Escalade, Inc. (NASDAQ: ESCA, or the “Company”), a leading
manufacturer and distributor of sporting goods and indoor/outdoor
recreational equipment, today announced fourth quarter and full
year results for 2022.
FOURTH QUARTER 2022 (As
compared to the fourth quarter 2021)
- Net Sales
decreased 1.8% to $72.1 million
- Organic sales,
excluding acquisition contributions, declined 14.4%
- Gross margin
increased 19 basis points, to 22.4%
- Operating income
decreased 23.8% to $4.9 million
- Net income of
$2.7 million, or $0.20 per diluted share vs. $4.9 million, or $0.36
per share for Q4 2021
- EBITDA decreased
21.5% to $5.8 million
- Announced $0.15
per share cash dividend to shareholders of record on March 13,
2023
FULL YEAR 2022(As compared to full year
2021)
- Net Sales were
up to prior year at $313.8 million
- Organic sales,
excluding acquisition contributions, declined 9.8%
- Gross margin
declined 112 basis points, to 23.5%
- Operating income
decreased 17.5% to $26.3 million
- Net income of
$18.0 million, or $1.31 per diluted share vs. $24.4 million, or
$1.76 per diluted share for 2021
- EBITDA decreased
12.0% to $32.5 million
For the three months ended December 31, 2022,
Escalade reported net income of $2.7 million, or $0.20 per diluted
share.
Sales declined due to softening consumer demand
and excess inventories in the retail channel. During the fourth
quarter, increases in indoor games 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, basketball, games, water
sports, and playground.
The Company reported fourth quarter gross margin
of 22.4%, an increase of 19 basis points when compared with the
prior-year period, despite increased logistics expenses primarily
associated with ongoing inventory handling and storage.
Selling, general, and administrative expense as
percentage of net sales increased to 15.0% in the fourth quarter
2022, versus 12.9% in the prior-year period, due to the addition of
Brunswick Billiards.
Earnings before interest, taxes, depreciation,
and amortization (“EBITDA”) declined 21.5% to $5.8 million in the
fourth quarter 2022, versus $7.3 million in the prior-year period.
Full-year 2022 EBITDA decreased 12.0% to $32.5 million, versus
$36.9 million in 2021.
As of December 31, 2022, the Company had total
cash and equivalents of $4.0 million, together with $35.0 million
of availability on its senior secured revolving credit facility
maturing in 2027. At the end of the fourth quarter 2022, net debt
(total debt less cash) was 2.8x trailing twelve-month EBITDA.
Escalade announced a quarterly dividend of $0.15
per share to be paid to all shareholders of record on March 13,
2023 and disbursed on March 20, 2023.
Effective January 1, 2023, Escalade transitioned
to a conventional twelve-month reporting calendar. The fourth
quarter 2022 ended on December 31, 2022. Please see the
accompanying table in our footnotes for a comparison of the days in
each quarter for 2022 and 2023.
MANAGEMENT COMMENTARY
“During the full-year 2022, we continued to
build leading market positions within key indoor and outdoor
recreational categories, while navigating supply chain disruptions
and a return to more normalized demand conditions,” stated Walter
P. Glazer, Jr., President and CEO of Escalade. “While inventory in
the system remained elevated and consumer demand softened into
year-end, we maintained our price discipline, underscoring the
resiliency of our brands and the loyalty of our customers.”
“Fourth quarter sales declined year-over-year
due to softness in most outdoor categories, including archery,
partially offset by continued strength in pickleball, table tennis,
indoor games and billiards,” continued Glazer. “We delivered
year-over-year growth in gross margin during the fourth quarter,
despite a seasonally promotional environment. We also successfully
completed the integration of Brunswick Billiards, which was
accretive to our full-year earnings per share, consistent with our
expectations for this acquisition.”
“We expect conditions in the first half of 2023
to be challenging as we work through high-cost inventory, manage
through continued excess inventory levels in the channel, respond
to a cautionary outlook from retailers and adjust to softer
consumer demand. The first quarter 2023 will be a particularly
difficult comparison as we go up against an unusually strong
prior-year period. As we noted last year, our first quarter 2022
benefited from favorable mix and sales pulled forward from the
second quarter 2022,” stated Glazer.
“As expected,
inventory levels began to recede during the fourth quarter due to
planned reductions of inbound product flow, anticipated seasonal
demand and select promotional activities,” continued Glazer. “We
reduced our total inventory by over $13 million sequentially in the
fourth quarter, which enabled us to repay nearly $12 million in
outstanding debt. We expect to further reduce inventory by year-end
2023, resulting in improved cash conversion.”
“Given expectations for a continued challenging
economic environment, including a general softening in consumer
demand, we’ve stayed focused on prudent capital allocation, while
further reducing controllable expenses and improving our asset
utilization. As a result, we made the decision to close our
manufacturing facilities in Rosarito, Mexico. While we expect some
near term costs related to the closure of the facility, we believe
this strategic action will drive improved organizational
efficiency,” continued Glazer.
“In 2023, we intend to use our cash flow
primarily for debt reduction, consistent with our long-term target
of a net leverage ratio in a range of 1.5x - 2.5x, while supporting
investment in new product development. During the first quarter, we
are launching patented, innovative paddle technology to further
support our market leadership in the fast-growing pickleball
category; a suite of American Cornhole League (ACL) licensed
products; together with accessory and ancillary products in other
leading categories. We are also building a market-leading billiards
and game room platform through the combination of our Brunswick
Billiards, American Heritage, and Cue & Case brands.”
“Looking ahead, we see opportunities for market
share gains within our categories in the year ahead, yet remain
equally focused on maintaining a lean, efficient cost structure
supportive of our margin and profitability targets given the
increasing economic headwinds facing consumers as they return to
more normal post-pandemic buying patterns,” continued Glazer. “As
Escalade completes the celebration of its 100-year anniversary, we
are grateful for the ongoing support of our customers, employees,
and investors, and remain steadfast in our focus on delivering
exceptional, memorable consumer experiences that build brand
loyalty, while driving long-term value creation for our
shareholders. I would particularly like to thank our talented
employees who responded to the many challenges we faced in
2022.”
CONFERENCE CALL
A conference call will be held Wednesday,
February 22, 2023, 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 March 8, 2023: |
|
|
Domestic Replay: |
844-512-2921 |
International Replay: |
412-317-6671 |
Conference ID: |
13735952 |
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 GriffinVice President - Corporate Development &
Investor Relations812-467-1358
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, including
inflationary pressures; 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; the potential impact of
regulatory claims, proceedings or investigations involving our
products; 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
SubsidiariesConsolidated Statements of
Operations(Unaudited, In Thousands Except Per Share
Data)
|
Three Months Ended |
|
Twelve Months Ended |
All
Amounts in Thousands Except Per Share Data |
December 31, 2022 |
|
December 25, 2021 |
|
December 31, 2022 |
|
December 25, 2021 |
|
|
|
|
|
|
|
|
Net sales |
$ |
72,136 |
|
|
$ |
73,444 |
|
|
$ |
313,757 |
|
|
$ |
313,612 |
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
Cost of products sold |
|
55,971 |
|
|
|
57,127 |
|
|
|
240,118 |
|
|
|
236,482 |
|
Selling, administrative and general expenses |
|
10,790 |
|
|
|
9,479 |
|
|
|
44,765 |
|
|
|
43,367 |
|
Amortization |
|
492 |
|
|
|
429 |
|
|
|
2,559 |
|
|
|
1,867 |
|
|
|
|
|
|
|
|
|
Operating Income |
|
4,883 |
|
|
|
6,409 |
|
|
|
26,315 |
|
|
|
31,896 |
|
|
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
|
Interest expense |
|
(1,318 |
) |
|
|
(475 |
) |
|
|
(3,780 |
) |
|
|
(1,510 |
) |
Other income (expense) |
|
29 |
|
|
|
39 |
|
|
|
79 |
|
|
|
163 |
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
3,594 |
|
|
|
5,973 |
|
|
|
22,614 |
|
|
|
30,549 |
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
890 |
|
|
|
1,102 |
|
|
|
4,625 |
|
|
|
6,144 |
|
|
|
|
|
|
|
|
|
Net Income |
$ |
2,704 |
|
|
$ |
4,871 |
|
|
$ |
17,989 |
|
|
$ |
24,405 |
|
|
|
|
|
|
|
|
|
Earnings Per Share Data: |
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.20 |
|
|
$ |
0.36 |
|
|
$ |
1.33 |
|
|
$ |
1.78 |
|
Diluted earnings per share |
$ |
0.20 |
|
|
$ |
0.36 |
|
|
$ |
1.31 |
|
|
$ |
1.76 |
|
|
|
|
|
|
|
|
|
Dividends declared |
$ |
0.15 |
|
|
$ |
0.14 |
|
|
$ |
0.60 |
|
|
$ |
0.56 |
|
Consolidated Balance
Sheets(Unaudited, In Thousands)
All Amounts in Thousands Except Share Information |
|
December 31,2022 |
|
December 25,2021 |
|
|
|
|
|
ASSETS |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
3,967 |
|
|
$ |
4,374 |
|
Receivables, less allowances of $492 and $457; respectively |
|
|
57,419 |
|
|
|
65,991 |
|
Inventories |
|
|
121,870 |
|
|
|
92,382 |
|
Prepaid expenses |
|
|
4,942 |
|
|
|
7,569 |
|
Prepaid income tax |
|
|
-- |
|
|
|
739 |
|
TOTAL CURRENT ASSETS |
|
|
188,198 |
|
|
|
171,055 |
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
24,751 |
|
|
|
24,936 |
|
Assets held for sale |
|
|
2,823 |
|
|
|
-- |
|
Operating lease right-of-use assets |
|
|
9,100 |
|
|
|
2,210 |
|
Intangible assets |
|
|
31,120 |
|
|
|
20,778 |
|
Goodwill |
|
|
42,326 |
|
|
|
32,695 |
|
Other assets |
|
|
400 |
|
|
|
124 |
|
TOTAL ASSETS |
|
$ |
298,718 |
|
|
$ |
251,798 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Current portion of long-term debt |
|
$ |
7,143 |
|
|
$ |
7,143 |
|
Trade accounts payable |
|
|
9,414 |
|
|
|
15,847 |
|
Accrued liabilities |
|
|
21,320 |
|
|
|
24,385 |
|
Income tax payable |
|
|
71 |
|
|
|
-- |
|
Current operating lease liabilities |
|
|
993 |
|
|
|
818 |
|
TOTAL CURRENT LIABILITIES |
|
|
38,941 |
|
|
|
48,193 |
|
|
|
|
|
|
Long-term debt |
|
|
87,738 |
|
|
|
50,396 |
|
Deferred income tax liability |
|
|
4,516 |
|
|
|
4,759 |
|
Operating lease liabilities |
|
|
8,641 |
|
|
|
1,387 |
|
Other liabilities |
|
|
407 |
|
|
|
448 |
|
TOTAL LIABILITIES |
|
|
140,243 |
|
|
|
105,183 |
|
|
|
|
|
|
Commitments and contingencies |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
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: 2022 —13,594,407 shares, 2021 —13,493,332
shares |
|
|
13,594 |
|
|
|
13,493 |
|
Retained earnings |
|
|
144,881 |
|
|
|
133,122 |
|
TOTAL STOCKHOLDERS’ EQUITY |
|
|
158,475 |
|
|
|
146,615 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
298,718 |
|
|
$ |
251,798 |
|
Reconciliation of GAAP Net Income to
Non-GAAP EBITDA(Unaudited, In Thousands)
|
Three Months Ended |
|
Twelve Months Ended |
All
Amounts in Thousands |
December 31, 2022 |
|
December 25, 2021 |
|
December 31, 2022 |
|
December 25, 2021 |
|
|
|
|
|
|
|
|
Net Income (GAAP) |
$ |
2,704 |
|
|
$ |
4,871 |
|
|
$ |
17,989 |
|
|
$ |
24,405 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
1,318 |
|
|
|
475 |
|
|
|
3,780 |
|
|
|
1,510 |
|
Income tax expense |
|
890 |
|
|
|
1,102 |
|
|
|
4,625 |
|
|
|
6,144 |
|
Depreciation and amortization |
|
856 |
|
|
|
900 |
|
|
|
6,063 |
|
|
|
4,835 |
|
|
|
|
|
|
|
|
|
EBITDA (Non-GAAP) |
$ |
5,768 |
|
|
$ |
7,348 |
|
|
$ |
32,457 |
|
|
$ |
36,894 |
|
Comparison of Fiscal Calendar Days for
2023 and 2022 Quarters
|
|
2023 Days |
|
|
|
2022 Days |
|
|
|
|
|
|
|
|
|
First Fiscal Quarter |
|
90 |
|
|
|
84 |
|
Second Fiscal Quarter |
|
91 |
|
|
|
112 |
|
Third Fiscal Quarter |
|
92 |
|
|
|
84 |
|
Fourth Fiscal Quarter |
|
92 |
|
|
|
91 |
|
Total Days |
|
365 |
|
|
|
371 |
|
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