Item 1. FINANCIAL STATEMENTS
See notes to Consolidated Condensed Financial Statements.
See notes to Consolidated Condensed Financial Statements.
See notes to Consolidated Condensed Financial Statements.
See notes to Consolidated Condensed Financial Statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A – Summary of Significant Accounting Policies
Presentation of Consolidated Condensed Financial Statements – The significant accounting policies followed by the Company and its wholly owned subsidiaries for interim financial reporting are consistent with the accounting policies followed for its annual financial reporting. All adjustments that are of a normal recurring nature and are in the opinion of management necessary for a fair statement of the results for the periods reported have been included in the accompanying consolidated condensed financial statements. The consolidated condensed balance sheet of the Company as of December 25, 2021 has been derived from the audited consolidated balance sheet of the Company as of that date. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2021 filed with the Securities and Exchange Commission.
Note B ‑ Seasonal Aspects
The results of operations for the three and six month periods ended July 9, 2022 and July 10, 2021 are not necessarily indicative of the results to be expected for the full year.
Note C ‑ Inventories
In thousands
|
|
July 9,
2022
|
|
|
December 25,
2021
|
|
|
July 10,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$ |
9,821 |
|
|
$ |
9,142 |
|
|
$ |
10,291 |
|
Work in progress
|
|
|
4,653 |
|
|
|
3,529 |
|
|
|
4,070 |
|
Finished goods
|
|
|
115,772 |
|
|
|
79,711 |
|
|
|
72,251 |
|
|
|
$ |
130,246 |
|
|
$ |
92,382 |
|
|
$ |
86,612 |
|
Note D – Fair Values of Financial Instruments
The following methods were used to estimate the fair value of all financial instruments recognized in the accompanying balance sheets at amounts other than fair values.
Cash and Cash Equivalents
Fair values of cash and cash equivalents approximate cost due to the short period of time to maturity.
Long-term Debt
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 9, 2022, December 25, 2021 and July 10, 2021.
|
|
|
|
|
|
Fair Value Measurements Using
|
|
July 9, 2022 |
|
Carrying |
|
|
Quoted Prices in
Active Markets
for Identical
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
In thousands
|
|
Amount |
|
|
Assets (Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Financial assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
6,195 |
|
|
$ |
6,195 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$ |
7,143 |
|
|
$ |
-- |
|
|
$ |
7,143 |
|
|
$ |
-- |
|
Long-term debt
|
|
$ |
94,040 |
|
|
$ |
-- |
|
|
$ |
94,040 |
|
|
$ |
-- |
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
December 25, 2021 |
|
Carrying |
|
|
Quoted Prices in
Active Markets
for Identical
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
In thousands
|
|
Amount
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
4,374 |
|
|
$ |
4,374 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$ |
7,143 |
|
|
$ |
-- |
|
|
$ |
7,143 |
|
|
$ |
-- |
|
Long-term debt
|
|
$ |
50,396 |
|
|
$ |
-- |
|
|
$ |
50,396 |
|
|
$ |
-- |
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
July 10, 2021 |
|
Carrying |
|
|
Quoted Prices in
Active Markets
for Identical
|
|
|
Significant Other
Observable Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
In thousands
|
|
Amount
|
|
|
Assets (Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
10,641 |
|
|
$ |
10,641 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$ |
7,143 |
|
|
$ |
-- |
|
|
$ |
7,143 |
|
|
$ |
-- |
|
Long-term debt
|
|
$ |
42,857 |
|
|
$ |
-- |
|
|
$ |
42,857 |
|
|
$ |
-- |
|
Note E – Stock Compensation
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 9, 2022 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors 3,886 shares of common stock. During the six months ended July 9, 2022, the Company awarded 20,000 restricted stock units to directors and 196,254 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. Director restricted stock units are subject to forfeiture, except for termination of services as a result of retirement, death or disability, if on the vesting date the director no longer holds a position with the Company. The 2022 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 9, 2022, the Company recognized stock based compensation expense of $688 thousand and $1,076 thousand, respectively compared to stock based compensation expense of $326 thousand and $437 thousand for the same periods in the prior year. At July 9, 2022 and July 10, 2021, respectively, there was $2.6 million and $1.1 million in unrecognized stock-based compensation expense related to non-vested stock awards.
Note F ‑ Segment Information
|
|
For the Three Months
Ended July 9, 2022
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$ |
94,337 |
|
|
$ |
-- |
|
|
$ |
94,337 |
|
Operating income (loss)
|
|
|
8,830 |
|
|
|
(641 |
) |
|
|
8,189 |
|
Net income (loss)
|
|
|
5,737 |
|
|
|
(64 |
) |
|
|
5,673 |
|
|
|
As of and for the Six Months
Ended July 9, 2022
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$ |
166,717 |
|
|
$ |
-- |
|
|
$ |
166,717 |
|
Operating income (loss)
|
|
|
18,365 |
|
|
|
(1,153 |
) |
|
|
17,212 |
|
Net income
|
|
|
12,278 |
|
|
|
49 |
|
|
|
12,327 |
|
Total assets
|
|
$ |
307,941 |
|
|
$ |
8,911 |
|
|
$ |
316,852 |
|
|
|
For the Three Months
Ended July 10, 2021
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$ |
99,679 |
|
|
$ |
-- |
|
|
$ |
99,679 |
|
Operating income (loss)
|
|
|
11,367 |
|
|
|
(681 |
) |
|
|
10,686 |
|
Net income
|
|
|
7,980 |
|
|
|
146 |
|
|
|
8,126 |
|
|
|
As of and for the Six Months
Ended July 10, 2021
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$ |
158,870 |
|
|
$ |
-- |
|
|
$ |
158,870 |
|
Operating income (loss)
|
|
|
18,962 |
|
|
|
(1,147 |
) |
|
|
17,815 |
|
Net income
|
|
|
13,342 |
|
|
|
226 |
|
|
|
13,568 |
|
Total assets
|
|
$ |
220,712 |
|
|
$ |
10,905 |
|
|
$ |
231,617 |
|
Note G – Dividend Payment
On June 7, 2022, the Company paid a quarterly dividend of $0.15 per common share to all shareholders of record on May 31, 2021. The total amount of the dividend was approximately $2.0 million and was charged against retained earnings.
On March 21, 2022, the Company paid a quarterly dividend of $0.15 per common share to all shareholders of record on March 14, 2022 (the amount was funded to the transfer agent by the Company on March 17, 2022). The total amount of the dividend was approximately $2.0 million and was charged against retained earnings.
Note H ‑ Earnings Per Share
The shares used in computation of the Company’s basic and diluted earnings per common share are as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
In thousands
|
|
July 9,
2022
|
|
|
July 10,
2021
|
|
|
July 9,
2022
|
|
|
July 10,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
13,588 |
|
|
|
13,863 |
|
|
|
13,554 |
|
|
|
13,871 |
|
Dilutive effect of stock options and restricted stock units
|
|
|
55 |
|
|
|
93 |
|
|
|
62 |
|
|
|
91 |
|
Weighted average common shares outstanding, assuming dilution
|
|
|
13,643 |
|
|
|
13,956 |
|
|
|
13,616 |
|
|
|
13,962 |
|
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. The number of stock options and restricted stock units that were excluded in 2022 and 2021 were zero and 11,900, respectively.
Note I – New Accounting Standards and Changes in Accounting Principles
There have been no recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended July 9, 2022, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021, that are of significance, or potential significance to the Company.
Note J – Revenue from Contracts with Customers
Revenue Recognition – Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our goods at a point in time based on shipping terms and transfer of title. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within revenue.
Gross-to-net sales adjustments – We recognize revenue net of various sales adjustments to arrive at net sales as reported on the statement of operations. These adjustments are referred to as gross-to-net sales adjustments and primarily fall into one of three categories: returns, warranties and customer allowances.
Returns – The Company records an accrued liability and reduction in sales for estimated product returns based upon historical experience. An accrued liability and reduction in sales is also recorded for approved return authorizations that have been communicated by the customer.
Warranties – Limited warranties are provided on certain products for varying periods. We record an accrued liability and reduction in sales for estimated future warranty claims based upon historical experience and management’s estimate of the level of future claims. Changes in the estimated amounts recognized in prior years are recorded as an adjustment to the accrued liability and sales in the current year.
Customer Allowances – Customer allowances are common practice in the industries in which the Company operates. These agreements are typically in the form of advertising subsidies, volume rebates and catalog allowances and are accounted for as a reduction to gross sales. The Company reviews such allowances on an ongoing basis and accruals are adjusted, if necessary, as additional information becomes available.
Disaggregation of Revenue – We generate revenue from the sale of widely recognized sporting goods brands in basketball goals, archery, indoor and outdoor game recreation and fitness products. These products are sold through multiple sales channels that include: mass merchants, specialty dealers, key on-line retailers (“E-commerce”) and international. The following table depicts the disaggregation of revenue according to sales channel:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
All Amounts in Thousands
|
|
July 9,
2022
|
|
|
July 10,
2021
|
|
|
July 9,
2022
|
|
|
July 10,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Sales by Channel: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mass Merchants
|
|
$ |
28,925 |
|
|
$ |
33,110 |
|
|
$ |
55,955 |
|
|
$ |
51,506 |
|
Specialty Dealers
|
|
|
28,990 |
|
|
|
31,617 |
|
|
|
54,333 |
|
|
|
54,177 |
|
E-commerce
|
|
|
38,495 |
|
|
|
39,711 |
|
|
|
61,351 |
|
|
|
60,937 |
|
International
|
|
|
4,531 |
|
|
|
4,196 |
|
|
|
8,611 |
|
|
|
6,923 |
|
Other
|
|
|
1,492 |
|
|
|
1,015 |
|
|
|
2,266 |
|
|
|
1,586 |
|
Total Gross Sales
|
|
|
102,433 |
|
|
|
109,649 |
|
|
|
182,516 |
|
|
|
175,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Gross-to-Net Sales Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Returns
|
|
|
678 |
|
|
|
2,633 |
|
|
|
2,848 |
|
|
|
4,248 |
|
Warranties
|
|
|
697 |
|
|
|
531 |
|
|
|
1,322 |
|
|
|
1,113 |
|
Customer Allowances
|
|
|
6,721 |
|
|
|
6,806 |
|
|
|
11,629 |
|
|
|
10,898 |
|
Total Gross-to-Net Sales Adjustments
|
|
|
8,096 |
|
|
|
9,970 |
|
|
|
15,799 |
|
|
|
16,259 |
|
Total Net Sales
|
|
$ |
94,337 |
|
|
$ |
99,679 |
|
|
$ |
166,717 |
|
|
$ |
158,870 |
|
Note K – Leases
We have operating leases for office, manufacturing and distribution facilities as well as for certain equipment. Our leases have remaining lease terms of 1 year to 10 years. As of July 9, 2022, the Company has not entered into any lease arrangements classified as a finance lease.
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities and operating lease liabilities on our consolidated balance sheet. The Company has elected an accounting policy to not recognize short-term leases (one year or less) on the balance sheet. The Company also elected the package of practical expedients which applies to leases that commenced before the adoption date. By electing the package of practical expedients, the Company did not need to reassess the following; whether any existing contracts are or contain leases, the lease classification for any existing leases and initial direct costs for any existing leases.
ROU assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When the implicit rate of the lease is not provided or cannot be determined, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Components of lease expense and other information is as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
All Amounts in Thousands
|
|
July 9,
2022
|
|
|
July 10,
2021
|
|
|
July 9,
2022
|
|
|
July 10,
2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease Cost
|
|
$ |
342 |
|
|
$ |
407 |
|
|
$ |
680 |
|
|
$ |
718 |
|
Short-term Lease Cost
|
|
|
723 |
|
|
|
655 |
|
|
|
1,224 |
|
|
|
1,031 |
|
Variable Lease Cost
|
|
|
130 |
|
|
|
117 |
|
|
|
312 |
|
|
|
203 |
|
Total Operating Lease Cost
|
|
$ |
1,195 |
|
|
$ |
1,179 |
|
|
$ |
2,216 |
|
|
$ |
1,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease – Operating Cash Flows
|
|
$ |
309 |
|
|
$ |
361 |
|
|
$ |
612 |
|
|
$ |
616 |
|
New ROU Assets – Operating Leases
|
|
$ |
7,743 |
|
|
$ |
313 |
|
|
$ |
7,743 |
|
|
$ |
1,140 |
|
Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:
|
|
Six Months Ended
|
|
All Amounts in Thousands
|
|
July 9,
2022
|
|
|
July 10,
2021
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term – Operating Leases (in years)
|
|
|
9.47 |
|
|
|
1.66 |
|
Weighted Average Discount Rate – Operating Leases
|
|
|
5.00 |
% |
|
|
5.00 |
% |
Future minimum lease payments under non-cancellable leases as of July 9, 2022 were as follows:
All Amounts in Thousands
|
|
|
|
|
|
|
|
|
|
Year 1
|
|
$ |
253 |
|
Year 2
|
|
|
1,358 |
|
Year 3
|
|
|
1,306 |
|
Year 4
|
|
|
1,287 |
|
Year 5
|
|
|
1,276 |
|
Thereafter
|
|
|
6,464 |
|
Total future minimum lease payments
|
|
|
11,944 |
|
Less imputed interest
|
|
|
(2,608 |
) |
Total
|
|
$ |
9,336 |
|
|
|
|
|
|
Reported as of July 9, 2022
|
|
|
|
|
Current operating lease liabilities
|
|
|
676 |
|
Long-term operating lease liabilities
|
|
|
8,660 |
|
Total
|
|
$ |
9,336 |
|
Note L – Commitments and Contingencies
The Company is involved in litigation arising in the normal course of business. 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.
Note M – Acquisition
On January 21, 2022, the Company completed its acquisition of the assets constituting the Brunswick Billiards business of Life Fitness, LLC. The purchase price of the acquisition is $35.8 million. The acquisition was funded by cash and the Company’s revolving credit facility. The Company has not yet finalized its final evaluation of the fair value of certain items. The current estimates of fair value for the more significant assets acquired and liabilities assumed were receivables ($1.3 million), inventory ($13.6 million), fixed assets, including building and land ($4.1 million), accounts payable ($3.2 million), other accrued liabilities ($2.5 million), goodwill and other intangible assets ($22.5 million).
Note N – Debt
On January 21, 2022, the Company entered into an Amended and Restated Credit Agreement (“Restated Credit Agreement”) with its issuing bank, JP Morgan Chase Bank, N.A. (“Chase”), and the other lenders identified in the Restated Credit Agreement (collectively, the “Lender”). Under the terms of the Restated Credit Agreement, Old National Bank has been added as a Lender. The Lenders have now made available to the Company a senior revolving credit facility with increased maximum availability of $65.0 million (the “Revolving Facility”), up from $50.0 million, plus an accordion feature that would allow borrowings up to $90.0 million under the Revolving Facility subject to certain terms and conditions. The maturity date of the revolving credit facility was extended to January 21, 2027. The Company may prepay the Revolving Facility, in whole or in part, and reborrow prior to the revolving loan maturity date. The Restated Credit Agreement further extended the maturity date for the term loan facility to January 21, 2027.
As of July 9, 2022, the outstanding principal amount of the term loan was $43.5 million and total amount drawn under the Revolving Facility was $57.7 million.
Note O – Subsequent Events
On July 18, 2022, the Company entered into the First Amendment to the Restated Credit Agreement. Under the terms of the First Amendment, the Lender increased the maximum availability under the senior revolving credit facility from $65.0 million to $75.0 million pursuant to the accordion feature in the Restated Credit Agreement. The First Amendment also adjusted the funded debt to EBITDA ratio financial covenant to 3:00 to 1:00 as of the end of the Company’s third and fourth fiscal quarters of 2022.