EVANSVILLE, Ind., May 9, 2023
/PRNewswire/ -- Escalade, Inc. (NASDAQ: ESCA, or the "Company"), a
leading manufacturer and distributor of sporting goods and
indoor/outdoor recreational equipment, today announced results for
the first quarter 2023.
FIRST QUARTER 2023 HIGHLIGHTS
(As compared to the
first quarter 2022)
- Net sales were $56.9 million, a
decline of 21.3%
- Operating income was $0.1
million, 98.3% below 2022
- EBITDA totaled $1.6 million, a
decrease of 85.2%
- Net loss of $1.0 million, or
$0.07 loss per diluted share vs.
$0.49 income per share for Q1
2022
- Cash provided by operations of $4.5
million vs. cash used of $2.9
million for Q1 2022
For the three months ended March 31,
2023, Escalade posted net sales of $56.9 million, net loss of $1.0 million and diluted loss per share of
$0.07.
Sales declined 21.3% on a year-over-year basis, given a
combination of changing post-pandemic consumer demand, excess
inventories in the retail channel and unfavorable weather
conditions in the quarter which delayed the start of the spring
business.
The Company reported first quarter gross margin of 19.4%, a
decline of 840 basis points versus the prior-year period, primarily
driven by less favorable product mix, ongoing additional inventory
storage and handling costs, and lower operating leverage with the
lower sales level.
Earnings before interest, taxes, depreciation, and amortization
("EBITDA") declined 85.2% to $1.6
million in the first quarter 2023, versus $10.5 million in the prior-year period.
Net loss for the first quarter of 2023 was $1.0 million, or $0.07 diluted loss per share compared to net
income of $6.7 million, or
$0.49 diluted earnings per share for
the same quarter in 2022.
Cash provided by operations for the first quarter of 2023 was
$4.5 million compared to cash used of
$2.9 million for the same quarter in
2022.
As of March 31, 2023, the Company
had total cash and equivalents of $6.1
million, together with $32.9
million of availability on its senior secured revolving
credit facility maturing in 2027. At the end of the first quarter
2023, net debt (total debt less cash) was 3.8x trailing
twelve-month EBITDA.
Escalade announced a quarterly dividend of $0.15 per share to be paid to all shareholders of
record on June 12, 2023 and disbursed
on June 19, 2023.
Effective January 1, 2023,
Escalade transitioned to a conventional twelve-month reporting
calendar. The first quarter 2023 had 90 operating days, versus 84
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
"As expected, consumer demand softened during the first quarter
and retailers continued to aggressively manage inventories, both
contributing to a year-over-year decline in revenue and
profitability," stated Walter P. Glazer,
Jr., President and CEO of Escalade. "While sales volumes
declined across most categories in the period given a challenging
prior-year comparison, we continued to maintain price discipline,
consistent with our strategic focus. Entering the second quarter,
channel inventories remain elevated. We anticipate wholesale
restocking to gradually increase as we move into the warmer, summer
months and the second half of the year."
"In January, sales declined materially versus the prior year
period due to lower sell-in of our basketball and archery
categories given elevated inventory levels in the wholesale
channel," continued Glazer. "During February and March, demand
conditions improved meaningfully versus January levels, supported
by demand from indoor games, fitness, and safety. While our overall
E-commerce sales declined in the quarter due to inventory
destocking within our marketplace and at third-party reseller
customers, our owned direct to consumer website sales increased 44%
on a year-over-year basis in the first quarter, reflecting
continued consumer demand for our products and the effectiveness of
our marketing, product development, and E-commerce teams."
"First quarter gross margin declined significantly versus the
prior-year period, reflecting the impact of higher-cost inventory,
shut-down and severance expenses, lower sales volumes and a less
favorable product mix," continued Glazer.
"Although Escalade remains lean, we continue to evaluate
opportunities to further align our cost structure with the current
demand environment," continued Glazer. "In February, we announced
plans to divest our owned facility in Rosarito, Mexico as we seek to further
optimize our manufacturing footprint. We are targeting the
divestiture of this facility by year-end 2023 and expect to realize
annualized savings of between $0.5
million to $1.5 million upon
the sale of the asset. We will use the net proceeds from the
divestiture for debt reduction. Additionally, we initiated a
targeted reduction in force during the second quarter 2023 within
our domestic operations. We anticipate $2.3
million in annualized cost savings resulting from the
domestic reduction in force beginning in the third quarter 2023.
Between the divestiture of our Mexico operations and planned reduction in
force domestically, we anticipate total annualized savings to be
approximately $2.8 million to
$3.8 million annually."
"We ended the first quarter with a ratio of net debt to trailing
twelve-month EBITDA of 3.8x, well above our targeted range of 1.5x
to 2.5x," stated Glazer. "Importantly, we anticipate a combination
of improved seasonal demand and expense reductions, together with a
normalization of channel inventories, will bring us back within our
targeted range by year-end. We have worked with our banks to amend
our credit agreement to address the temporarily higher leverage. We
have also reduced our planned capital expenditures and initiated
other actions to generate additional cash to reduce our debt. We
have taken these preemptive actions to ensure adequate liquidity
with which to support our customers, while continuing to build a
market-leading portfolio of high-quality, beloved brands and
indoor/outdoor products for our loyal consumer base."
CONFERENCE CALL
A conference call will be held Tuesday,
May 9, 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:
|
1-412-317-6026
|
To listen to a replay of the teleconference, which subsequently
will be available through May 23,
2023:
Domestic
Replay:
|
1-844-512-2921
|
International
Replay:
|
1-412-317-6671
|
Conference
ID:
|
10177647
|
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, 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, 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)
|
|
|
|
Three Months
Ended
|
All Amounts in
Thousands Except Per Share Data
|
|
|
|
|
March 31,
2023
|
|
March 19,
2022
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
$56,931
|
|
$72,380
|
|
|
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
|
|
Cost of products
sold
|
|
|
|
|
45,879
|
|
52,261
|
Selling,
administrative and general expenses
|
|
|
|
|
10,283
|
|
10,526
|
Amortization
|
|
|
|
|
620
|
|
570
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
|
|
149
|
|
9,023
|
|
|
|
|
|
|
|
|
Other Income
(Expense)
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
|
|
(1,375)
|
|
(560)
|
Other
income
|
|
|
|
|
18
|
|
43
|
|
|
|
|
|
|
|
|
Income (Loss) Before
Income Taxes
|
|
|
|
|
(1,208)
|
|
8,506
|
|
|
|
|
|
|
|
|
Provision (Benefit) for
Income Taxes
|
|
|
|
|
(256)
|
|
1,852
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
|
|
|
($952)
|
|
$6,654
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per
Share Data:
|
|
|
|
|
|
|
|
Basic earnings (loss)
per share
|
|
|
|
|
($0.07)
|
|
$ 0.49
|
Diluted earnings
(loss) per share
|
|
|
|
|
($0.07)
|
|
$ 0.49
|
|
|
|
|
|
|
|
|
Dividends
declared
|
|
|
|
|
$ 0.15
|
|
$ 0.15
|
Consolidated Balance
Sheets
(Unaudited, In Thousands)
|
All Amounts in
Thousands Except Share Information
|
March 31,
2023
|
December 31,
2022
|
March 19,
2022
|
|
(Unaudited)
|
(Audited)
|
(Unaudited)
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$ 6,064
|
$
3,967
|
$ 6,392
|
Receivables, less
allowance of $490; $492; and $566; respectively
|
50,468
|
57,419
|
67,301
|
Inventories
|
122,453
|
121,870
|
114,605
|
Prepaid
expenses
|
4,879
|
4,942
|
12,716
|
Prepaid income
tax
|
175
|
--
|
--
|
TOTAL CURRENT
ASSETS
|
184,039
|
188,198
|
201,014
|
|
|
|
|
Property, plant and
equipment, net
|
24,679
|
24,751
|
28,812
|
Assets held for
sale
|
2,823
|
2,823
|
--
|
Operating lease
right-of-use assets
|
8,844
|
9,100
|
1,896
|
Intangible assets,
net
|
30,500
|
31,120
|
36,208
|
Goodwill
|
42,326
|
42,326
|
38,837
|
Other assets
|
376
|
400
|
294
|
TOTAL ASSETS
|
$293,587
|
$298,718
|
$307,061
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities:
|
|
|
|
Current portion of
long-term debt
|
$ 7,143
|
$
7,143
|
$ 7,143
|
Trade accounts
payable
|
17,232
|
9,414
|
27,378
|
Accrued
liabilities
|
10,500
|
21,320
|
19,875
|
Income tax
payable
|
--
|
71
|
1,087
|
Current operating
lease liabilities
|
991
|
993
|
604
|
TOTAL CURRENT
LIABILITIES
|
35,866
|
38,941
|
56,087
|
|
|
|
|
Other
Liabilities:
|
|
|
|
Long–term
debt
|
88,082
|
87,738
|
92,850
|
Deferred income tax
liability
|
4,516
|
4,516
|
4,759
|
Operating lease
liabilities
|
8,398
|
8,641
|
1,298
|
Other
liabilities
|
407
|
407
|
448
|
TOTAL LIABILITIES
|
137,269
|
140,243
|
155,442
|
|
|
|
|
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 – 13,729,859;
13,594,407; and 13,585,096; shares respectively
|
13,730
|
13,594
|
13,585
|
Retained
earnings
|
142,588
|
144,881
|
138,034
|
TOTAL STOCKHOLDERS'
EQUITY
|
156,318
|
158,475
|
151,619
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$293,587
|
$298,718
|
$307,061
|
Reconciliation of
GAAP Net Income to Non-GAAP EBITDA
(Unaudited, In Thousands)
|
|
Three Months
Ended
|
All Amounts in
Thousands
|
March 31,
2023
|
|
March 19,
2022
|
|
|
|
|
Net Income (Loss)
(GAAP)
|
($952)
|
|
$6,654
|
|
|
|
|
Interest
expense
|
1,375
|
|
560
|
Income tax expense
(benefit)
|
(256)
|
|
1,852
|
Depreciation and
amortization
|
1,396
|
|
1,473
|
|
|
|
|
EBITDA
(Non-GAAP)
|
$1,563
|
|
$10,539
|
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