EVANSVILLE, Ind., Oct. 27,
2022 /PRNewswire/ -- Escalade, Inc. (NASDAQ: ESCA, or
the "Company"), a leading manufacturer and distributor of sporting
goods and indoor/outdoor recreational equipment, today announced
third quarter and year to date results for 2022.
THIRD QUARTER 2022
(As compared to the third
quarter 2021)
- Net Sales decreased 7.9% to $74.9
million
- Organic sales, excluding acquisition contributions, declined
17.9%
- Gross margin declined 432 basis points, to 18.2%
- Operating income decreased 45.0% to $4.2
million
- Net income of $3.0 million, or
$0.22 per diluted share vs.
$6.0 million, or $0.43 per share for Q3 2021
- EBITDA decreased 35.3% to $5.8
million
- Announced $0.15 per share cash
dividend to shareholders of record on December 5, 2022
NINE MONTHS ENDED OCTOBER 1,
2022
(As compared to the first nine months of
2021)
- Net Sales increased 0.6% to $241.6
million
- Organic sales, excluding acquisition contributions, declined
8.4%
- Gross margin declined 153 basis points, to 23.8%
- Operating income decreased 15.9% to $21.4 million
- Net income of $15.3 million, or
$1.12 per diluted share vs.
$19.5 million, or $1.40 per diluted share for 2021
- EBITDA decreased 9.7% to $26.7
million
For the three months ended October 1,
2022, Escalade reported net income of $3.0 million, or $0.22 per diluted share, including $0.06 per diluted share of non-recurring
expense.
Sales declined due to softening consumer demand and excess
inventories in the retail channel. During the third quarter,
increases in billiards and pickleball sales, together with
contribution from the Brunswick Billiards® acquisition completed
January 21, 2022 were more than
offset by lower sales in outdoor categories including archery,
games, water sports, and playground.
The Company reported gross margin of 18.2%, a decline of 432
basis points compared with the prior-year period, due to lower
sales, unfavorable product mix, global supply chain constraints,
and nonrecurring product recall expenses.
Selling, general, and administrative expense as percentage of
net sales decreased to 11.7% in the third quarter 2022, versus
12.5% in the prior-year period, due to the Company's expense
mitigation efforts.
Earnings before interest, taxes, depreciation, and amortization
("EBITDA") declined 35.3% to $5.8
million in the third quarter 2022, versus $9.0 million in the prior-year period. For the
nine months year-to-date EBITDA decreased 9.7% to $26.7 million vs $29.5
million in 2021.
As of October 1, 2022, the Company
had total cash and equivalents of $4.0
million, together with $10.0
million of availability on its senior secured revolving
credit facility maturing in 2027. At the end of the third quarter
2022, net debt (total debt less cash) was 3.0x trailing
twelve-month EBITDA.
Escalade announced a quarterly dividend of $0.15 per share to be paid to all shareholders of
record on December 5, 2022 and
disbursed on December 12, 2022.
Effective January 1, 2023,
Escalade will transition to a conventional twelve-month reporting
calendar. The fourth quarter 2022 will end on December 31, 2022, then the Company will
transition to its new financial reporting calendar for 2023.
MANAGEMENT COMMENTARY
"Broad-based inflationary pressures and a rising interest rate
environment adversely impacted consumer discretionary spending
behaviors during the third quarter, resulting in a year-over-year
decline in sales and profitability during the period," stated
Walter P. Glazer, Jr., President and
CEO of Escalade. "During a transitional period for the consumer, we
believe the strength of our brands, diverse sourcing capabilities,
onshore manufacturing presence and disciplined expense management
will position us to successfully navigate a challenging near-term
macroeconomic backdrop."
"Third quarter sales declined year-over-year due to softness in
most outdoor categories, including archery, partially offset by
continued strength in pickleball and billiards," continued Glazer.
"Elevated freight and logistics expenses more than offset some
lower material costs in the third quarter, contributing to a
year-over-year decline in gross profit in the period. While ocean
freight rates and turnaround have begun to improve, inland freight
has become challenging due to domestic labor and equipment
shortages."
"In recent months, several large retail customers have slowed
their pace of purchasing to reduce their overall inventories,
contributing to the elevated inventory levels we are holding,"
continued Glazer. "During the next six months, we expect that a
combination of seasonal demand, together with increased promotional
activity, will contribute to a decline in inventories throughout
the entire system. We believe this inventory decline will reduce
our carrying costs and improve asset utilization to more acceptable
levels."
"While we are not satisfied with the 2022 year to date results,
we are taking steps to right size our cost structure and asset base
to weather the economic headwinds and position our Company for
continued growth in the years ahead," continued Glazer.
"Subsequent to the quarter end, we exercised a $15 million accordion provision under our senior
revolving credit facility," continued Glazer. "Including this
additional availability, we now have nearly $30 million of liquidity to support the ongoing
growth of our business. As our inventory levels normalize over the
coming months, we anticipate free cash conversion will also
improve, further bolstering our liquidity."
"Our capital allocation priorities remain unchanged," continued
Glazer. "We remain committed to a reduction in net leverage to a
range of 1.5x-2.0x trailing-twelve-month EBITDA, while maintaining
a consistent quarterly cash dividend. As before, we will continue
to selectively invest internally in higher-growth categories that
cater to a durable base of loyal customers who value our portfolio
of premium indoor/outdoor brands. Looking forward, we also believe
an economic downturn may create additional market share
opportunities for the Company."
CONFERENCE CALL
A conference call will be held Thursday,
October 27, 2022, at 11:00 a.m.
ET to review the Company's financial results, discuss recent
events and conduct a question-and-answer session.
A webcast of the conference call and accompanying presentation
materials will be available in the Investor Relations section of
Escalade's website at www.escaladeinc.com. To listen to a live
broadcast, go to the site at least 15 minutes prior to the
scheduled start time in order to register, download, and install
any necessary audio software.
To participate in the live teleconference:
Domestic
Live:
|
877-407-0792
|
International
Live:
|
201-689-8263
|
To listen to a replay of the teleconference, which subsequently
will be available through November 10,
2022:
Domestic
Replay:
|
844-512-2921
|
International
Replay:
|
412-317-6671
|
Conference
ID:
|
13733441
|
USE OF NON-GAAP FINANCIAL
MEASURES
In addition to disclosing financial statements in accordance
with U.S. generally accepted accounting principles ("GAAP"), this
release contains the non-GAAP financial measure known as "EBITDA."
A reconciliation of this non-GAAP financial measure is contained at
the end of this press release. EBITDA is a non-GAAP financial
measure that Escalade uses to facilitate comparisons of operating
performance across periods. Escalade believes the disclosure of
EBITDA provides useful information to investors regarding its
financial condition and results of operations. Non-GAAP measures
should be viewed as a supplement to and not a substitute for the
Company's U.S. GAAP measures of performance and the financial
results calculated in accordance with U.S. GAAP and reconciliations
from these results should be carefully evaluated. Non-GAAP
measures have limitations as an analytical tool and should not be
considered in isolation or in lieu of an analysis of the Company's
results as reported under U.S. GAAP and should be evaluated only on
a supplementary basis.
ABOUT ESCALADE, INC
Founded in 1922, and headquartered in Evansville, Indiana, Escalade designs,
manufactures, and sells sporting goods, fitness, and indoor/outdoor
recreation equipment. Our mission is to connect family and
friends creating lasting memories. Leaders in our respective
categories, Escalade's brands include Brunswick
Billiards®; STIGA® table tennis;
Accudart®; RAVE Sports® water recreation;
Victory Tailgate® custom games; Onix®
pickleball; Goalrilla™ basketball; Lifeline®
fitness; Woodplay® playsets; and Bear®
Archery. Escalade's products are available online and at leading
retailers nationwide. For more information about Escalade's many
brands, history, financials, and governance please visit
www.escaladeinc.com.
INVESTOR RELATIONS CONTACT
Patrick Griffin
Vice President - Corporate Development & Investor Relations
812-467-1358
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; 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; continued listing of the
Company's common stock on the NASDAQ Global Market; the Company's
inclusion or exclusion from certain market indices; 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; the
potential impact of actual or perceived defects in, or safety of,
our products, including any impact of product recalls or legal or
regulatory claims, proceedings or investigations involving our
products; 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
and Subsidiaries
Consolidated Statements of Operations
(Unaudited, In Thousands Except Per Share Data)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
All Amounts in
Thousands Except Per Share Data
|
October 1,
2022
|
|
October 2,
2021
|
|
October 1,
2022
|
|
October 2,
2021
|
|
|
|
|
|
|
|
|
Net sales
|
$74,904
|
|
$81,298
|
|
$241,621
|
|
$240,168
|
|
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
Cost of products
sold
|
61,273
|
|
62,992
|
|
184,147
|
|
179,355
|
Selling,
administrative and general expenses
|
8,769
|
|
10,202
|
|
33,975
|
|
33,888
|
Amortization
|
642
|
|
432
|
|
2,067
|
|
1,438
|
|
|
|
|
|
|
|
|
Operating
Income
|
4,220
|
|
7,672
|
|
21,432
|
|
25,487
|
|
|
|
|
|
|
|
|
Other Income
(Expense)
|
|
|
|
|
|
|
|
Interest
expense
|
(954)
|
|
(414)
|
|
(2,462)
|
|
(1,035)
|
Other income
(expense)
|
(22)
|
|
68
|
|
50
|
|
124
|
|
|
|
|
|
|
|
|
Income Before Income
Taxes
|
3,244
|
|
7,326
|
|
19,020
|
|
24,576
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes
|
286
|
|
1,360
|
|
3,735
|
|
5,042
|
|
|
|
|
|
|
|
|
Net Income
|
$2,958
|
|
$5,966
|
|
$15,285
|
|
$19,534
|
|
|
|
|
|
|
|
|
Earnings Per Share
Data:
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$ 0.22
|
|
$ 0.44
|
|
$ 1.13
|
|
$ 1.41
|
Diluted earnings per
share
|
$ 0.22
|
|
$ 0.43
|
|
$ 1.12
|
|
$ 1.40
|
|
|
|
|
|
|
|
|
Dividends
declared
|
$ 0.15
|
|
$ 0.14
|
|
$ 0.45
|
|
$ 0.42
|
|
|
|
|
|
|
|
|
Consolidated Balance
Sheets
(Unaudited, In Thousands)
|
|
All Amounts in
Thousands Except Share Information
|
October 1,
2022
|
December 25,
2021
|
October 2,
2021
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$ 4,000
|
$ 4,374
|
$ 6,492
|
Receivables, less
allowance of $729; $457; and $636; respectively
|
65,258
|
65,991
|
68,849
|
Inventories
|
134,957
|
92,382
|
91,755
|
Prepaid
expenses
|
4,143
|
7,569
|
6,527
|
Prepaid income
tax
|
1,075
|
739
|
--
|
TOTAL CURRENT
ASSETS
|
209,433
|
171,055
|
173,623
|
|
|
|
|
Property, plant and
equipment, net
|
27,618
|
24,936
|
24,000
|
Operating lease
right-of-use assets
|
9,074
|
2,210
|
2,500
|
Intangible assets,
net
|
34,712
|
20,778
|
21,207
|
Goodwill
|
39,226
|
32,695
|
32,695
|
Other assets
|
261
|
124
|
131
|
TOTAL ASSETS
|
$320,324
|
$251,798
|
$254,156
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Current portion of
long-term debt
|
$ 7,143
|
$ 7,143
|
$ 7,143
|
Trade accounts
payable
|
22,684
|
15,847
|
25,071
|
Accrued
liabilities
|
19,060
|
24,385
|
18,100
|
Income tax
payable
|
--
|
--
|
124
|
Current operating
lease liabilities
|
816
|
818
|
990
|
TOTAL CURRENT
LIABILITIES
|
49,703
|
48,193
|
51,428
|
|
|
|
|
Other
Liabilities:
|
|
|
|
Long‑term
debt
|
99,568
|
50,396
|
51,874
|
Deferred income tax
liability
|
4,759
|
4,759
|
4,193
|
Operating lease
liabilities
|
8,557
|
1,387
|
1,493
|
Other
liabilities
|
448
|
448
|
448
|
TOTAL LIABILITIES
|
163,035
|
105,183
|
109,436
|
|
|
|
|
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 – 13,590,407;
13,493,332; and 13,557,879; shares respectively
|
13,590
|
13,493
|
13,558
|
Retained
earnings
|
143,699
|
133,122
|
131,162
|
TOTAL STOCKHOLDERS'
EQUITY
|
157,289
|
146,615
|
144,720
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$320,324
|
$251,798
|
$254,156
|
Reconciliation of
GAAP Net Income to Non-GAAP EBITDA (Unaudited, In
Thousands)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
All Amounts in
Thousands
|
October 1,
2022
|
|
October 2,
2021
|
|
October 1,
2022
|
|
October 2,
2021
|
|
|
|
|
|
|
|
|
Net Income
(GAAP)
|
$ 2,958
|
|
$5,966
|
|
$ 15,285
|
|
$19,534
|
|
|
|
|
|
|
|
|
Interest
expense
|
954
|
|
414
|
|
2,462
|
|
1,035
|
Income tax
expense
|
286
|
|
1,360
|
|
3,735
|
|
5,042
|
Depreciation and
amortization
|
1,604
|
|
1,226
|
|
5,207
|
|
3,935
|
|
|
|
|
|
|
|
|
EBITDA
(Non-GAAP)
|
$5,802
|
|
$8,966
|
|
$26,689
|
|
$29,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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SOURCE Escalade, Incorporated