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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended July 12, 2003
Commission File Number 0-6966
ESCALADE, INCORPORATED
----------------------
(Exact name of registrant as specified in its charter)
Indiana 13-2739290
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(State of incorporation) (I.R.S. EIN)
251 Wedcor Avenue, Wabash, Indiana 47992
---------------------------------------------
(Address of principal executive office)
260-569-7208
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(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act
NONE
Securities registered pursuant to section 12(g) of the Act
Common Stock, No Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act
Yes [X] No [ ]
The number of shares of Registrant's common stock (no par value) outstanding as
of July 28, 2003: 6,434,006
INDEX
Page
No.
Part I. Financial Information:
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets (Unaudited) As of July 12, 2003, July 13, 2002, and
December 28, 2002 3
Consolidated Condensed Statements of Income (Unaudited) For the Three Months and Six Months
Ended July 12, 2003 and July 13, 2002 4
Consolidated Condensed Statements of Comprehensive Income (Unaudited) For the Three Months
and Six Months Ended July 12, 2003 and July 13, 2002 4
Consolidated Condensed Statements of Cash Flows (Unaudited) for the Six Months Ended July
12, 2003 and July 13, 2002 5
Notes to Consolidated Condensed Financial Statements 6-9
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
9-11
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 12
Item 4 - Controls and Procedures 12-13
Part II. Other Information
Item 4 - Submission of matters to a Vote of Securities Shareholders 13
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(All amounts in thousands except share information)
July 12, July 13, December 28,
2003 2002 2002
ASSETS
Current Assets:
Cash and cash equivalents $ 1,253 $ 1,002 $ 3,370
Receivables, less allowance of
$1,318; $596; and $550;
respectively 35,760 22,436 34,141
Inventories 40,659 27,456 20,549
Prepaid Expenses 1,793 583 542
Deferred income tax benefit 1,675 902 815
--------- -------- --------
TOTAL CURRENT ASSETS 81,140 52,379 59,417
Property, plant and equipment 46,964 35,208 35,258
Accumulated depreciation and amortization (28,406) (25,191) (26,198)
--------- -------- -------
18,558 10,017 9,060
Intangible assets 8,542 6,856 6,491
Goodwill 17,791 13,351 13,351
Other assets 7,158 5,467 8,469
--------- -------- --------
$ 133,189 $ 88,070 $ 96,788
========= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 17,440 $ 8,565 $ 11,223
Current portion of long-term debt 5,179 3,317 167
Trade accounts payable 12,633 6,976 2,793
Accrued liabilities 14,806 10,886 17,004
Federal income tax payable 1,991 1,467 1,189
--------- -------- --------
TOTAL CURRENT LIABILITIES 52,049 31,211 32,376
Other Liabilities:
Long-term debt 31,861 18,200 17,200
Interest rate swap agreement 728 -- --
Deferred compensation 1,357 1,316 1,337
--------- -------- --------
33,946 19,516 18,537
Minority Interest 364 -- --
Stockholders' equity:
Preferred stock:
Authorized 1,000,000 shares; no par value, none issued
Common stock:
Authorized 10,000,000 shares; no par value, Issued
and outstanding - 6,434,006; 6,508,706; and
6,508,856; respectively 6,434 6,509 6,509
Additional Paid in capital -- 682 682
Retained Earnings 40,154 30,105 38,709
Accumulated other comprehensive income 242 47 (25)
--------- -------- --------
46,830 37,343 45,875
--------- -------- --------
$ 133,189 $ 88,070 $ 96,788
========= ======== ========
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(All amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
July 12, July 13, July 12, July 13,
2003 2002 2003 2002
Net Sales $ 49,837 $ 32,202 $ 78,940 $49,707
Costs, expenses and other income:
Cost of products sold 31,160 21,579 49,819 33,913
Selling, general and administrative expenses 14,389 6,635 24,321 11,617
Interest 652 246 1,100 367
Other (income) expense (11) (326) 40 (151)
------- ------- ------- -------
46,190 28,134 75,280 45,746
Net income before income taxes and minority
interest 3,647 4,068 3,660 3,961
Provision for income taxes 1,399 1,465 1,403 1,426
------- ------- ------- -------
Net income before minority interest 2,248 2,603 2,257 2,535
Net Loss in subsidiary allocated to minority
interest 6 -- 4 --
------- ------- ------- -------
Net income $ 2,254 $ 2,603 $ 2,261 $ 2,535
======= ======= ======= =======
Per Share Data:
Basic earnings per share $ 0.35 $ 0.40 $ 0.35 $ 0.39
Diluted earnings per share $ 0.34 $ 0.39 $ 0.34 $ 0.38
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Net income $ 2,254 $ 2,603 $ 2,261 $ 2,535
Unrealized gain (loss) on securities, net of tax 122 (161) 69 (78)
Foreign currency translation adjustment 548 -- 926 --
Unrealized loss on interest rate swap agreement net
of deferred tax benefit of $466) (728) -- (728) --
------- ------- ------- -------
Comprehensive income $ 2,196 $ 2,442 $ 2,528 $ 2,457
======= ======= ======= =======
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)
Six Months Ended
July 12, 2003 July 13, 2002
Operating Activities:
Net income $ 2,261 $ 2,535
Depreciation and amortization 2,785 2,111
Adjustments necessary to reconcile net income to net
cash used by operating activities (4,923) (8,095)
--------- ---------
Net cash provided (used) by operating activities 123 (3,449)
Investing Activities:
Purchase of property and equipment (1,362) (1,079)
Purchase of certain assets of North American Archery
Group (11,432) --
Acquisition of majority interest in Schleicher & Co.
International AG (12,587) --
Equity investment in Sweden Table Tennis AB (187) --
Step(R)product license buyout (875) --
Purchase of certain assets of Murrey and Sons -- (2,489)
Purchase of certain assets of Steve Mizerak, Inc. -- (1,229)
Purchase of all assets relating to Step(R)product line -- (4,840)
-------- ---------
Net cash used by investing activities (26,443) (9,637)
Financing Activities:
Net increase (decrease) in notes payable - bank 6,217 (1,205)
Net increase in long-term debt 19,673 13,883
Proceeds from exercise of stock options 266 490
Purchase of common stock (1,839) --
Foreign Currency Translation (114) --
--------- ---------
Net cash provided by financing activities 24,203 13,168
--------- ---------
Net increase (decrease) in cash and cash equivalents (2,117) 82
Cash and cash equivalents, beginning of period 3,370 920
--------- ---------
Cash and cash equivalents, end of period $ 1,253 $ 1,002
========= =========
See notes to Consolidated Condensed Financial Statements.
ESCALADE, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
- --------------------------------------------------------------------------------
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 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
condensed consolidated balance sheet of the Company as of December 28, 2002 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 have been
condensed or omitted. These condensed consolidated 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 2002 filed with
the Securities and Exchange Commission.
Note B - Seasonal Aspects
- --------------------------------------------------------------------------------
The results of operations for the six-month periods ended July 12, 2003
and July 13, 2002 are not necessarily indicative of the results to be expected
for the full year.
Note C - Inventories
- --------------------------------------------------------------------------------
(All amounts in thousands)
July 12, July 13, December 28,
2003 2002 2002
Raw materials $ 10,902 $ 9,417 $ 5,750
Work in progress 5,544 5,702 4,536
Finished goods 24,213 12,337 10,263
-------- -------- --------
$ 40,659 $ 27,456 $ 20,549
======== ======== ========
Note D - Income Taxes
- --------------------------------------------------------------------------------
The provision for income taxes was computed based on financial
statement income.
Note E - Long Term Debt
- --------------------------------------------------------------------------------
In June 2003, the Company amended its revolving term loan agreement
with Bank One increasing the available balance from $25 million to $35 million
and extending the term until March 31, 2008. The amount available under the
agreement is reduced by $7 million each year beginning March 31, 2004. Under
this agreement, the Company can choose between two interest rate options: a
LIBOR option based on the London Inter Bank Offered Rate (LIBOR) plus a
negotiated spread, or a negotiated reduction from the US prime rate. At July 12,
2003, the outstanding balance under the agreement was $32.8 million: $12.8
million under a prime option at a rate of 3.25% and $20.0 million under a LIBOR
option at an interest rate of 2.60%.
Note F - Interest Rate Swap Agreement
- --------------------------------------------------------------------------------
In May 2003, the Company entered into an interest rate swap agreement
having a notional amount of $10 million and a maturity date of May 19, 2008.
This swap agreement is designated as a cash flow hedge, and effectively converts
a portion of the Company's variable rate debt to fixed rate debt with a weighted
average interest rate of 5.08%. The Company entered into this interest rate swap
agreement to manage interest costs and cash flows associated with variable
interest rates, primarily short-term changes in LIBOR and the US prime rate;
changes in the cash flows of the interest rate swap offset changes in the
interest payments on the covered portion of the Company's revolving debt. In
connection with this interest rate swap agreement the Company recorded an after
tax charge of $728 thousand in Other Comprehensive Income (OCI). There was no
impact on net income due to ineffectiveness. The Company's exposure to credit
loss on its interest rate swap agreement in the event of non-performance by the
counterparty is believed to be remote due to the Company's requirement that the
counterparty have a strong credit rating.
Note G - Acquisitions
- --------------------------------------------------------------------------------
In April 2003 the Company completed a public tender offer for the shares of
Schleicher & Co. International AG, a German manufacturer of Data Shredder
equipment. As a result of the tender offer and share purchases through private
transactions, the Company acquired 97% of the outstanding shares. In total the
Company paid cash of $12.6 million for the shares purchased, a premium over book
value of $7.3 million, of which $1.8 million was applied to property, plant and
equipment, $1.4 million was applied to trademarks, and $4.1 million was applied
to goodwill.
In June 2003, the Company acquired substantially all the assets of North
American Archery Group, a manufacturer of premium archery equipment. The Company
paid $9.9 million in cash and assumed $1.5 million in liabilities. The total
purchase price of $11.4 million was allocated to the assets acquired as follows:
$7.4 million was applied to inventory and accounts receivable; $3.7 million to
property, plant and equipment; and $0.3 million to intangible assets.
Note H - Minority Interest
- --------------------------------------------------------------------------------
The minority interest on the consolidated balance sheet represents a 3% interest
in Schleicher & Co. International AG that is not owned by the Company. For the
six months ended July 12, 2003, $4 thousand in net losses were attributed to the
minority interest. The Company is currently engaged in a tender offer for the
minority interest and expects to successfully complete this action by the end of
the current year.
Note I - Earnings Per Share
- --------------------------------------------------------------------------------
Earnings per share (EPS) were computed as follows:
Three months ended July 12, 2003
Weighted
Average Per
Net Income Shares Share
(thousands) (thousands) Amount
Basic Earnings per share:
Income available to common stockholders $ 2,254 6,500 $ 0.35
======
Effect of Dilutive Securities stock options -- 124
------- -------
Diluted Earnings per Share
Income available to common stockholders
and assumed conversions $ 2,254 6,624 $ 0.34
======= ======
Note I - Earnings Per Share - continued
- --------------------------------------------------------------------------------
Three months ended July 13, 2002
Weighted
Average Per
Net Income Shares Share
(thousands) (thousands) Amount
Basic Earnings per share:
Income available to common stockholders $ 2,603 6,495 $ 0.40
======
Effect of Dilutive Securities stock options -- 197
------- ------
Diluted Earnings per Share
Income available to common stockholders
and assumed conversions $ 2,603 6,692 $ 0.39
======= ======
Six Months ended July 12, 2003
Weighted
Average Per
Net Income Shares Share
(thousands) (thousands) Amount
Basic Earnings per share:
Income available to common stockholders $ 2,261 6,505 $ 0.35
======
Effect of Dilutive Securities stock options -- 124
------- -------
Diluted Earnings per Share
Income available to common stockholders
and assumed conversions $ 2,261 6,629 $ 0.34
======= ======
Six Months ended July 13, 2002
Weighted
Average Per
Net Income Shares Share
(thousands) (thousands) Amount
Basic Earnings per share:
Income available to common stockholders $ 2,535 6,467 $ 0.39
======
Effect of Dilutive Securities stock options -- 197
------- ------
Diluted Earnings per Share
Income available to common stockholders
and assumed conversions $ 2,535 6,664 $ 0.38
======= ======
Note J - Segment Information
- --------------------------------------------------------------------------------
As of and for the Six Months
Ended July 12, 2003
Office -
Sporting Graphic
Goods Arts Corp. Total
Revenues from external customers $37,591 $41,349 $ -- $ 78,940
Net Income 1,201 1,288 (228) 2,261
Total Assets $67,544 $58,620 $7,025 $133,189
As of and for the Six Months
Ended July 13, 2002
Office -
Sporting Graphic
Goods Arts Corp. Total
Revenues from external customers $33,941 $15,766 $ -- $49,707
Net Income 1,023 1,795 (283) 2,535
Total Assets $60,267 $21,497 $6,306 $88,070
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER COMPARISON 2003 vs. 2002
Net sales in the second quarter were $49.8 million, an increase of
$17.6 million or 55% over the same period last year. Approximately $15.3
million, or 87% of the increase, is the result of consolidating Schleicher & Co.
International AG ("Schleicher"), a German company that manufactures data
shredder equipment. The Company successfully acquired a 97% ownership interest
in Schleicher through a tender offer concluded during the second quarter.
Escalade is currently engaged in a tender offer to acquire the remaining 3% and
expects to complete this before year-end. Also during the second quarter, the
Company acquired substantially all the assets of North American Archery Group, a
Florida manufacturer of premium archery equipment and supplies. This acquisition
added approximately $2.0 million in sales during the second quarter.
Net income for the second quarter was $2.3 million or $0.35 per share,
compared to $2.6 million or $0.40 per share in the same period of the prior
year. The decrease is primarily due to a reduction of $315 thousand in other
income; in 2002, other income included a pre-tax gain of $423 thousand on the
sale of real estate.
Net sales at Escalade Sports increased $3.1 million, or 13% for the
quarter compared to the prior year. Approximately 65% or $2.0 million of this
increase came from the archery acquisition, with the remainder being in
increased fitness and basketball product sales.
Net sales at Martin Yale were $14.6 million higher than the same period last
year. The Schleicher consolidation accounts for all of this increase and offsets
a shortfall in office product sales of $0.8 million. The depressed economy
continues to have a negative impact on office and graphic arts product sales.
The introduction of the Company's office products into the European market has
started and will continue. In the second quarter, the Company decided to
discontinue the project exploring the viability of a new Hardwood Creek photo
frame and gift line. The trademark was sold, the remaining inventory was sold or
written off, and all expenses paid; after which there was a $47 thousand gain
for the quarter.
Cost of sales as a percentage of net sales was 63% in the second
quarter as compared to 67% last year. The consolidation of Schleicher which has
a cost of sales percentage similar to Martin Yale, which is lower than Sporting
Goods, was the main reason for the decrease. Sporting Goods cost of sales
percentage was up about 1% due to increased overhead including insurance expense
and outside warehousing costs.
Selling, general, and administrative expenses as a percentage of net
sales were 29% in the second quarter as compared to 21% last year. This increase
is due to the consolidation of Schleicher, which has a higher ratio of selling,
general, and administrative expenses to net sales compared to Martin Yale and
Sporting Goods. Schleicher accounted for $7.7 million of the $7.8 million
increase. The Company is exploring opportunities to reduce selling, general and
administrative costs.
Interest expense for the second quarter was higher than the prior year
as a result of the Schleicher consolidation. The increase was $406 thousand, of
which $361 thousand was due to Schleicher and the remainder is attributed to the
increased borrowings necessary to fund the two acquisitions completed during the
quarter.
FIRST HALF COMPARISON 2003 VS. 2002
Net sales of $78.9 million for the first half were $29.2 million, or
59% greater than the same period last year. The consolidation of Schleicher
accounts for $26.7 million, or 91% of the increase, and the archery acquisition
accounts for $2.0 million, or 7% of the increase. The Company will concentrate
on the integration of the Schleicher and North American Archery acquisitions
into its existing operations. During the first half the Company purchased
126,080 shares of its common stock under a stock buy back program.
Net income in the first half was $2.3 million, or $.35 per share,
compared to $2.5 million, or $.39 per share in the prior year. While Schleicher
added $26.7 million to net sales in the first half, it recorded a net loss of
$88 thousand for the first half.
Net sales at Escalade Sports increased $3.6 million, or 11% over the
same period last year. Approximately $2.0 million of the increase came from the
archery acquisition. Sales growth for the first half was hampered by residual
2002 inventory at key distributors. The Company expects that the traditionally
strong second half for sporting goods will be experienced in the current year.
Net sales at Martin Yale increased $25.6 million over the prior year.
The consolidation of Schleicher added $26.7 million in net sales that was
partially offset by decreased sales of office products due to the depressed
economic climate and an intensified competitive environment.
Cost of sales as a percentage of net sales was 63% in the first half
compared to 68% last year. This decrease is mainly due to the consolidation of
Schleicher into the operations. Like Martin Yale, Schleicher has a lower cost of
sales percentage than Sporting Goods.
Selling, general, and administrative expenses as a percentage of net
sales were 31% in the first half compared to 23% last year. The increase was
$12.7 million and was due to the Schleicher consolidation. The Company is
exploring opportunities to reduce selling, general and administrative costs.
Interest expense for the first half increased $733 thousand over the
prior year, primarily as a result of the consolidation of Schleicher which
accounted for $642 thousand. The remainder of the increase is a direct result of
the increased borrowings resulting from the company's acquisition activity.
LIQUIDITY AND CAPITAL RESOURCES
Cash on hand as of July 12, 2003 was $1.3 million compared to $1.0
million on July 13, 2002. The company used $26.4 million during the first half
for acquisitions, purchase of equipment, and investments. The Company increased
its bank debt to fund these acquisitions.
The Company's short term working capital requirements are funded by
cash flow and a revolving line of credit used to finance the purchase of trade
receivables by the Company's Swiss subsidiary from the Company's manufacturing
subsidiaries. The Company utilizes a borrowing base formula that defines and
identifies eligible accounts receivable in order to calculate the maximum amount
that could be borrowed under this revolving line of credit. At the end of the
second quarter, the maximum amount that could be drawn under this line of credit
was $15.6 million of which $5.4 million was used at an interest rate of 2.75%.
This short term revolving line of credit expired on July 15, 2003 but has been
extended until October 15, 2003 under the same terms. The Company anticipates
and has been notified by the bank that this agreement will be renewed for an
additional year.
The Company's long-term financing requirements are currently funded by
a $35 million revolving term loan that expires March 31, 2008. Under the terms
of this credit agreement the maximum borrowing available to the Company is
reduced by $7.0 million on March 31 of each year until the line expires. At July
12, 2003, the maximum amount available was $35.0 million of which $32.8 million
was used at an aggregate interest rate of 2.85%. The Company uses this revolving
term loan from time to time to finance acquisitions, stock buy backs and other
material obligations that may arise. Anticipating that interest rates will rise
in the near term, the Company entered an interest rate swap agreement that
matures on May 19, 2008. The agreement, based on LIBOR, effectively converts
variable rate debt to fixed rate debt at a weighted average interest rate of
5.08%. The Company believes that future long term funding for acquisitions,
stock buy backs or other material obligations deemed appropriate by the
Company's Board of Directors is available from similar credit vehicles and/or
other financial institutions.
During the second quarter, the Company completed two acquisitions. In
April the company successfully completed a tender offer for the shares of
Schleicher & Co. International AG, a German manufacturer of data shredder
equipment for a total cost of $12.6 million. In June the Company completed the
acquisition of substantially all the assets of North American Archery Group,
LLC, a manufacturer of premium archery equipment and supplies, for a total cost
of $11.4 million. Both acquisitions were funded through borrowings on the
Company's long term revolving loan facility.
During the first half the Company purchased 126,080 shares of its
common stock under a stock buy back program authorized by the Board of
Directors. The Company was authorized to expend up to $3.0 million, of which
$1.8 million was expended in the first half.
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, the impact of competitive products and
pricing, product demand and market acceptance, Escalade's ability to
successfully integrate the operations of acquired assets and businesses, new
product development, the continuation and development of key customer and
supplier relationships, Escalade's ability to control costs, general economic
conditions, fluctuations in operating results, changes in the securities markets
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 update these forward-looking statements
after the date of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks, including changes in
currency exchange rates, interest rates and marketable equity security prices.
To mitigate these risks, the Company utilizes derivative financial instruments,
among other strategies. At the present time, the only derivative financial
instrument used by the company is an interest rate swap. The Company does not
use derivative financial instruments for speculative purposes.
A substantial majority of revenue, expense and capital purchasing
activities are transacted in U.S. dollars. However, the Company's foreign
subsidiaries enter into transactions in other currencies, primarily the Euro. To
protect against reductions in value and the volatility of future cash flows
caused by changes in currency exchange rates, the Company carefully considers
the use of transaction and balance sheet hedging programs. Such programs reduce,
but do not entirely eliminate, the impact of currency exchange rate changes.
Presently the Company does not employ currency exchange hedging financial
instruments, but has adjusted transaction and cash flows to mitigate adverse
currency fluctuations. Historical trends in currency exchanges indicate that it
is reasonably possible that adverse changes in exchange rates of 20% for the
Euro could be experienced in the near term. Such adverse changes would not have
resulted in a material impact on income before taxes for the six months ended
July 12, 2003.
A substantial portion of the Company's debt is based on U.S. prime and
LIBOR interest rates. In an effort to lock-in current low rates and mitigate the
risk of unfavorable interest rate fluctuations the Company has entered an
interest rate swap agreement. This agreement effectively converted a portion of
its variable rate debt into fixed rate debt.
An adverse movement of equity market prices would have an impact on the
Company's long-term marketable equity securities that are included in other
assets on the consolidated balance sheet. At July 12, 2003 the aggregate book
value of long-term marketable equity securities was $1.4 million. Due to the
unpredictable nature of the equity market the Company has not employed any hedge
programs relative to these investments.
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a-14(c). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Also, the Company
has investment in certain unconsolidated entities. As the Company does not
control or manage these entities, its disclosure controls and procedures with
respect to such entities are necessarily substantially more limited than those
it maintains with respect to its consolidated subsidiaries.
The Company has carried out an evaluation, under the supervision and
with the participation of the Company's management, including the Company's
Chief Executive Officer and the Company's Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of the end of the period covered by this report. Based on the
foregoing, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were effective.
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the internal
controls
subsequent to the date the Company completed its evaluation. Therefore, no
corrective actions were taken.
PART II. OTHER INFORMATION
Item 1, 2, and 3. Not Required.
Item 4. Submission of Matters to a Vote of Securities Holders.
The annual meeting of the Registrant was held at the offices of the
Company in Evansville, Indiana on April 26, 2003. Proxy materials had been
circulated on March 14, 2003, proposing the election of six members to the Board
of Directors for a one-year term, and the appointment of BKD LLP to serve as
independent auditors of the Company for the year 2003.
The stockholders approved the election of Directors by the following
vote:
Nominee For Withheld
Yale A. Blanc 5,781,285 223,196
Robert E. Griffin 5,993,525 10,956
Blaine E. Matthews, Jr. 5,831,438 173,043
C. W. "Bill" Reed 5,993,525 10,956
A. Graves Williams, Jr. 5,679,534 324,947
Keith P. Williams 5,780,803 223,678
The stockholders approved the appointment of BKD LLP to serve as
independent auditors of the Company for the year 2003 with the following vote:
5,914,407 shares for, 79,310 shares against, and 10,764 shares abstained.
Item 5. Not Required
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
10.1 Third Amendment to amend and restate the credit agreement between Escalade, Incorporated
and Bank One, N.A. The effective date is June 1, 2003.
10.2 Fourth Amendment to Credit Agreement dated as of May 15, 2000 by and between
Indian-Martin AG and Bank One, Indiana, National Association (excluding exhibits and
schedules not deemed to be material) dated July 15, 2003.
31.1 Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification.
31.2 Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification.
32.1 Chief Executive Officer Section 1350 Certification.
32.2 Chief Financial Officer Section 1350 Certification.
(b) Reports on Form 8-K
1. On April 11, 2003, Escalade filed a report on Form 8-K relating to its
financial information for the quarter ended March 22, 2003 and
forward-looking statements as presented in the shareholder message and press
release dated April 11, 2003.
2. On April 29, 2003, Escalade filed a report on Form 8-K relating to the
conclusion of its tender offer for Schleicher & Co. International AG, a
publicly traded German company.
3. On May 23, 2003, Escalade filed a report on Form 8-K relating to its press
release dated May 12, 2003 that announced the intent to acquire substantially
all of the assets of North American Archery Group, LLC.
4. On June 06, 2003, Escalade filed a report on Form 8-K/A submitting financial
statements and exhibits relating to the completed tender offer for Schleicher
& Co. International AG, a publicly traded German company.
5. On June 20, 2003, Escalade filed a report on Form 8-K relating to the
completed acquisition of substantially all of the assets of North American
Archery Group, LLC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESCALADE, INCORPORATED
Date: August 1, 2003 C. W. (Bill) Reed
----------------------------
C. W. (Bill) Reed
President and Chief Executive Officer
Date: August 1, 2003 John R. Wilson
----------------------------
John R. Wilson
Vice President and
Chief Financial Officer