EVANSVILLE, Ind., Oct. 26,
2023 /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 2023.
THIRD QUARTER 2023
(As compared to the third
quarter 2022)
- Net sales decreased 2.1% to $73.4
million
- Gross margin improved 652 basis points, to 24.7%
- Operating income increased 52.7% to $6.4
million
- EBITDA totaled $7.9 million, an
increase of 35.7%
- Net income of $4.3 million, or
$0.31 per diluted share vs.
$3.0 million, or $0.22 per diluted share for 2022
- Cash provided by operations of $14.8
million vs. cash used of $5.5
million
THREE QUARTERS ENDED SEPTEMBER 30,
2023
(As compared to three quarters ended
October 1, 2022)
- Net sales decreased 18.0% to $198.1
million
- Gross margin declined 70 basis points, to 23.1%
- Operating income decreased 40.0% to $12.9 million
- EBITDA totaled $17.1 million, a
decrease of 35.9%
- Net income of $7.0 million, or
$0.50 per diluted share vs.
$15.3 million, or $1.12 per diluted share for 2022
- Cash provided by operations of $27.7
million vs. cash used of $5.7
million
For the third quarter ended September 30,
2023, Escalade reported net income of $4.3 million, or $0.31 per diluted share, versus net income of
$3.0 million, or $0.22 per diluted share for the third quarter in
2022. Total net sales declined 2.1% on a year-over-year basis in
the third quarter, primarily due to softer consumer demand across
the majority of the Company's product categories, partially offset
by improved demand in our basketball and pickleball product
categories and the impact of the change in the Company's reporting
calendar which resulted in eight more business days during the
third quarter of 2023. Excluding the impact of the change in the
Company's reporting calendar, net sales declined 11.6%.
For the three quarters ended September
30, 2023, Escalade reported net income of $7.0 million, or $0.50 per diluted share, versus $15.3 million, or $1.12 per diluted share for the three quarters
ended October 1, 2022. Total net
sales declined 18.0% on a year-over-year basis in 2023 due to
softer consumer demand and the impact of the change in the
Company's reporting calendar, which has resulted in seven fewer
days in the first three quarters of 2023 compared to the first
three quarters of 2022. Excluding the impact of the change in the
Company's reporting calendar, net sales declined 15.5%.
Escalade reported third quarter gross margin of 24.7%, an
increase of 652 basis points versus the prior-year quarter, due to
favorable product mix, lower costs associated with supply chain
disruption and nonrecurring product recall expenses in the prior
year quarter that did not recur in the third quarter of 2023.
The Company generated $14.8
million of cash flow from operations in the third quarter
2023, compared to cash use from operations of $5.5 million for the same quarter in 2022.
Earnings before interest, taxes, depreciation, and amortization
("EBITDA") increased 35.7% to $7.9
million in the third quarter 2023, versus $5.8 million in the prior-year period.
As of September 30, 2023, the
Company had total cash and equivalents of $0.9 million, together with $47.5 million of availability on its senior
secured revolving credit facility maturing in 2027. At the end of
the third quarter 2023, net debt (total debt less cash) was 3.1x
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 January 12,
2024 to all shareholders of record at the close of business
on January 5, 2024.
Effective January 1, 2023,
Escalade transitioned to a conventional twelve-month reporting
calendar. Please see the accompanying table in our footnotes for a
comparison of the days in each quarter for 2022 and 2023.
MANAGEMENT COMMENTARY
"We delivered strong third quarter results highlighted by
significant year-over-year-growth in gross margins, operating
income and operating cash flow resulting in substantial debt
reduction," stated Walter P. Glazer,
Jr., President and CEO of Escalade. "The wholesale
inventory destocking cycle that began earlier this year progressed
favorably for many of our categories. Order activity also improved
within our mass merchant channel, which includes our big box and
sporting goods retailers, during the third quarter driven by demand
for our basketball and pickleball product categories. We've
remained highly focused on reducing fixed overhead expenses, while
continuing to reduce inventory levels, consistent with our focus on
improved working capital efficiency," stated Glazer.
"During a period of higher interest rates and persistent
inflationary headwinds, consumer demand for many of our categories
has so far remained resilient," continued Glazer. "These economic
headwinds will likely continue for some time and may further erode
consumer confidence and have a greater impact on discretionary
spending in our categories. We also believe our retail partners
will continue to closely manage their inventory levels and be more
promotional in this uncertain economic environment," stated Glazer.
"Our diverse portfolio of recreational brands has resonated with
consumers in this current environment, particularly within our
basketball and pickleball assortment," continued Glazer. "The sales
improvement we are seeing in these categories results from
innovative product introductions, our strong brand support and our
continued investment in our direct-to-consumer (DTC) sales
platform, which has grown over 50% year-to-date. We continue to
invest in both our DTC initiatives and new product development
within our brand portfolio."
"Third quarter gross margin improved substantially to the best
levels since the second quarter of last year," continued Glazer.
"The improvement is the result of favorable product mix, expense
reductions, and price discipline. We believe that this gross margin
level is sustainable as we continue to identify opportunities for
fixed cost reductions amid raw material and freight tailwinds. We
also continue to focus on the divestiture of our underutilized
facility in Mexico."
"Debt reduction remains our top capital allocation priority at
this time," stated Glazer. "Strong free cash generation in the
third quarter supported approximately $12
million in debt reduction, bringing net leverage
down to 3.1x at the end of the quarter," stated Glazer. "Looking
ahead, we remain focused on closely managing our capital
expenditures as well as further reducing outstanding borrowings and
reinvesting in our market-leading portfolio of high-quality
brands."
CONFERENCE CALL
A conference call will be held Thursday,
October 26, 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:
|
1-877-300-8521
|
International Live:
|
1-412-317-6062
|
To listen to a replay of the teleconference, which subsequently
will be available through November 9,
2023:
Domestic
Replay:
|
1-844-512-2921
|
International
Replay:
|
1-412-317-6671
|
Conference
ID:
|
10183197
|
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)
|
|
|
|
|
|
Third Quarter
Ended
|
|
Three Quarters
Ended
|
All Amounts in
Thousands Except Per Share Data
|
September
30, 2023
|
|
October 1,
2022
|
|
September
30, 2023
|
|
October 1,
2022
|
|
|
|
|
|
|
|
|
Net sales
|
$73,358
|
|
$74,904
|
|
198,060
|
|
$241,621
|
|
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
Cost of products
sold
|
55,222
|
|
61,273
|
|
152,225
|
|
184,147
|
Selling,
administrative and general expenses
|
11,071
|
|
8,769
|
|
31,123
|
|
33,975
|
Amortization
|
620
|
|
642
|
|
1,860
|
|
2,067
|
|
|
|
|
|
|
|
|
Operating
Income
|
6,445
|
|
4,220
|
|
12,852
|
|
21,432
|
|
|
|
|
|
|
|
|
Other Income
(Expense)
|
|
|
|
|
|
|
|
Interest
expense
|
(1,325)
|
|
(954)
|
|
(4,280)
|
|
(2,462)
|
Other income
(expense)
|
5
|
|
(22)
|
|
30
|
|
50
|
|
|
|
|
|
|
|
|
Income Before Income
Taxes
|
5,125
|
|
3,244
|
|
8,602
|
|
19,020
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes
|
850
|
|
286
|
|
1,637
|
|
3,735
|
|
|
|
|
|
|
|
|
Net Income
|
$4,275
|
|
$2,958
|
|
$6,965
|
|
$15,285
|
|
|
|
|
|
|
|
|
Earnings Per Share
Data:
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$0.31
|
|
$ 0.22
|
|
$0.51
|
|
$ 1.13
|
Diluted earnings per
share
|
$0.31
|
|
$ 0.22
|
|
$0.50
|
|
$ 1.12
|
|
|
|
|
|
|
|
|
Dividends
declared
|
$ 0.15
|
|
$ 0.15
|
|
$ 0.45
|
|
$ 0.45
|
Consolidated Balance
Sheets
(Unaudited, In Thousands)
|
|
|
|
|
All Amounts in
Thousands Except Share Information
|
September
30, 2023
|
December 31,
2022
|
October
1, 2022
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$ 919
|
$ 3,967
|
$ 4,000
|
Receivables, less
allowance of $367; $492; and $729; respectively
|
63,378
|
57,419
|
65,258
|
Inventories
|
105,267
|
121,870
|
134,957
|
Prepaid
expenses
|
4,303
|
4,942
|
4,143
|
Prepaid income
tax
|
2,080
|
--
|
1,075
|
TOTAL CURRENT
ASSETS
|
175,947
|
188,198
|
209,433
|
|
|
|
|
Property, plant and
equipment, net
|
23,949
|
24,751
|
27,618
|
Assets held for
sale
|
2,823
|
2,823
|
--
|
Operating lease
right-of-use assets
|
8,645
|
9,100
|
9,074
|
Intangible assets,
net
|
29,260
|
31,120
|
34,712
|
Goodwill
|
42,326
|
42,326
|
39,226
|
Other assets
|
423
|
400
|
261
|
TOTAL ASSETS
|
$283,373
|
$298,718
|
$320,324
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Current portion of
long-term debt
|
$ 7,143
|
$ 7,143
|
$ 7,143
|
Trade accounts
payable
|
24,050
|
9,414
|
22,684
|
Accrued
liabilities
|
11,991
|
21,320
|
19,060
|
Income tax
payable
|
--
|
71
|
--
|
Current operating
lease liabilities
|
1,037
|
993
|
816
|
TOTAL CURRENT
LIABILITIES
|
44,221
|
38,941
|
49,703
|
|
|
|
|
Other
Liabilities:
|
|
|
|
Long‑term
debt
|
64,896
|
87,738
|
99,568
|
Deferred income tax
liability
|
4,516
|
4,516
|
4,759
|
Operating lease
liabilities
|
8,163
|
8,641
|
8,557
|
Other
liabilities
|
407
|
407
|
448
|
TOTAL LIABILITIES
|
122,203
|
140,243
|
163,035
|
|
|
|
|
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
|
147,433
|
144,881
|
143,699
|
TOTAL STOCKHOLDERS'
EQUITY
|
161,170
|
158,475
|
157,289
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$283,373
|
$298,718
|
$320,324
|
Reconciliation of
GAAP Net Income to Non-GAAP EBITDA
(Unaudited, In Thousands)
|
|
|
|
|
|
Third Quarter
Ended
|
|
Three Quarters
Ended
|
All Amounts in
Thousands
|
September
30, 2023
|
|
October 1,
2022
|
|
September
30, 2023
|
|
October 1,
2022
|
|
|
|
|
|
|
|
|
Net Income
(GAAP)
|
$4,275
|
|
$ 2,958
|
|
$6,965
|
|
$ 15,285
|
|
|
|
|
|
|
|
|
Interest
expense
|
1,325
|
|
954
|
|
4,280
|
|
2,462
|
Income tax
expense
|
850
|
|
286
|
|
1,637
|
|
3,735
|
Depreciation and
amortization
|
1,423
|
|
1,604
|
|
4,221
|
|
5,207
|
|
|
|
|
|
|
|
|
EBITDA
(Non-GAAP)
|
$7,873
|
|
$5,802
|
|
$17,103
|
|
$26,689
|
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, Inc.