a variety of categories including basketball goals, archery, pickleball, billiards, indoor and outdoor game recreation, water sports, and fitness products.

Strong brands and on-going investment in product development provide a solid foundation for building customer loyalty and continued growth.

Within the sporting goods industry, the Company has successfully built a robust market presence in several niche markets.

This strategy is heavily dependent on expanding our customer base, barriers to entry, strong brands, excellent customer service and a commitment to innovation.

A key strategic advantage is the Company’s established relationships with major customers that allow the Company to bring new products to market in a cost effective manner while maintaining a diversified portfolio of products to meet the demands of consumers.

In addition to strategic customer relations, the Company has substantial manufacturing and import experience that enables it to be a low cost supplier.

To enhance growth opportunities, the Company has focused on promoting new product innovation and development and brand marketing.

In addition, the Company has embarked on a strategy of acquiring companies or product lines that complement or expand the Company's existing product lines or provide expansion into new or emerging categories in sporting goods.

A key objective is the acquisition of product lines with barriers to entry that the Company can take to market through its established distribution channels or through new market channels.

Significant synergies are achieved through assimilation of acquired product lines into the existing Company structure.

The Company also sometimes divests or discontinues certain operations, assets, brands, and products that do not perform to the Company's expectations or no longer fit with the Company's strategic objectives.

Management believes that key indicators in measuring the success of these strategies are revenue growth, earnings growth, new product introductions, and the expansion of channels of distribution.

COVID-19 Pandemic

The novel coronavirus (COVID-19) pandemic continued to affect the Company’s operations through the third quarter of 2021 and may continue to do so indefinitely thereafter.

Increased customer demand the Company experienced through 2020, likely caused in part by consumers remaining home to limit the spread of COVID-19, has carried over into the 2021 fiscal year.

While the Company continues to meet these demands through accelerated ordering schedules and increased inventory, a substantial decrease in customer demand or slower payments by the Company’s mass merchants, specialty dealers or other customers could adversely impact the Company’s liquidity.

All of these factors may have far reaching impacts on the Company’s business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of the Company’s management and employees, manufacturing, distribution, marketing and sales operations, customer and consumer behaviors, and on the overall economy.

The scope and nature of these impacts, most of which are beyond the Company’s control, continue to evolve and the outcomes are uncertain.

In particular, uncertainty concerning the ongoing severity of the pandemic, potential government actions in response to the pandemic, the length of time it takes for normal economic operating conditions to resume, and potential changes in consumer habits following the lifting of COVID restrictions, all contribute to a volatile environment for conducting business.

Due to the above circumstances and as described generally in this Form 10-Q, the Company’s results of operations for the period ended October 2, 2021 are not necessarily indicative of the results to be expected for fiscal year 2021.

Management cannot predict the full impact of the COVID-19 pandemic on the Company’s sales channels, supply chain, manufacturing and distribution nor to economic conditions generally, including the effects on consumer spending.

The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic ends.

Results of Operations

The following schedule sets forth certain consolidated statement of operations data as a percentage of net revenue:

Three Months Ended

Nine Months Ended

Cost of products sold

Selling, administrative and general expenses

Operating income

Revenue and Gross Margin

Sales increased by 4.1% for the third quarter of 2021, compared with the same period in the prior year.

The increase in sales was driven by continued demand for our products, primarily in the archery and games product lines.

For the first nine months of 2021, sales were up 20.8% compared to prior year.

The overall gross margin percentage decreased to 22.5% for the third quarter of 2021, compared to 30.1% for 2020.

Gross margin was negatively impacted by higher transportation expenses, raw material costs, currency exchange rates, increased wage pressure, and inventory handling costs.

Gross margin percentage decreased to 25.3% for the first nine months of 2021, compared to 28.6% for the same period in the prior year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were $10.2 million for the third quarter of 2021 compared to $10.4 million for the same period in the prior year, a decrease of $0.2 million or 1.7%.

SG&A as a percent of sales is 12.6% for the third quarter of 2021 compared with 13.3% for the same period in the prior year.

For the first nine months of 2021, SG&A were $33.9 million compared to $29.8 million for the same period in 2020, an increase of $4.1 million or 13.9%.

As a percent of sales, SG&A is 14.1% for the first nine months of 2021 compared with 15.0% for the same period in the prior year.

Provision for Income Taxes

The effective tax rate for the first nine months of 2021 was 20.5% compared to 20.0% for the same period last year.

Financial Condition and Liquidity

Total debt at the end of the first nine months of 2021 was $59.0 million, an increase of $28.9 million from December 26, 2020.

The following schedule summarizes the Company’s total debt:

Current portion of long-term debt

Long term debt

As a percentage of stockholders’

equity, total debt was 40.8%, 21.6% and zero at October 2, 2021, December 26, 2020, and October 3, 2020 respectively.

On July 7, 2021, the Company and its wholly owned subsidiary, Indian Industries, Inc.

(“Indian”) entered into the Fourth Amendment dated as of July 7, 2021 (the “Fourth Amendment”) to the 2019 Restated Credit Agreement dated as of January 21, 2019 among the Company, Indian, each of their domestic subsidiaries, and Chase, as Administrative Agent and as Lender (the “Lender”).

Under the terms of the Fourth Amendment, the Lender extended a $50.0 million term loan to the Company and reduced the maximum availability under the senior revolving credit facility from $75.0 million to $50.0 million.

The maturity date of the term loan is July 7, 2026 and the maturity date of the revolving credit facility likewise was extended to July 7, 2026.

The Company may prepay the revolving credit facility, in whole or in part, and reborrow prior to the revolving loan maturity date.

The Company’s indebtedness under the Credit Agreement continues to be collateralized by liens on all of the present and future equity of each of the Company’s domestic subsidiaries and substantially all of the assets of the Company (excluding real estate).

The Company funds working capital requirements, shareholder dividends, and stock repurchases through operating cash flows and revolving credit agreements with its bank.

The Company expects to have access to adequate levels of revolving credit to meet growth needs.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Required.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements