Item 1. 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 26, 2020 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 2020 filed with the Securities and Exchange Commission.
Note B ‑ Seasonal Aspects
The results of operations for the three and nine month periods ended October 2, 2021 and October 3, 2020 are not necessarily indicative of the results to be expected for the full year.
Note C ‑ Inventories
In thousands
|
|
October 2,
2021
|
|
|
December 26,
2020
|
|
|
October 3,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
10,160
|
|
|
$
|
9,121
|
|
|
$
|
8,446
|
|
Work in progress
|
|
|
3,873
|
|
|
|
3,538
|
|
|
|
4,217
|
|
Finished goods
|
|
|
77,722
|
|
|
|
59,829
|
|
|
|
51,075
|
|
|
|
$
|
91,755
|
|
|
$
|
72,488
|
|
|
$
|
63,738
|
|
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 October 2, 2021, December 26, 2020 and October 3, 2020.
7
|
|
|
|
|
|
Fair Value Measurements Using
|
|
October 2, 2021
In thousands
|
|
Carrying
Amount
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,492
|
|
|
$
|
6,492
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
7,143
|
|
|
$
|
--
|
|
|
$
|
7,143
|
|
|
$
|
--
|
|
Long-term debt
|
|
$
|
51,874
|
|
|
$
|
--
|
|
|
$
|
51,874
|
|
|
$
|
--
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
December 26, 2020
In thousands
|
|
Carrying
Amount
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,505
|
|
|
$
|
3,505
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
30,073
|
|
|
$
|
--
|
|
|
$
|
30,073
|
|
|
$
|
--
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
October 3, 2020
In thousands
|
|
Carrying
Amount
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,811
|
|
|
$
|
6,811
|
|
|
$
|
--
|
|
|
$
|
--
|
|
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 nine months ended October 2, 2021 and pursuant to the 2017 Incentive Plan, in lieu of cash payments of director fees, the Company awarded to certain directors 5,683 shares of common stock. During the nine months ended October 2, 2021, the Company awarded 13,332 restricted stock units to directors and 37,283 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 2021 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 nine months ended October 2, 2021, the Company recognized stock based compensation expense of $229 thousand and $666 thousand, respectively compared to stock based compensation expense of $263 thousand and $756 thousand for the same periods in the prior year. At October 2, 2021 and October 3, 2020, respectively, there was $0.9 million and $1.2 million in unrecognized stock-based compensation expense related to non-vested stock awards.
Note F ‑ Segment Information
|
|
For the Three Months
Ended October 2, 2021
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
81,298
|
|
|
$
|
--
|
|
|
$
|
81,298
|
|
Operating income (loss)
|
|
|
8,087
|
|
|
|
(415
|
)
|
|
|
7,672
|
|
Net income
|
|
|
5,614
|
|
|
|
352
|
|
|
|
5,966
|
|
|
|
As of and for the Nine Months
Ended October 2, 2021
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
240,168
|
|
|
$
|
--
|
|
|
$
|
240,168
|
|
Operating income (loss)
|
|
|
27,049
|
|
|
|
(1,562
|
)
|
|
|
25,487
|
|
Net income
|
|
|
18,956
|
|
|
|
578
|
|
|
|
19,534
|
|
Total assets
|
|
$
|
246,777
|
|
|
$
|
7,379
|
|
|
$
|
254,156
|
|
|
|
For the Three Months
Ended October 3, 2020
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
78,069
|
|
|
$
|
--
|
|
|
$
|
78,069
|
|
Operating income (loss)
|
|
|
13,177
|
|
|
|
(362
|
)
|
|
|
12,815
|
|
Net income
|
|
|
9,554
|
|
|
|
632
|
|
|
|
10,186
|
|
|
|
As of and for the Nine Months
Ended October 3, 2020
|
|
In thousands
|
|
Sporting
Goods
|
|
|
Corp.
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
198,882
|
|
|
$
|
--
|
|
|
$
|
198,882
|
|
Operating income (loss)
|
|
|
27,640
|
|
|
|
(1,529
|
)
|
|
|
26,111
|
|
Net income
|
|
|
20,017
|
|
|
|
830
|
|
|
|
20,847
|
|
Total assets
|
|
$
|
190,309
|
|
|
$
|
8,407
|
|
|
$
|
198,716
|
|
Note G – Dividend Payment
On September 14, 2021, the Company paid a quarterly dividend of $0.14 per common share to all shareholders of record on September 7, 2021. The total amount of the dividend was approximately $1.9 million and was charged against retained earnings.
On June 8, 2021, the Company paid a quarterly dividend of $0.14 per common share to all shareholders of record on June 1, 2021. The total amount of the dividend was approximately $1.9 million and was charged against retained earnings.
On March 24, 2021, the Company paid a quarterly dividend of $0.14 per common share to all shareholders of record on March 17, 2021 (the amount was funded to the transfer agent by the Company on March 19, 2021). The total amount of the dividend was approximately $1.9 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
|
|
|
Nine Months Ended
|
|
In thousands
|
|
October 2,
2021
|
|
|
October 3,
2020
|
|
|
October 2,
2021
|
|
|
October 3,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
13,706
|
|
|
|
14,128
|
|
|
|
13,821
|
|
|
|
14,117
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
102
|
|
|
|
137
|
|
|
|
102
|
|
|
|
105
|
|
Weighted average common shares outstanding, assuming dilution
|
|
|
13,808
|
|
|
|
14,265
|
|
|
|
13,923
|
|
|
|
14,222
|
|
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 2021 and 2020 were 11,900 and 57,569, respectively.
Note I – New Accounting Standards and Changes in Accounting Principles
With the exception of that discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the three and nine months ended October 2, 2021, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2020, that are of significance, or potential significance to the Company.
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying Accounting for Income Taxes, which removes certain exceptions to the general principles of Topic 740, Accounting for Income Taxes (“ASC 740”) and is intended to improve consistency and simplify GAAP in several other areas of ASC 740 by clarifying and amending existing guidance. The Company adopted this standard on December 27, 2020 and the adoption did not have a material impact on its consolidated financial statements.
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.
10
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
|
|
|
Nine Months Ended
|
|
All Amounts in Thousands
|
|
October 2, 2021
|
|
|
October 3, 2020
|
|
|
October 2, 2021
|
|
|
October 3, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Sales by Channel:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mass Merchants
|
|
$
|
41,792
|
|
|
$
|
36,234
|
|
|
$
|
93,298
|
|
|
$
|
77,418
|
|
Specialty Dealers
|
|
|
19,170
|
|
|
|
21,741
|
|
|
|
73,347
|
|
|
|
57,666
|
|
E-commerce
|
|
|
25,116
|
|
|
|
25,172
|
|
|
|
86,053
|
|
|
|
78,242
|
|
International
|
|
|
2,259
|
|
|
|
2,637
|
|
|
|
9,182
|
|
|
|
6,129
|
|
Other
|
|
|
883
|
|
|
|
598
|
|
|
|
2,469
|
|
|
|
1,669
|
|
Total Gross Sales
|
|
|
89,220
|
|
|
|
86,382
|
|
|
|
264,349
|
|
|
|
221,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Gross-to-Net Sales Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Returns
|
|
|
1,283
|
|
|
|
2,117
|
|
|
|
5,531
|
|
|
|
5,538
|
|
Warranties
|
|
|
590
|
|
|
|
376
|
|
|
|
1,703
|
|
|
|
1,152
|
|
Customer Allowances
|
|
|
6,049
|
|
|
|
5,820
|
|
|
|
16,947
|
|
|
|
15,552
|
|
Total Gross-to-Net Sales Adjustments
|
|
|
7,922
|
|
|
|
8,313
|
|
|
|
24,181
|
|
|
|
22,242
|
|
Total Net Sales
|
|
$
|
81,298
|
|
|
$
|
78,069
|
|
|
$
|
240,168
|
|
|
$
|
198,882
|
|
Note K – Leases
We have operating leases for office, manufacturing and distribution facilities as well as for certain equipment. Our commenced leases have remaining lease terms of 1 year to 6 years. As of October 2, 2021, 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 as follows:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
All Amounts in Thousands
|
|
October 2,
2021
|
|
|
October 3,
2020
|
|
|
October 2,
2021
|
|
|
October 3,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease Cost
|
|
$
|
433
|
|
|
$
|
197
|
|
|
$
|
1,151
|
|
|
$
|
610
|
|
Short-term Lease Cost
|
|
|
330
|
|
|
|
137
|
|
|
|
1,361
|
|
|
|
411
|
|
Variable Lease Cost
|
|
|
101
|
|
|
|
52
|
|
|
|
304
|
|
|
|
169
|
|
Total Operating Lease Cost
|
|
$
|
864
|
|
|
|
386
|
|
|
$
|
2,816
|
|
|
$
|
1,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease – Operating Cash Flows
|
|
$
|
434
|
|
|
$
|
182
|
|
|
$
|
1,050
|
|
|
$
|
557
|
|
New ROU Assets – Operating Leases
|
|
$
|
1,189
|
|
|
$
|
56
|
|
|
$
|
2,329
|
|
|
$
|
744
|
|
Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:
|
|
Nine Months Ended
|
|
All Amounts in Thousands
|
|
October 2,
2021
|
|
|
October 3,
2020
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term – Operating Leases (years)
|
|
|
3.93
|
|
|
|
2.40
|
|
Weighted Average Discount Rate – Operating Leases
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Future minimum lease payments under non-cancellable leases as of October 2, 2021 were as follows:
All Amounts in Thousands
|
|
|
|
|
|
|
|
|
|
Year 1
|
|
$
|
325
|
|
Year 2
|
|
|
884
|
|
Year 3
|
|
|
405
|
|
Year 4
|
|
|
336
|
|
Year 5
|
|
|
312
|
|
Thereafter
|
|
|
486
|
|
Total future minimum lease payments
|
|
|
2,748
|
|
Less imputed interest
|
|
|
(265
|
)
|
Total
|
|
$
|
2,483
|
|
|
|
|
|
|
Reported as of October 2, 2021
|
|
|
|
|
Current operating lease liabilities
|
|
|
990
|
|
Long-term operating lease liabilities
|
|
|
1,493
|
|
Total
|
|
$
|
2,483
|
|
As of October 2, 2021, we have entered into a lease for additional warehouse and operations which has not yet commenced. Although the location is currently under construction, we do not control the building during construction, and are thus not deemed to be the owner during construction. Amounts in the table above exclude legally binding minimum lease payments for the lease signed but not yet commenced of $9.9 million.
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.