EVANSVILLE, Ind., July 27, 2023 /PRNewswire/ -- 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 2023.
SECOND QUARTER 2023
(As compared to the
second quarter 2022)
- Net sales were $67.8 million, a
decline of 28.2%
- Operating income was $6.3
million, 23.6% below 2022
- EBITDA totaled $7.7 million, a
decline of 25.9%
- Net income of $3.6 million, or
$0.26 per diluted share, a decline of
$2.0 million
- Cash provided by operations of $8.4
million, an increase of $5.9
million
TWO QUARTERS ENDED JUNE 30,
2023
(As compared to the first half 2022)
- Net sales decreased 25.2% to $124.7
million
- Gross margin declined 410 basis points, to 22.2%
- Operating income decreased 62.8% to $6.4
million
- Net income of $2.7 million, or
$0.20 per diluted share vs.
$12.3 million, or $0.91 per diluted share for 2022
- Cash provided by operations of $12.9
million vs. cash used of $0.3
million
For the second quarter ended June 30,
2023, Escalade reported net income of $3.6 million, or $0.26 per diluted share, versus net income of
$5.7 million, or $0.42 per diluted share for the second quarter in
2022. Total net sales declined 28.2% on a year-over-year basis in
the second quarter, due to a combination of reduced post-pandemic
consumer demand across most product categories, together with 21
fewer days in the Company's new reporting calendar, when compared
to the year-ago period. Excluding the impact of the change in the
Company's reporting calendar, sales declined 9.5% on a
year-over-year basis.
For the two quarters ended June 30,
2023, Escalade reported net income of $2.7 million, or $0.20 per diluted share, versus $12.3 million, or $0.91 per diluted share for the first half of
2022. Total net sales declined 25.2% on a year-over-year basis in
the first half of 2023 due mainly to reduced post-pandemic demand,
particularly in our archery, basketball, and indoor/outdoor games
categories as well as excess inventory levels in the retail
channel.
Escalade reported second quarter gross margin of 24.6%, a
decline of 50 basis points versus the prior-year quarter, primarily
driven by higher-cost inventory, elevated inventory storage and
handling costs, and lower operating leverage on a comparably lower
revenue base partially offset by improved margins in several
categories and expense reductions implemented through the second
quarter.
The Company generated $8.4 million
of cash flow from operations in the second quarter 2023, compared
to $2.5 million for the same quarter
in 2022. Earnings before interest, taxes, depreciation, and
amortization ("EBITDA") declined 25.9% to $7.7 million in the second quarter 2023, versus
$10.3 million in the prior-year
period.
As of June 30, 2023, the Company
had total cash and equivalents of $0.6
million, together with $42.4
million of availability on its senior secured revolving
credit facility maturing in 2027. At the end of the second quarter
2023, net debt (total debt less cash) was 4.0x trailing
twelve-month EBITDA.
Escalade's Board of Directors has declared a quarterly dividend
of $0.15 per share of common stock.
The dividend is payable on September 5,
2023 to all shareholders of record at the close of business
on August 29, 2023.
Effective January 1, 2023,
Escalade transitioned to a conventional twelve-month reporting
calendar. The second quarter 2023 had 91 operating days, versus 112
days in the prior year period. Please see the accompanying table in
our footnotes for a comparison of the days in each quarter for 2022
and 2023.
MANAGEMENT COMMENTARY
"Recovering from a challenging start to the year and our
disappointing first quarter, I am proud that our team demonstrated
resilience and delivered strong second quarter results highlighted
by substantial growth in cash provided by operations,
significant inventory and long-term debt reductions, EBITDA margin
expansion, thoughtful expense reductions, and a return to
profitability," stated Walter P. Glazer,
Jr., President and CEO of Escalade. "While US retail sales
of sporting goods are soft and consumer confidence remains dampened
by inflationary headwinds, higher interest rates and a mixed
employment outlook, we believe our diverse portfolio of leading
recreational brands will continue to resonate with consumers. As we
look into the second half of the year, we anticipate continued
normalization of wholesale channel inventories which should
position us to capitalize on restocking opportunities with
our retail partners as we move into the holiday season. Continuing
with our strategic direction, we remain highly focused on a
combination of cost control, improved working capital management,
and balance sheet optimization including the divestiture of our
owned facility in Rosarito,
Mexico."
"Sales strengthened relative to our first quarter as we
continued to gain momentum through the second quarter," continued
Glazer. "Notably, direct to consumer (DTC) sales have continued to
accelerate, with DTC sales up more than 60% versus the comparable
April to June period in 2022, driven by a combination of effective
marketing campaigns and successful new product launches. In the
second quarter, we also continued with strong sales growth in the
pickleball category versus year-ago second quarter, despite 19%
fewer days this year, driven by growing consumer demand for our
Onix brand and leading assortment of innovative paddles, balls, and
accessories."
"Second quarter gross margin declined on a year-over-year basis,
but improved significantly compared to the first quarter, due to
expense reductions, factory absorption, price discipline, and a
more favorable product mix," continued Glazer. "Looking to the
second half of the year, we anticipate margin expansion
opportunities as we expect to continue those favorable trends from
the second quarter and work through our higher-cost inventory."
"We remain highly focused on reducing net leverage to within our
targeted range of 1.5x to 2.5x," stated Glazer. "Over the
near-term, we will prioritize debt reduction, consistent with our
previously stated strategy. During the second half of the year, we
expect to materially reduce inventory levels, while closely
managing our capital expenditures, thereby positioning us to
further reduce net leverage and maintain our stable quarterly cash
dividend while supporting our customers and continuing to build our
market-leading portfolio of high-quality and beloved brands for our
loyal consumer base."
CONFERENCE CALL
A conference call will be held Thursday,
July 27, 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:
|
1-877-407-0792
|
International
Live:
|
1-201-689-8263
|
To listen to a replay of the teleconference, which subsequently
will be available through August 10,
2023:
Domestic
Replay:
|
1-844-512-2921
|
International
Replay:
|
1-412-317-6671
|
Conference
ID:
|
13740128
|
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
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; 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 Subsidiaries
|
Consolidated
Statements of Operations
|
(Unaudited, In
Thousands Except Per Share Data)
|
|
|
|
|
|
Second Quarter Ended
|
|
Two Quarters Ended
|
All Amounts in
Thousands Except Per Share Data
|
June 30,
2023
|
|
July 9,
2022
|
|
June 30,
2023
|
|
July 9,
2022
|
|
|
|
|
|
|
|
|
Net sales
|
$67,771
|
|
$94,337
|
|
$124,702
|
|
$166,717
|
|
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
Cost of products
sold
|
51,124
|
|
70,613
|
|
97,003
|
|
122,874
|
Selling,
administrative and general expenses
|
9,769
|
|
14,680
|
|
20,052
|
|
25,206
|
Amortization
|
620
|
|
855
|
|
1,240
|
|
1,425
|
|
|
|
|
|
|
|
|
Operating
Income
|
6,258
|
|
8,189
|
|
6,407
|
|
17,212
|
|
|
|
|
|
|
|
|
Other Income
(Expense)
|
|
|
|
|
|
|
|
Interest
expense
|
(1,580)
|
|
(948)
|
|
(2,955)
|
|
(1,508)
|
Other
income
|
7
|
|
29
|
|
25
|
|
72
|
|
|
|
|
|
|
|
|
Income Before Income
Taxes
|
4,685
|
|
7,270
|
|
3,477
|
|
15,776
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes
|
1,043
|
|
1,597
|
|
787
|
|
3,449
|
|
|
|
|
|
|
|
|
Net Income
|
$3,642
|
|
$ 5,673
|
|
$2,690
|
|
$12,327
|
|
|
|
|
|
|
|
|
Earnings Per Share
Data:
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$ 0.27
|
|
$ 0.42
|
|
$ 0.20
|
|
$ 0.91
|
Diluted earnings per
share
|
$ 0.26
|
|
$ 0.42
|
|
$ 0.20
|
|
$ 0.91
|
|
|
|
|
|
|
|
|
Dividends
declared
|
$ 0.15
|
|
$ 0.15
|
|
$ 0.30
|
|
$ 0.30
|
|
|
|
|
|
|
|
|
Consolidated Balance
Sheets
|
(Unaudited, In
Thousands)
|
|
|
|
|
|
All Amounts in
Thousands Except Share Information
|
June 30,
2023
|
December 31,
2022
|
July 9,
2022
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$ 577
|
$ 3,967
|
$ 6,195
|
Receivables, less
allowance of $355; $492; and $726; respectively
|
54,975
|
57,419
|
60,011
|
Inventories
|
111,676
|
121,870
|
130,246
|
Prepaid
expenses
|
3,925
|
4,942
|
7,263
|
Prepaid income
tax
|
1,518
|
--
|
621
|
TOTAL CURRENT
ASSETS
|
172,671
|
188,198
|
204,336
|
|
|
|
|
Property, plant and
equipment, net
|
24,261
|
24,751
|
28,344
|
Assets held for
sale
|
2,823
|
2,823
|
--
|
Operating lease
right-of-use assets
|
8,669
|
9,100
|
9,318
|
Intangible assets,
net
|
29,880
|
31,120
|
35,353
|
Goodwill
|
42,326
|
42,326
|
39,226
|
Other assets
|
455
|
400
|
275
|
TOTAL ASSETS
|
$281,085
|
$298,718
|
$316,852
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Current portion of
long-term debt
|
$ 7,143
|
$ 7,143
|
$ 7,143
|
Trade accounts
payable
|
14,680
|
9,414
|
24,650
|
Accrued
liabilities
|
9,897
|
21,320
|
20,483
|
Income tax
payable
|
--
|
71
|
--
|
Current operating
lease liabilities
|
1,002
|
993
|
676
|
TOTAL CURRENT
LIABILITIES
|
32,722
|
38,941
|
52,952
|
|
|
|
|
Other
Liabilities:
|
|
|
|
Long‑term
debt
|
76,809
|
87,738
|
94,040
|
Deferred income tax
liability
|
4,516
|
4,516
|
4,759
|
Operating lease
liabilities
|
8,222
|
8,641
|
8,660
|
Other
liabilities
|
407
|
407
|
448
|
TOTAL LIABILITIES
|
122,676
|
140,243
|
160,859
|
|
|
|
|
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 –
13,736,800; 13,594,407; and 13,590,407; shares
respectively
|
13,737
|
13,594
|
13,590
|
Retained
earnings
|
144,672
|
144,881
|
142,403
|
TOTAL STOCKHOLDERS'
EQUITY
|
158,409
|
158,475
|
155,993
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$281,085
|
$298,718
|
$316,852
|
Reconciliation of
GAAP Net Income to Non-GAAP EBITDA
|
(Unaudited, In
Thousands)
|
|
|
Second Quarter
Ended
|
|
Two Quarters
Ended
|
All Amounts in
Thousands
|
June 30,
2023
|
|
July 9,
2022
|
|
June 30,
2023
|
|
July 9,
2022
|
|
|
|
|
|
|
|
|
Net Income
(GAAP)
|
$ 3,642
|
|
$ 5,673
|
|
$2,690
|
|
$12,327
|
|
|
|
|
|
|
|
|
Interest
expense
|
1,580
|
|
948
|
|
2,955
|
|
1,508
|
Income tax
expense
|
1,043
|
|
1,597
|
|
787
|
|
3,449
|
Depreciation and
amortization
|
1,402
|
|
2,130
|
|
2,798
|
|
3,603
|
|
|
|
|
|
|
|
|
EBITDA
(Non-GAAP)
|
$7,667
|
|
$10,348
|
|
$9,230
|
|
$20,887
|
|
|
|
|
|
|
|
|
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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SOURCE Escalade, Incorporated