Escalade, Inc. (NASDAQ: ESCA, or the “Company”), a leading
manufacturer and distributor of sporting goods and indoor/outdoor
recreational equipment, today announced second quarter and year to
date results for 2022.
SECOND QUARTER 2022 (As
compared to the second quarter 2021)
- Net Sales decreased 5.4% to $94.3 million
- Organic sales, excluding acquisition contributions, declined
13.0%
- Gross margin was flat at 25.2% and gross profit decreased
5.4%
- Operating income decreased 23.4% to $8.2 million
- Net income of $5.7 million, or $0.42 per diluted share vs. $8.1
million, or $0.58 per share for Q2 2021
- EBITDA decreased 15.7% to $10.3 million
- Announced $0.15
per share cash dividend to shareholders of record on September 6,
2022
SIX MONTHS ENDED JULY 9, 2022
(As compared to the first half 2021)
- Net Sales increased 4.9% to $166.7 million
- Organic sales, excluding acquisition contributions, declined
3.6%
- Gross margin declined 46 basis points, to 26.3%
- Operating income decreased 3.4% to $17.2 million
- Net income of $12.3 million, or $0.91 per diluted share vs.
$13.6 million, or $0.97 per diluted share for 2021
- EBITDA increased
1.5% to $20.9 million
For the three months ended July 9, 2022,
Escalade reported net income of $5.7 million, or $0.42 per diluted
share, on net sales of $94.3 million. The Company reported gross
margin of 25.2%, consistent with the prior-year period, despite
continued challenges related to the global supply chain, raw
materials cost inflation, and labor constraints.
Selling, general, and administrative expense as
percentage of net sales increased to 15.6% in the second quarter
2022, versus 13.9% in the prior-year period, due to lower sales
volume and expenses related to the acquisition and integration of
Brunswick Billiards. SG&A expenses for the legacy business
units were down year over year on an absolute basis.
Earnings before interest, taxes, depreciation,
and amortization (“EBITDA”) declined 15.7% to $10.3 million in the
second quarter 2022, versus $12.3 million in the prior-year period.
For the six months year-to-date EBITDA increased 1.5% to $20.9
million vs $20.6 million in 2021.
As of July 9, 2022, the Company had total cash
and equivalents of $6.2 million, together with $7.3 million of
availability on its senior secured revolving credit facility
maturing in 2027. At the end of the second quarter 2022, net debt
(total debt less cash) was 2.55x trailing twelve-month EBITDA.
During the second quarter strong organic demand
for indoor games and pickleball, together with contribution from
the Brunswick Billiards® acquisition completed January 21, 2022,
were more than offset by the timing of shipments within the
basketball category, along with lower demand within the fitness and
outdoor categories, including archery and water sports.
Escalade announced a quarterly dividend of $0.15
per share to be paid to all shareholders of record on September 6,
2022 and disbursed on September 13, 2022.
MANAGEMENT COMMENTARY
“During the second quarter, we continued to
build leading positions across our niche sports, games, and outdoor
categories, while leveraging the benefits afforded by our hybrid
manufacturing and sourcing capabilities, decentralized structure
and lean operating model,” stated Walter P. Glazer, Jr., President
and CEO of Escalade.
“Although rising interest rates, inflationary
headwinds and geopolitical uncertainty have dampened broader
consumer sentiment and demand currently, our diverse portfolio of
premium brands and base of consumers who value quality,
performance, and an active lifestyle, should support our growth
plans over the longer term,” continued Glazer.
“Second quarter sales declined on a
year-over-year basis due to softness in select outdoor categories,
together with the previously announced pull-forward of basketball
revenue from the second to the first quarter of 2022,” continued
Glazer. “Importantly, gross profit margin held consistent with the
prior-year period, as we successfully navigated rising material,
shipping and labor costs.”
“The integration of our recently completed
acquisition of Brunswick Billiards® has progressed ahead of plan
and, as previously disclosed, is expected to be accretive to
earnings in the second half of 2022,” continued Glazer. “We believe
this acquisition will allow for meaningful cross-selling synergies
across our billiards and indoor recreation markets, categories that
continue to outperform in the current market environment."
“Subsequent to the quarter end, we exercised a
portion of our accordion availability, expanding our senior
revolving credit facility by $10 million,” continued Glazer. “We
have an additional $15 million that we could exercise in the
future, further increasing our credit line.”
“We’ve demonstrated a commitment to effective
capital allocation and disciplined balance sheet management, an
approach that contributes to long-term value creation,” continued
Glazer. “Looking ahead, our near-term capital allocation priorities
include a targeted reduction in net leverage, investments in
organic growth initiatives, and the consistent payment of a
quarterly cash dividend,” concluded Glazer.
CONFERENCE CALL
A conference call will be held Thursday, August
4, 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: |
877-300-8521 |
International Live: |
412-317-6026 |
|
|
To listen to a replay of the teleconference, which
subsequently will be available through August 18, 2022: |
Domestic Replay: |
844-512-2921 |
International Replay: |
412-317-6671 |
Conference ID: |
10169236 |
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 CONTACTPatrick 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; 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,
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; 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 and
SubsidiariesConsolidated Statements of
Operations(Unaudited, In Thousands Except Per Share
Data)
|
Three Months Ended |
|
Six Months Ended |
All
Amounts in Thousands Except Per Share Data |
July 9,2022 |
|
July 10,2021 |
|
July 9,2022 |
|
July 10,2021 |
|
|
|
|
|
|
|
|
Net sales |
$ |
94,337 |
|
|
$ |
99,679 |
|
|
$ |
166,717 |
|
|
$ |
158,870 |
|
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
|
Cost of products sold |
|
70,613 |
|
|
|
74,606 |
|
|
|
122,874 |
|
|
|
116,363 |
|
Selling, administrative and general expenses |
|
14,680 |
|
|
|
13,810 |
|
|
|
25,206 |
|
|
|
23,686 |
|
Amortization |
|
855 |
|
|
|
577 |
|
|
|
1,425 |
|
|
|
1,006 |
|
|
|
|
|
|
|
|
|
Operating Income |
|
8,189 |
|
|
|
10,686 |
|
|
|
17,212 |
|
|
|
17,815 |
|
|
|
|
|
|
|
|
|
Other Income (Expense) |
|
|
|
|
|
|
|
Interest expense |
|
(948 |
) |
|
|
(387 |
) |
|
|
(1,508 |
) |
|
|
(621 |
) |
Other income |
|
29 |
|
|
|
21 |
|
|
|
72 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
7,270 |
|
|
|
10,320 |
|
|
|
15,776 |
|
|
|
17,250 |
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
1,597 |
|
|
|
2,194 |
|
|
|
3,449 |
|
|
|
3,682 |
|
|
|
|
|
|
|
|
|
Net Income |
$ |
5,673 |
|
|
$ |
8,126 |
|
|
$ |
12,327 |
|
|
$ |
13,568 |
|
|
|
|
|
|
|
|
|
Earnings Per Share Data: |
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.42 |
|
|
$ |
0.59 |
|
|
$ |
0.91 |
|
|
$ |
0.98 |
|
Diluted earnings per share |
$ |
0.42 |
|
|
$ |
0.58 |
|
|
$ |
0.91 |
|
|
$ |
0.97 |
|
|
|
|
|
|
|
|
|
Dividends declared |
$ |
0.15 |
|
|
$ |
0.14 |
|
|
$ |
0.30 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
Consolidated Balance
Sheets(Unaudited, In Thousands)
All
Amounts in Thousands Except Share Information |
July 9,2022 |
December 25,2021 |
July 10,2021 |
|
(Unaudited) |
(Audited) |
(Unaudited) |
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
6,195 |
|
$ |
4,374 |
|
$ |
10,641 |
|
Receivables, less allowance of $726; $457; and $717;
respectively |
|
60,011 |
|
|
65,991 |
|
|
52,248 |
|
Inventories |
|
130,246 |
|
|
92,382 |
|
|
86,612 |
|
Prepaid expenses |
|
7,263 |
|
|
7,569 |
|
|
4,775 |
|
Prepaid income tax |
|
621 |
|
|
739 |
|
|
-- |
|
TOTAL CURRENT ASSETS |
|
204,336 |
|
|
171,055 |
|
|
154,276 |
|
|
|
|
|
Property, plant and equipment,
net |
|
28,344 |
|
|
24,936 |
|
|
20,792 |
|
Operating lease right-of-use
assets |
|
9,318 |
|
|
2,210 |
|
|
2,079 |
|
Intangible assets, net |
|
35,353 |
|
|
20,778 |
|
|
21,638 |
|
Goodwill |
|
39,226 |
|
|
32,695 |
|
|
32,695 |
|
Other assets |
|
275 |
|
|
124 |
|
|
137 |
|
TOTAL ASSETS |
$ |
316,852 |
|
$ |
251,798 |
|
$ |
231,617 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
Current Liabilities: |
|
|
|
Current portion of long-term debt |
$ |
7,143 |
|
$ |
7,143 |
|
$ |
7,143 |
|
Trade accounts payable |
|
24,650 |
|
|
15,847 |
|
|
14,705 |
|
Accrued liabilities |
|
20,483 |
|
|
24,385 |
|
|
14,875 |
|
Income tax payable |
|
-- |
|
|
-- |
|
|
180 |
|
Current operating lease liabilities |
|
676 |
|
|
818 |
|
|
1,526 |
|
TOTAL CURRENT LIABILITIES |
|
52,952 |
|
|
48,193 |
|
|
38,429 |
|
|
|
|
|
Other Liabilities: |
|
|
|
Long-term debt |
|
94,040 |
|
|
50,396 |
|
|
42,857 |
|
Deferred income tax liability |
|
4,759 |
|
|
4,759 |
|
|
4,193 |
|
Operating lease liabilities |
|
8,660 |
|
|
1,387 |
|
|
557 |
|
Other liabilities |
|
448 |
|
|
448 |
|
|
448 |
|
TOTAL LIABILITIES |
|
160,859 |
|
|
105,183 |
|
|
86,484 |
|
|
|
|
|
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 13,779,489; shares respectively |
|
13,590 |
|
|
13,493 |
|
|
13,779 |
|
Retained earnings |
|
142,403 |
|
|
133,122 |
|
|
131,354 |
|
TOTAL STOCKHOLDERS' EQUITY |
|
155,993 |
|
|
146,615 |
|
|
145,133 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ |
316,852 |
|
$ |
251,798 |
|
$ |
231,617 |
|
Reconciliation of GAAP Net Income to
Non-GAAP EBITDA(Unaudited, In Thousands)
|
Three Months Ended |
|
Six Months Ended |
All
Amounts in Thousands |
July 9,2022 |
|
July 10, 2021 |
|
July 9,2022 |
|
July 10,2021 |
|
|
|
|
|
|
|
|
Net Income (GAAP) |
$ |
5,673 |
|
|
$ |
8,126 |
|
|
$ |
12,327 |
|
|
$ |
13,568 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
948 |
|
|
|
387 |
|
|
|
1,508 |
|
|
|
621 |
|
Income tax expense |
|
1,597 |
|
|
|
2,194 |
|
|
|
3,449 |
|
|
|
3,682 |
|
Depreciation and amortization |
|
2,130 |
|
|
|
1,575 |
|
|
|
3,603 |
|
|
|
2,709 |
|
|
|
|
|
|
|
|
|
EBITDA (Non-GAAP) |
$ |
10,348 |
|
|
$ |
12,282 |
|
|
$ |
20,887 |
|
|
$ |
20,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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